Kusile Power Station

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The Kusile Power Station (formerly known as the Bravo Power Station) is a 4,800-megawatt (MW) coal-fired power station under development in South Africa.

Both Kusile and Eskom's Medupi power station are long-delayed from the initially planned April 2011 commissioning date.[1]

Location

The undated satellite photo below shows the power plant under construction. The project is located about 15 km north of the existing Kendal Power Station and about 20 km west of Witbank, Mpumalanga.

Loading map...

Background

The power station is sponsored by state electricity utility Eskom, and was originally proposed as six 900 megawatt coal-fired generating units for a total generating capacity of 5,400 megawatts.[2]

An environmental impact assessment program was conducted in March 2006 and received the Record of Decision (ROD) in June 2007. The Minister of Environmental Affairs and Tourism however revised the ROD and issued environmental authorization for the project in March 2008. The construction of the power plant began in August 2008,[3] and was planned to have a total capacity of 4,800 megawatts (6 x 800 MW).[4]

The first generating unit was scheduled to enter the South African electrical grid by the second half of 2015, with the subsequent five units being commissioned at eight- and then 12-month intervals thereafter. The last unit was expected to be in commercial operation by 2019.[5]

In 2015, it was reported that Unit 1 would come online in 2016,[6] and the last unit by 2021.[7] In March 2015, Eskom appointed ABB South Africa to replace Alstom to execute the control and instrumentation (C&I) for the Kusile power station, but said it would not delay construction.[8]

As of May 2016, Eskom's website stated unit 1 of Kusile was planned for operation by end-2017.[9] In July 2016, it was reported that unit 1 was planned for commercial operation in July 2018, and unit 6 by September 2022.[10]

In December 2016, Unit 1 was synchronized with the grid,[11] and commercial operations began on August 30, 2017.[12] As of 2017, Unit 1 is operating with 800 MW capacity.[13]

In April 2018, plant developer ABB said unit 2 was synchronized.[14]

In February 2019, Eskom reported R8 billion would be needed to fix design defects at Medupi and Kusile.[15] A routine inspection found some defects in various areas of the plant, including Unit 1, the only unit in operation. The planned date for return-to-service of Unit 1 was August 2019.[16]

On March 16, 2019, Unit 3 was synchronised to the national grid.[17]

As of July 2019, units 2 and 3 – although synchronised to the grid – were still undergoing testing and commissioning and not yet in commercial service. Unit 2 experienced a failure related to the induced draft (ID) fans in the first week of July 2019 and minor repairs had to be done. Unit 6 at Kusile was being be stripped for certain replacement parts needed for Units 1, 2 and 3.[16]

In October 2020, Unit 2 achieved commercial operation.[18]

According to Eskom's 2020 Annual Report, the full plant is planned for operation in 2024.[19]

In May 2021, South African Deputy-President, David Mabuza, who is also serving as Chairperson of the Political Task Team on Eskom, visited the plant to evaluate the progress being made. The Political Task Team noted the plant’s current 2,400 MW output. Mabuza summarized that "Kusile has now completed 3 units and they are now in a process of taking the forth unit to commercial operation by mid next year." Construction activities are winding down, with currently 5,000 construction workers on site. (at the peak of building activities, there were more than 15,000). The full plant is now expected to be completed by 2023. [20]

Coal Supply

In the minutes of a 2009 stakeholder briefing, Eskom stated that they "will obtain most of the coal required for Kusile Power Station from Anglo Coal's New Largo operations, south east of the Kusile Power Station."[21]

According to a 2011 Sierra Club report, Eskom’s own consultants estimate that 35 new coal mines will be required to support the Medupi and Kusile plants.[22]

Anglo Coal's subsidiary, Anglo Inyosi Coal, will also supply about 17 million tons of coal to the power station for a period of 47 years.[23]

