Eskom Signs Contracts with Hitachi, Alstom for 4,800-Megawatt Plant

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Researched by Industrial Info Resources (Sugar Land, Texas)--South Africa's state power utility Eskom (Johannesburg) has signed contracts worth a total of $5.1 billion with Hitachi Power Africa (NYSE:HIT ) (Tokyo, Japan) and France's Alstom for boilers and turbines for the $11 billion Medupi power plant project in the country's northern Limpopo Province. Hitachi will receive $3 billion for the boiler contract, and Alstom will receive $2.1 billion for the turbines. The combined total represents the largest contracts that Eskom has signed in its 84-year history. The total investment in the project when completed will be $11.2 billion.

The 4,800-megawatt Medupi will have six units and will be the largest dry-cooled power station in the world when the last unit is commissioned in 2015. The first unit will go into operation in late 2011 or early 2012. Brian Dames, Managing Director of Eskom Enterprises, said the supercritical design of the plant would be a first for Eskom, which would benefit from the higher efficiency in a 25% improved utilization of both water and coal resources and improved environmental performance.

Both contracts include substantial investments in skills transfer agreements that will develop local engineering, manufacturing and artisan skills capacities.

Contract terms require up to half of the contract procurement value to be sourced locally and as much of the workforce as possible to be found locally. At peak activity the project will employ 9,000 people. The $300 million civil construction contract will be awarded in early 2008 and work will start in 2009.

The plant in full operation will burn between 15 million to 17 million tons of coal per year, Dames said. He said that although Eskom had made a conscious decision to move away from coal and diversify into nuclear and other energy sources, coal-fired power was the best short-to-medium term solution for South Africa. Environmental consideration would drive the diversification process, he said.

Eskom will launch work on another major coal-fired plant next year which will be built at Emalahleni near Witbank on the country's eastern coal belt. Negotiations with Hitachi and Alstom are underway for the boilers and turbines for the project. With specifications based on Medupi and standardized equipment the delivery of the construction program for the second plant will optimized.

The projects are part of Eskom's five-year plan to invest $23 billion to close the power shortfall gaps currently being experienced on the national grid and create a reserve power margin in line with international standards.

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