Siemens Wins South Africa's Peak Power Turbines Contract

---

Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). When Siemens was announced as the winner of the Eskom contract for turbines for South Africa's latest $540 million open-cycle gas turbine (OCGT) peaking power projects, Dietmar Siersdorfer said that the short timeframe between the project's approval and the awarding of contracts was impressive and much faster than the global norm. Siemens (NYSE:SI) (NYSE:) (Munich, Germany) had been in a three-way tussle with other major power manufacturing companies for the contract.

Eskom Enterprises' Managing Director, Brian Dames, said that in the state- owned power utility's $16 billion power capacity expansion plans, $3.2 billion worth of projects had already been sanctioned, but that, out of this total, $2.6 billion had yet to be contracted out to suppliers. This indicated that announcements of new contracts were imminent.

The $286 million Siemens turbine contract is for seven OCGT units. The scope of the contract covers design, manufacture, supply, delivery, installation, commissioning, and testing of the units. Three of the units are already under construction in Germany. The environmental impact assessments for the two new power stations should produce a final permitting decision in early 2006. This timing is critical, as the units are scheduled to be producing power by the start of the winter peak demand in May 2007.

The power stations will both be constructed in the Western Cape province. The 588 MW Atlantis unit will use liquid fuels like kerosene or gas. This plant will be sited in the same region as South Africa's sole nuclear power station, at Koeberg, on the Atlantic coast. The 440 MW Mossel Bay unit on the country's southern Indian Ocean coast will use liquid fuel, paraffin, or diesel. It is reported that Eskom is looking to secure with the state’s PetroSA, with a plant at Mossel Bay, adjacent to the power site, to secure a competitive long-term fuel offtake agreement. Eskom wants a fuel-feed solution that is not linked to spot prices, which rise with oil prices.

Eskom will act as overall project managers for the two new power islands, including civil engineering and construction.

Under South Africa's black economic empower (BEE) parameters which govern deals made by foreign suppliers, an industrial participation commitment offset of 30% is required from any order over $10 million placed by state-owned enterprises. Siemens has signed an alliance agreement with the Department of Trade (DTI,) in terms of which it earns industrial participation credits. It will make up the credits needed after the signing of the new contract. Siemens SA is 26% black-owned, with JSE securities exchange company, Sekunjalo, holding 13% and Africom 13%.

With President Thabo Mbeki's most recent announcement that state spending will be accelerated and will undergo major increases, in a drive to induce a 6% national growth rate and cut into the unemployment figures, global infrastructure and power suppliers should be watching tender openings with their BEE ducks in a row. For related news item see April 29, 2005 - Bidders Flock to South Africa's 1,000 Megawatt Tender and Look to $16 Billion Power projects by 2010.

Industrial Information Resources (IIR) is a Marketing Information Service company that has been doing business for over 22 years. IIR is respected as a leader in providing comprehensive market intelligence pertaining to the industrial processing, heavy manufacturing, and energy-related industries throughout the world.