Early Project Timeline

  • Department of Environmental Affairs & Tourism issued a positive Record of Decision on 5 June 2007.[24]
  • February 2008: Hitachi Power Africa has been awarded the boiler contract worth R18.5 billion and Alstom S&E has been awarded the turbine island works contract valued at R13 billion."[25]
  • April 14, 2011: Black & Veatch Corp. won preliminary approval for US$805.6 million in financing from the U.S. Export-Import Bank for the Kusile plant.[26][27]
  • May 31, 2011: Eskom announced that the Export-Import Bank of the United States (Ex-Im Bank) had given its initial approval for a US$805 million (R5.78 billion) loan to help Eskom build the plant.[28]

Financial institution support

According to BankTrack in 2011, the following institutions are involved in supporting the Kusile Power Station:[29]

Multilateral development banks

  • African Development Bank - $500 million corporate loan, November 2008

Banks

  • Bank of America - advisory service, October 2010
  • Bank of Tokyo Misubishi UFJ - 705 million euro syndicated loan, December 2009
  • Barclays - advisory service, October 2010
  • BNP Pribas - corporate loan as part of 1,185 million euro syndicated loan
  • China Development Bank - US$2.5 billion, July 2018[30]
  • Credit Agricole - corporate loan as part of 1,185 million euro syndicated loan
  • Credit Mutuel-CIC - corporate loan as part of 1,185 million euro syndicated loan
  • Credit Suisse Group - helping with the sale of a stake
  • Deutsche Bank - 705 million euro syndicated loan, December 2009
  • FirstRand Bank Ltd - 705 million euro syndicated loan, December 2009
  • HSBC Group - 705 million euro syndicated loan, December 2009
  • JPMorgan Chase - advisory services
  • KfW IPEX-Bank - 705 million euro syndicated loan, December 2009
  • Natixis - corporate loan as part of 1,185 million euro syndicated loan
  • Nedbank Group - 705 million euro syndicated loan, December 2009
  • Rand Merchand Bank - 705 million euro syndicated loan, December 2009
  • Societe Generale - corporate loan as part of 1,185 million euro syndicated loan
  • Standard Bank - 705 million euro syndicated loan, December 2009

Export Credit Agencies

  • COFACE - corporate loan as part of 1,185 million euro syndicated loan
  • Euler Hermes Kreditversicherungs-AG (Hermes) - 705 million euro syndicated loan, December 2009
  • Export-Import Bank of the United States (Ex-Im Bank) - $805 million, April 2011

Investment Funds

  • Public Investment Corporation (PIC) - R 9 billion (US $1.2), May 2010

U.S. Export-Import Bank financing

As of October 2010, the Export-Import Bank of the United States (Ex-Im Bank) is currently preparing for decisions regarding Ex-Im Bank financing of what would be two of the world's largest coal-fired power plants, Kusile and Sasan Ultra Mega Power Project (proposed in India). August 11, 2010, marked the comment deadline for the Environmental Impact Assessment on the Kusile project. US citizens submitted nearly 7,500 public comments in opposition to the US government's contribution to the project and its environmental impacts, including annually emitting more than 150% of the annual carbon dioxide emissions from projects supported by the Ex-Im Bank in 2009. In 2004, the Ex-Im Bank adopted "global environmental standards," and in 2009 the bank adopted a carbon policy. Yet according to a recently released Government Accountability Office (GAO) report, more than 95% of Ex-Im's energy portfolio is based on fossil fuels, and in 2009 Ex-Im Bank financing for renewable energy was less than .5% of the agency's total financing. The US Ex-Im Bank Board is expected to take up a due diligence vote on Kusile by the end of 2010.[31]

Eskom Plant Gets Approval

On April, 14, 2011 Black & Veatch Corp. won preliminary approval for $805.6 million in financing from the U.S. Export-Import Bank for the Kusile plant in South Africa's Mpumalanga Province, which was to include six units and have a total capacity of 4,800 megawatts.[26][27]

On May 31, 2011, Eskom announced that the Export-Import Bank of the United States (Ex-Im Bank) had given its initial approval for an $805 million (R5.78 billion) loan to help Eskom build the plant. The final vote on the Ex-Im Bank’s loan for Kusile was expected after a mandatory Congressional notification period.

