MEGAPROJECTS & MAJOR CLIENTS

ESKOM

Eskom's capacity expansion budget is R385bn up to 2013 and is expected to grow to more than a trillion rand by 2026. Ultimately, Eskom will aim to double its capacity to 80 000MW by 2026. Additional power stations and major power lines are being built on a massive scale to meet rising electricity demand in South Africa.

Since the new build programme started in 2005, an additional 4 454MW have been commissioned, and if all goes according to plan, an additional 16 304MW in power station capacity will be delivered by 2017.

The energy parastatal currently has three major projects on the cards – Medupi, Kusile and Ingula.

Medupi Coal-Fired Power Plant

In 2006, Eskom received a licence to build the first new coal-fired power station in more than 20 years, being Medupi in Lephalale, Limpopo. An official sod turning took place on 14 August 2007 and to date, terracing is approximately 60% complete and slip column construction on the first two units is near complete.

When finished, the power station will have six boilers, each powering an 800MW turbine, producing 4 800MW of power. The first 800MW unit should be commissioned in early 2012, with the next units following at 9-month intervals. It will then be the largest dry-cooled coal-fired power station in the world.

Contracts were placed with Hitachi to supply the boilers, and Alstom to provide the turbines for this plant, and at R33.6bn, are the biggest contracts ever placed by Eskom – the very contracts that have drenched the project in criticism. Fingers all point toward the fact that the African National Congress (ANC) holds a 25% stake in the venture, and stands to make R1bn profit on the deal. Coupled with that was the World Bank’s R27.3bn loan to Eskom, most of which is funding for Medupi.

However, the World Bank's Inspection Panel, which provides quasi-judicial reviews of the bank’s decisions, has launched a probe into the loan, focussing on environmental concerns. Communities fear the impact the station may have on their lives and livelihoods, its drain on water resources and the cumulative impacts of coal mining in the region.

The Democratic Alliance and Independent Democrats have opposed the loan from the start, specifically because of the ANC’s involvement. But Mathews Phosa, ANC Treasurer General, has long since said that the ANC would remove itself from Hitachi, announcing it would happen by mid-September.

Kusile Coal-Fired Power Plant

The Kusile power station, which is expected to become the world's largest coal fired power plant upon completion, is being built near Emalahleni, in Mpumalanga. Kusile is the first South African power facility to incorporate flue gas desulphurisation (FGD) technology. It is the second coal-fired power facility being built by Eskom and will generate 4,800MW of power once fully operational.

The construction of the plant began in August 2008 and is expected to be complete by 2018. The main civil works contract, worth R2.9bn, was awarded in 2008 to the Kusile Civil Works Joint Venture, which is comprised of companies including Stefanutti Stocks, Group 5, Basil Read and WBHO Construction. The project currently employs more than 2 700 local and 600 non-local workers.

The plant's concrete work mainly includes the construction of power station buildings and administrative (control, medical and security) buildings. It also includes the construction of high-voltage yard and roads.

Work related to the infrastructure of the plant, such as water and wastewater treatment works, access roads and railway lines, will be part of the project. Infrastructure work designed to feed the operation of the plant include water supply pipelines, fuel and water storage facilities, limestone off-loading facilities, as well as an ash disposal and conveyor system.

Eskom, however, is facing a massive shortfall in funding for the project, so is planning to sell up to 49% of its stake in the project. The cash-strapped utility hoped to raise R40bn from the sale to try narrow its R90bn funding gap between now and 2017, which should provide a healthy challenge.

Ina Business Report article, Doug Kuni, Managing Director of the SA Independent Power Producers' Association, said he would be "very surprised" if there was private sector interest in the plant. He suggested the utility would have difficulty attracting any investment if it did not give control to an independent power producer (IPP). Eskom has already placed the turbine and boiler contracts with Alstom and Babcock-Hitachi, leaving little room for new investors to drive savings, or profits by sweating the project costs.

Kuni said, "My take is that whoever purchases Kusile, in whatever way, would require operational control and a government guarantee on the power purchase agreement. That is a very tall order for a 4 800MW station.”

Ingula Pumped-Storage Scheme

Work is also progressing well on Ingula, a pumped-storage scheme near Ladysmith, KwaZulu-Natal, with a planned capacity of 1 352MW. The station is planned to be fully operational by the middle of 2013. The reservoirs are nearly finished, both dam walls have reached their maximum height and major civil works are winding down.

A pumped storage site needs dam sites relatively close together but with the right difference in altitude. It also needs suitable geology and, naturally, enough water. The Ingula Scheme will consist of an upper and lower dam (Bedford and Bramhoek Dams) 4.6km apart and connected by tunnels. The underground powerhouse will house four 333MW reversible pump-turbines.

During times of peak energy consumption, water will be released from the upper dam through the pump turbines to the lower dam to generate electricity. At night, when energy demand is low, the turbines use excess power from the coal and nuclear plants to pump the water from the lower dam back to the upper dam.

