Eskom in massive overspend

ESKOM is set to spend R52.2 billion more on its Medupi and Kusile power station projects for cumulative costs incurred.

A report by the Office of the Central Procurement Officer said that the power utility overspent at least R103.3bn at its Medupi project in Limpopo for the financial year to end March 31, 2017, from R93.9bn in March 2016. The project’s budget was initially pegged at R145bn, according to Eskom’s 2017 annual report. On the other hand, the cumulative cost incurred on the Kusile project in Mpumalanga was R112.4bn last year, compared to R95.1bn in March 2016. At the time, Kusile’s budget was R161.4bn.

The cumulative cost incurred on the Ingula Pumped Storage Scheme in the escarpment of the Little Drakensberg range was R29.3bn, against a budget of R29.8bn, Eskom said. As at March 31, Ingula’s four units were in commercial operation and produce a total of 1 324MW nominal capacity of peaking power.

The report, which has been submitted to the Parliament Appropriations Committee, said Kusile would overspend by R26.2bn, while Medupi would overspend by R26bn.

“I have since written to the Office of the Chief Procurement Officer to determine whether there are any active forensic investigations into these contracts and, if not, to request that they be instituted as a matter of urgency.

“Eskom Rotek Industries, a subsidiary of Eskom, is handling a contract on which there has been a 936.1 percent overspend. This is not only suspicious, but shows a lack of transparency in the procurement process within Eskom,” DA spokesperson for finance Alf Lees said yesterday.

Lees said the biggest overspend went to Mitsubishi Hitachi Power with an overspend of R10.2bn. He said Hitachi’s Eskom contracts had been mired in controversy since the involvement of the ANC’s investment arm, Chancellor House, was exposed.

Meanwhile, energy consultant Ted Blom said yesterday that Eskom was in denial about the dire state of the coal stockpiles at its power stations. Blom said nine of Eskom’s 11 power stations in Mpumalanga were experiencing coal shortages.

“Eskom has tried to appease the public that coal is being transhipped from the balance of the stations – but that can only be from the remaining two stations. Also, the (open cycle gas turbines) have been running for a week. Eskom top management have been caught sleeping at the wheel again…”

Eskom spokesperson Khulu Phasiwe was yesterday adamant that seven – not nine – power stations were experiencing coal problems. Phasiwe said Eskom continued to divert coal to power stations that were running low. “Stock levels are starting to improve,” he said.

R52.2bn more will have to be spent on Medupi and Kusile stations