The South African government indicated that it was not in a position to contribute any further funds to its Kusile and Medupi Power Station projects. In the case of Medupi, additional financing was expected to come from the World Bank.

The plant was expected to emit an estimated 36.8 million tonnes of CO2-equivalent per year once it is completed. It was forecast to increase South Africa’s greenhouse gas emissions – already the biggest in Africa – by nearly 10%. In addition, it was projected to consume more than a billion gallons of water annually and release various health-threatening pollutants into the air. South Africa has extensive coal reserves and is generating more than 90% of its electricity supply through it.[32]

China Development Bank funding

In July 2018, Eskom signed a US$2.5 billion loan agreement with the China Development Bank for the Kusile plant, helping Eskom meet its goal to secure 62% of the financial year 2018/19 funding requirement.[33]

Greenpeace report

The 2011 report[34] by Greenpeace Africa and the University of Pretoria’s Business Enterprises unit calculated the full costs of the Kusile plant, from climate change to water use, and the impact on health and the environment. It was estimated that the damage caused by Kusile will cost South Africa between R31.2 billion and R60.6 billion a year, and that just 30% of Kusile’s externality cost would be able to generate five times the coal station’s proposed power with renewable energy. Roughly 70% of the total cost was water-related. Instead of coal, Greenpeace pushes for renewable energy sources.[35]

Meridian Economics report

A November 2017 report by Meridian Economics recommended South Africa curtail its coal plant construction program in favor of more flexible renewable power sources. The report recommended the early retirement of three power plants (Grootvlei, Hendrina, and Komati) and the cancellation of Kusile power station Units 5 and 6. Such moves would result in financial savings in the region of R15 billion to R17 billion (US$1.14 billion to US$1.30 billion). The study warned that failing to alter the company's current construction program could push Eskom or the state into default on its financial obligations.[36]

Opposition

The project has faced opposition and controversy at every step of the way. In November 2011, Greenpeace activists chained themselves to a gate and some climbed a crane to protest the Kusile power station and South Africa's dependence on coal, a few weeks before the country was set to host a global conference on climate change. Authorities arrested nine people, who were ordered to return to court November 21 on charges of trespassing and malicious damage to property.[37]

In February 2014, 1,400 employees were reported absent from the construction of the Kusile power plant. This was during a time of allegations of corruption around the power plant.[38]

On April 5, 2017, a protest by Kusile power station was reported, stating that community members were not happy with procurement processes and urging for the closure of the power station.[39]

In May 2018, 27 people were reportedly arrested and 4 vehicles were damaged in a violent protest near Kusile power station in Mpumalanga. Eskom stated that they had to evacuate construction workers at the plant for safety. Police were called to restore order. The protestors included disappointed workers including subcontractors of Mitsubishi Hitachi Power Systems Africa.[40]

By May 2019, around 400-500 workers at the Kusile power station were fired as a result of continuous protests over unpaid wages for constructing the plants. Multiple security guard strikes made it impossible for the site to operate optimally.[41]

Corruption Allegations

In 2017, South African newspapers reported a kickback scandal following allegations regarding illicit payments by a sub-contractor for the Kusile project. In addition to handing the matter to the police, the company's Assurance and Forencsic Division began an internal investigation.[42]

In December 2017, France Hlakudi, the former manager of contracts for Eskom, rejected allegations that he took bribes from Tubular Construction Projects, which was a contractor on the construction of the Kusile plant. In a statement from his attorney, Hlakudi confirmed Tubular paid his company, Hlakudi Translation and Interpretation, almost 20 million rand (US$1.5 million) for projects undertaken as part of the construction company’s corporate social investment program, including translation work.[43]