In a curious turn of events, excavations were recently delayed when a palaeontologist, Dr Gideon Groenewald, discovered the fossil of an ancient Gorgonopsian, a ferocious flesh-eating creature with sabre-like teeth. From the Permian Period, around 250 million years ago, it dates back to one of the greatest mass extinctions in history, and is one of many prehistoric plant and animal fossils that have been found on the site.

Figure 2 – Eskom’s Build Programme Progress

SANRAL

South Africa depends entirely on its 600 000km network of roads, of which 32 340 are overseen by the South African National Roads Agency (SANRAL):

• 16 170km of national road
• 3 120km of toll roads
• 13 050km of non-toll roads

The SANRAL business model has been lauded the world over, and is certainly one of Government’s major success stories. The Agency forms a critical function in South Africa’s social and economic policy, and of the three tiers of Government tasked with managing the roads, SANRAL is the only one that has no maintenance backlog. In fact, it regularly receives glowing recommendations from the construction industry for its quick tender and payment turnaround times.

In April this year the Agency raised a billion Rand in a single week, coupled with a further R10bn without a guarantee. Its credit rating is consistently and comfortably stable, meaning raising capital has seldom been an issue. The ease with which it raises funding has set it far apart from other state-owned enterprises. Indeed, Government provided SANRAL with a guarantee of R12.3bn for the 2010/11 financial year, and has committed to providing guarantees for future funding.

SANRAL is a bona fide leader in the field of small enterprise development. Its philosophy is centred on economic and social progress through traning the small and informal sectors. The principle is incredibly simple, yet exactly what the country needs – development from the ground up.

In routine road maintenance work, 80% of the work is done by SMME’s, 90% of whom are black contractors. The remaining 20% is allocated to the established contractors, who must then abide by the Construction Charter. The spread is nothing less than comprehensive.

Some of the major projects currently underway are the Gauteng Freeway Improvement Project, the Intelligent Transport System (ITS) Freeway Management Project, the R300 road development in Cape Town, ring roads around Nelspruit and Polokwane, the N17 between Johannesburg and Swaziland, as well as the N2 toll highways in Knysna and the Wild Coast.

Until 2013, SANRAL is geared up to spend R16bn on toll roads, more than 80% of which will be spent on strengthening, improvements and new facilities. Over the same period, nearly R27bn will be spent on non-toll roads, around 65% of which will be spent on strengthening, improvements, new facilities, as well as community development and land acquisition.

Gauteng Freeway Improvement Programme (GFIP)

The GFIP will inject about R29bn into the economy and around R13bn into the provisional gross geographic product, creating nearly 30 000 direct jobs over its lifecycle.
Once completed, the initiative that crosses the Johannesburg, Ekurhuleni and Tshwane metropolitan boundaries will widen freeways to at least four lanes in both directions and in some sections up to six lanes.

The first phase of the project involves a 185km upgrade of the existing freeway network and over the lifespan of the project, a further 376km of upgrades and newly constructed freeways. The project is designed to significantly reduce traffic congestion and unblock access to economic opportunity. The network will provide an interconnected freeway system of inner and outer ring roads, incorporating the historically neglected western and southern Gauteng settlements.

The project is segmented into various phases, with the first phase due for completion by the end of 2011 at the latest (it was originally planned to be complete by the end of 2010). Long-term plans are expected to culminate by 2020 and are subject to fiscal viability. Once the entire GFIP is complete, it will effectively upgrade and create over 561km of roads in Gauteng.

The GFIP will operate on an open-road tolling system with revenue collected and utilised in order to improve the road infrastructure, service debt already incurred and to ensure a well-maintained road network into the future. The ‘user-pay’ principle indicates that future congestion in Gauteng will be minimised as SANRAL fosters a sufficient revenue stream to upgrade the infrastructure in line with road demand.

Open-road tolling means that transactions will be conducted electronically on a strictly user-pay system. Physical tolling booths will be eliminated – thus removing delays and vehicle emissions associated with stop-start driving. Motorist’s vehicles will be fitted with transponders, which detect movement whenever the driver passes under gantries spaced every 10km along the freeway.

Intelligent Transport System

The ITS system has the potential to increase road capacity by 20 – 25%. It consists of an expansive CCTV camera system, variable message signboards along the highways, and a comprehensive Network Management System.

The system, to be introduced in Gauteng, Cape Town, Durban and Pietermaritzburg, effectively helps manage the flow of highway traffic. Accidents are picked up immediately, and operators then send out an emergency team to the site within 12 minutes. From here, real time information will be sent via sms to all subscribers, and to the SANRAL website, providing information about traffic flows, jams, accidents and even overall road conditions.

Amid a public outcry against the costs of this project, it is important to consider the impact of these upgrades on South Africa’s social and economic fabric. Transport infrastructure, whether it is rural or city-based, is the lifeblood of a country. As the saying goes, ‘excellence costs, but mediocrity costs far more’. South Africa is the centrepiece of Africa; let it be dressed as such.

