Jun 29, 2012
M&R says Medupi ‘derisked’ following Eskom agreementBack
Construction|Engineering|Civils|CoAL|Coal-fired Power Station|Contractor|Eskom|Flow|Hitachi|Murray|PROJECT|Projects|Medupi Power Station|Flow|Power Station Project Site|Henry Laas|Power
© Reuse this
CE Henry Laas told investors on Friday that the agreement dealt with all historical claims and, more importantly, defined the scope and value of the remaining works, now estimated at around R3-billion. The full value of the contract was estimated at around R8-billion for the M&R-led civils joint venture, which also included Aveng.
The high-level settlement still had to be signed off by the Eskom board, but Laas said he did not foresee any problems related to the clearing of that governance hurdle.
The solution, together with a deal concluded with Hitachi in the first half of 2011, meant that M&R no longer perceived the Medupi-related orders to represent ‘problem contracts’.
The JSE-listed contractor is also the mechanical works subcontractor for the multibillion-rand boiler contract, awarded to Hitachi in 2007. The contract value to M&R was estimated at around R18-billion, with about R5-billion having been executed.
“The relationship with Hitachi really changed in June last year, when we came to an agreement on the way forward. Since then, progress on the Medupi site has improved materially,” Laas told Engineering News Online during a recent interview on the Medupi site.
He also indicated that the progress achieved with both Hitachi and Eskom was enabling the contractors to “claw back” some of the time lost during the earlier phases.
Nevertheless, Eskom was still forecasting output from the first unit at the R91-billion, six-unit project towards the end of 2013. The coal-fired power station, with a final nameplate capacity of 4 764 MW, would be ramped up to full capacity by 2017.
“The relationship is now such that the parties are working together and they are delivering the project, “Laas said, adding that he did not anticipate any costs to M&R as a result of a ‘flow through’ claim by Aveng’s DSE against Hitachi.
Financially, the arrangements were such that M&R was recovering all costs related to the Hitachi subcontract, while it had the potential to earn a profit based on performance.
“There was no profit for us up to the end of June 2011. But as from July onwards, the arrangement is working well for us and we expect to earn a profit of between 5% and 7.5%.”
On the civils side, the group also expected to secure margins within the 5% to 7.5% range following the settlement.
“There is clear definition of what we need to do, we are all in agreement on the programme, we are also in agreement on the cost and the value to complete the project.
“This has effectively derisked the project to a large extent,” Laas explained, adding that in the absence of the agreement, the issued would have probably moved into arbitration.
Edited by: Creamer Media Reporter© Reuse this Comment Guidelines (150 word limit)
Other Construction News
Article contains comments
Electrical solutions consultant Magnet was appointed Southern African distributor for Dromex personal protection equipment (PPE) in April this year. MD Brian Howarth said that Magnet had recognised an urgent need in the electricity industry for increased safety for...
Updated 7 hours ago The Worldwide Fund for Nature (WWF) has called on governments to introduce legislation that puts a stop to the construction of new coal plants, stating that coal consumption needed to be phased out completely by 2050, or earlier. The international nongovernmental...
Updated 7 hours ago The International Monetary Fund (IMF) has again lowered its growth outlook for South Africa for 2015, projecting in its October World Economic Outlook (WEO) that the economy would expand by only 1.4% this year and 1.3% in 2016. The forecasts represent a 0.6 and a 0.8...
Updated 7 hours ago There are still many opportunities for South Africa’s black high school learners to find jobs in future, both in the public and private sectors, provided that the learners apply discipline and commitment to study, Public Works Minister Thulas Nxesi said on Tuesday....
Recent Research Reports
Liquid Fuels 2015: A review of South Africa's liquid fuels sector (PDF Report)
Creamer Media’s Liquid Fuels 2015 Report examines these issues in the context of South Africa’s business environment; oil and gas exploration; fuel pricing; the development of the country’s biofuels industry; the logistics of transporting liquid fuels; and...
Road and Rail 2015: A review of South Africa's road and rail sectors (PDF Report)
Creamer Media’s Road and Rail 2015 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail infrastructure and network, the funding and maintenance of these respective networks, and...
Defence 2015: A review of South Africa's defence sector (PDF Report)
Creamer Media’s Coal 2015 report examines South Africa’s coal industry with regards to the business environment, the key participants in the sector, local demand, export sales and coal logistics, projects being undertaken by the large and smaller participants in the...
Real Economy Year Book 2015 (PDF Report)
There are very few beacons of hope on South Africa’s economic horizon. Economic growth is weak, unemployment is rising, electricity supply is insufficient to meet demand and/or spur growth, with poor prospects for many of the commodities mined and exported. However,...
Real Economy Insight: Automotive 2015 (PDF Report)
Creamer Media’s Real Economy Year Book comprises separate reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, gold, iron-ore and platinum sectors.
Real Economy Insight: Water 2015 (PDF Report)
Creamer Media’s Real Economy Year Book has been divided into individual reports under the banner Real Economy Insight and investigates key developments in the automotive, construction, electricity, road and rail, steel, water, coal, gold, iron-ore and platinum sectors.
This Week's Magazine
Black-owned investment holding company Sphere Holdings plans to raise a further R1-billion in the coming months in support of its strategy to become a leading black industrial enterprise, which could ultimately seek a listing on the JSE.
Energy analyst and EE Publishers MD Chris Yelland warned recently against excessive optimism regarding timescales for the proposed construction of new nuclear power plants (NPPs) in South Africa. He was speaking at a Nuclear Roundtable in Johannesburg. “I think we...
Malawi’s Lilongwe Water Board (LWB) is inviting eligible bidders to prequalify for the board’s efficiency improvement works, which will be implemented as part of the E24-million Lilongwe Water Resources Efficiency Programme. LWB CEO Alfonso Chikuni explains that...
CROATIA, AN EU MEMBER BUT NOT A TDCA MEMBER On July 1, 2013, Croatia officially became the twenty-eighth member of the European Union (EU). Despite Croatia’s accession into the EU, it is yet to become party to the Trade, Development and Cooperation Agreement (TDCA)...
The Council for Scientific and Industrial Research (CSIR) has announced that its new Inundu airborne electronics testing, evaluation and training pod had made its first test flight on September 10. The successful flight was undertaken from Lanseria International...