In November 2019, the Daily Maverick detailed an alleged slush fund corruption scandal involving Eskom executives and at least four contractors. The scandal involved contracts worth a combined R10 billion resulting in an estimated R75 million being lost due to irregular activities. At the time of the publication, the construction of Kusile was five years past its original completion date and an estimated R80 billion (US$5.4 billion) over budget.[44]

In May 2021, the Sunday Times summarized "the free-for-all that saw costs for Eskom's half-completed and behind-schedule Kusile power station spiral to R161.4bn," including millions of rands in unnecessary contracts, a spending spree on furniture, and even a donation to a foundation chaired by former president Jacob Zuma's fiancé.[45] Some top Eskom executives are now facing fraud and corruption charges.[46]

Problems with New Largo mine

A November 2017 report by Meridian Economics described the following problems with the New Largo mine:[36]

Kusile was originally designed to burn coal from the co-located Anglo American New Largo resource. Despite Anglo initiating environmental and regulatory permitting processes as far back as 2007, the mine remains undeveloped. Progress was hindered by Eskom and Anglo’s inability to find mutually agreeable terms for the coal supply agreement. Key sticking points related to the capital sharing arrangements, returns to be earned by the shareholders, and Black Economic Empowerment ownership requirements. In the interim, Eskom signed medium-term contracts for the station's initial years. Despite the substantial additional costs and externalities of importing such coal to Kusile from other mines, Eskom has only recently released a tender for long-term coal supply at the station, which is expected to include a response from New Largo. However, it is clear from interviews that due to financing challenges, a smaller version of the mine will be designed and will supply around half of Kusile's total demand (15 Mtpa at full load). This still leaves a substantial residual volume of coal to be imported to Kusile over its lifetime following the construction of New Largo. Given that Kusile was designed to be supplied by a large tied mine, the coal yard infrastructure was not designed to facilitate large-scale coal imports and will face challenges in congestion, stockpiling and blending, if 50% of its supply is imported. Procurement of many smaller, cheaper contracts will exacerbate this problem due to the greater need for coal blending and handling. These constraints will therefore require further capital investment should large imports be required.

Project Details

  • Sponsor: Eskom
  • Parent company:
  • Location: Witbank, South Africa
  • Coordinates: -25.9200701, 28.924942 (exact)
  • Status:
    • Units 1-3: Operating
    • Units 4-6: Construction
  • Gross Capacity: 4,800 MW (Units 1-6: 800 MW)
  • Type: Supercritical
  • Start year: Unit 1: 2017, Unit 2: 2020, Unit 3: 2021
  • Coal Type: Bituminous
  • Coal Source: New Largo coal mine
  • Source of financing: US$2.5 billion in debt from the China Development Bank[33]

