All is well with Exxaro/Medupi contract

Exxaro Resources said yesterday it has resolved amicably with Eskom issues resulting from  the delay suffered by its contract to supply the Medupi power station with coal.
Reporting financial results for the six months ended June, Exxaro said it confirms that it has reached an amicable agreement to deal with the Medupi delay.
Construction of the coal fired power station, Medupi, has encountered problems which saw commissioning of first power postponed trice and costs of the project have escalated.
Once completed the R120bn plant will have generation capacity of 4 764 MW comprising six 794 MW units.
First power from Medupi was initially scheduled for 2012. Problems encountered by contractors saw the launch postponed to the second half of 2013 and again to second half of 2014. This has caused a huge row partly because the delay has left the country with a dangerously tight national grid but more because of unfulfilled contractual obligations.
Exxaro clinched a contract to supply the Medupi power station in Limpopo with 14.6 million tonnes of coal per annum. The contract is set to be fulfilled through the Grootegeluk Medupi Expansion Project (GMEP). Exxaro said Construction on the GMEP continued to progress on time and within budget and was 96% complete. The 740 housing units at Grootegeluk were completed by June 2013 and within the budget of R590m.
 Exxaro added that GMEP capital expenditure to date was R8.9bn and total capital expenditure for the project was still forecast at R10.2bn. “The major construction contracts are expected to be completed during the second half of 2013”.
Exxaro said the coal supply ramp-up at GMEP did not commence during the first half of 2013 as scheduled. However, the ramp-up completion date remains scheduled to continue until 2016”.
The group said in terms of the contractual arrangement between Exxaro and Eskom, the power utility has the option to defer the commencement of coal deliveries to the Medupi power station from March 2013 to the first quarter of 2014.
“The subsequent rate of coal deliveries will then be increased to take the full volume of the deferred coal over a period of 24 months prior to December 2016. There is no adverse financial impact on the parties in the long run in terms of the revised agreement”.

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