Articles and Resources

Sources

  1. "Kusile power station ‘on course to deliver by next December,’" Business Day Live, August 22, 2013
  2. Mariaan Olivier, "Regulator to consider new Eskom power station licence," Engineering News, October 22, 2007
  3. "Kusile Power Station, South Africa," Power Technology, accessed February 2015
  4. Terence Creamer, "Eskom begins standing its ground, but regaining credibility will be tough," Engineering News, June 6, 2008
  5. "Kusile power plant project, South Africa," Power Engineering, March 21, 2014
  6. "No official new Medupi sync date, but Feb being targeted," Mining Weekly, January 8, 2015
  7. "Medupi, Kusile to be completed by 2021," Eyewitness News, April 22, 2015
  8. "Eskom appoints new SA contractor for Kusile," Fin 24, March 20, 2015
  9. "Kusile Power Station Project," Eskom, accessed May 2016
  10. "Medupi, Kusile, and the massive cost/time overrun," Daily Maverick, July 7, 2016
  11. Antoinette Slabbert, "ABB preparing to hand over control of Kuile Unit 1," Moneyweb, May 8, 2017
  12. "GE’s efficient power generation and air quality control technology is deployed at Kusile Unit One in South Africa," GE, September 6, 2017
  13. "Progress at Kusile Power Station" Infrastructure News, accessed June 2019
  14. "Eskom reaches major milestone with the synchronization of Kusile’s Unit 2," ABB, April 11, 2018
  15. "Kusile and Medupi were destined to fail from the start," BusinessLIVE, May 1, 2019
  16. 16.0 16.1 Linda van Tilburg, "Still no puff from Kusile and Medupi – Chris Yelland," July 29, 2019
  17. "New Kusile unit produces power eight months ahead of schedule," TimesLIVE, April 17, 2019
  18. "Eskom’s Kusile Unit 2 achieves full commercial operation," ESI-Africa, October 29, 2020}
  19. "Integrated Report," Eskom, 2020
  20. "Kusile Power Station on target to be completed by 2023, ESI Africa, May 17, 2021
  21. Eskom Holdings Ltd, "Second Key Stakeholder Meeting between Eskom and Topigs SA," August 19, 2009
  22. "Move Beyond Coal, Now!: Voices from the Front Lines of the Global Struggle," Sierra Club, September 2011
  23. "Kusile Power Station, South Africa," Power Technology, accessed February 2015
  24. Eskom, New Build News," November 2007
  25. "Eskom Announces Major Contracts for Bravo Project," Media Release, February 29, 2008
  26. 26.0 26.1 "South African Coal Plant Wins U.S. Backing Over Environmentalist Protests," Bloomberg, April 14, 2011
  27. 27.0 27.1 "Ex-Im Bank Gives Preliminary Approval For $800M Loan To South Africa Power Plant," Wall Street Journal, April 14, 2011
  28. "Kusile Power Station, South Africa," Power Technology, accessed February 2015
  29. "Kusile Coal Power Plant, Bank Role," BankTrack, accessed April 22, 2011
  30. "Eskom signs $2.5bn loan agreement with China Development Bank," ESI, July 25, 2018
  31. "US Ex-Im Bank May Fund Giant Coal Plants in South Africa, India" Sustainable Business News, August 11, 2010.
  32. Andreas Spath, "US To Finance Dirty Coal Power In South Africa," Care 2 Care, May 30, 2011
  33. 33.0 33.1 "Eskom signs $2.5bn loan agreement with China Development Bank," ESI, July 25, 2018
  34. "The True Cost of Coal: The monstrous price of South Africa's coal addiction," Greenpeace, 2011
  35. “Kusile Power Plant: The Waking Giant,” Greenpeace Africa, October 21, 2011
  36. 36.0 36.1 Grové Steyn, Jesse Burton, Marco Steenkamp, "Eskom's Financial Crisis and the Viability of Coal-Fired Power in South Africa," Meridian Economics, November 15, 2017
  37. "Greenpeace protests South African coal-fired power station; police arrest 9," Washington Post, November 6, 2011
  38. “Kusile Power Station,” WikiVisually, accessed May 31, 2021
  39. “Twitter Post,” Mweli Masilela, SABCNews, April 5, 2017
  40. “Vehicles damaged, 27 arrested after Kusile power station protest,” The Citizen, May 19, 2018
  41. “Security firm fires hundreds at Eskom’s Kusile Power station following protests over unpaid wages payments,” Today’s Labour News, South Africa, May 27, 2019
  42. Siseko Njobeni, "Eskom in kickback scandal at Kusile," BusinessReport, November 3, 2017
  43. "I did not take bribes - Hlakudi," Moneyweb, December 11, 2017
  44. "SCORPIO: Top Eskom contractors in fresh R75m Kusile slush fund scandal," Daily Maverick, November 26, 2019
  45. "Kusile free-for-all exposed: How Eskom 'crooks siphoned' millions from project," Sunday Times, May 16, 2021 (for subscribers)
  46. "Kusile corruption case postponed," Sowetan Live, June 1, 2021

Related GEM.wiki articles

External Articles

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