TRANSNET

Transnet is the key driver and enabler of South Africa’s transport logistics infrastructure and is the primary contributor in planning for South Africa’s freight transport infrastructure. These plans, however, are continuously updated to account for changes in market demand and worked into the National Infrastructure Plan (NIP), which is then approved by Parliament. The principal objective of the NIP is to provide Transnet with a 30-year framework for the planning and development of its port, rail and pipeline infrastructure, and to ensure that adequate infrastructure capacity is created ahead of time.

The NIP also:

• Enables Transnet to plan in advance for the medium to long-term capacity requirements to determine the nature and extent of infrastructure capital investments.
• Communicates Transnet’s long-term development plans to key stakeholders to ensure alignment in overall infrastructure planning in South Africa.
• Highlights environmental and sustainable development issues to be considered and incorporated in the capital planning processes.

Transnet uses a Freight Demand Model developed with the University of Stellenbosch to make accurate demand assessments for 65 different market segments, which are allocated to 356 magisterial districts. The model is based on macroeconomic indicators and takes into account the expected performance of the local economy in the context of its major trading partners.

Based on the model, overall freight is forecast to grow by an estimated 42% over the next 30 years, reflecting an overall increase in Transnet’s rail market share. Although, the volume demand projections have been updated to reflect the economic decline in the various commodity sectors that impact on the company itself.

This data has not had any significant impact on long-term investment plans, but does show potential postponement in the rollout of the infrastructure capacity in later years. The timing of Transnet’s capacity expansion is therefore linked to the macro-economic environment and prevailing economic conditions, affordability and the commercial principle of ensuring that returns on investment are related to the risks involved.

Ultimately, planning and implementation are designed to stimulate economic growth in a socially and environmentally conscious way, maintaining the company’s position as a responsible entity.

Capital Expansion (5 Years)

The previous five-year capital investment plan (2010 - 2014) of R80.5bn has been increased to R93.4bn. Over the next five years, about R5.6bn has been earmarked as Private Sector Participation (PSP) funding, which together with the R93.4bn, is deemed sufficient to meet the projected capacity demands without breaching Transnet’s financial metrics.

Figure 3: Five-Year Capital Investment (by corridor)

Figure 4: Three-Year Capital Expenditure

Table 3: Five-Year Capital Expenditure (split per major asset)

Figure 5: Five-Year Expansion vs. Replacement

PROGRESS OF THE MEGAPROJECTS

Coal Line Expansion: facilitates expansion up to 81mt

Expansion to rail, facilities and power infrastructure work is progressing well and is approximately 60% complete. Major milestones for 2011 are the completion of the five new crossovers between Welgedag and Ogies, and the Lenjane formation rehabilitation project. The Ermelo third balloon, the Bethal loop lengthening and the Richards Bay Container Terminal (RBCT) departures bypass line are planned for completion in the 2012 financial year.

Ore Line: all phases up to 60mt

To improve efficiency and accommodate increasing tonnage on the iron ore line, the 19 existing passing loops were extended by an additional 1,5km to accommodate longer trains. In 2009, the longest trains in the world - consisting of 342 wagons - became operational on the Sishen-Saldanha Ore Line.

Progress on the ore line continued during the year with both the odd and even loops becoming operational. The locomotive workshop at Saldanha was completed, 1 414 wagons, three out of 44 class-15E locomotives, and the power to run 342-wagon trains were brought into service.

Re-engineering of the Port of Saldanha had to be undertaken to cater for the increase in capacity. The tipper cars responsible for transporting minerals and discharging ore have been redesigned, rebuilt and revamped, all geared to boost productivity. 200 tons of iron ore can now be tipped every 90 seconds, and up to 195 000 tons can now be loaded onto ships within 24 hours of calling at the port.

Progress by the end of March 2011 on the individual phases is anticipated as follows:

• Phase 1A/B – 87% complete
• Postmasburg – 75% complete
• Power Upgrade – 93% complete

Cape Town Container Terminal

As of March 2010, the project was 75% complete. The work completed is as follows:

• Quay refurbishment and berth deepening works

The first phase of berth 602 was handed over in April 2010, and vessels 305m long are now being berthed on a regular basis. Dredging of the basin is 95% complete, with a dredge depth of approximately -15,3m chart datum (CD).

• Reconfiguration work

The second of 16 Rubber-tyred Gantry Cranes (RTGs) will be delivered before December 2010. The coastal berth stack area contract is coming along, with the first section due in August. A section of the Long Quay was handed over in May as well, after reconfiguration for RTG operations.

Ngqura Container Terminal

The Port of Ngqura became operational in October 2009 and a number of vessels have called since. The first phase of the project has created capacity for 800 000 TEUs per annum and will be able to accommodate up to 1 600 refrigerated containers for each vessel.

Transnet’s strategy is to develop the Port of Ngqura as a trans-shipment hub, and to date, the port has handled 78 423 TEUs, the bulk of which were for trans-shipments.

Durban Container Terminal (DCT) re-engineering

The DCT re-engineering project is progressing well. To date nine out of 28 new facilities have been completed and are operational, including the multi-level staff parking. The new entrance facility as well as the work along berth 203 to 205 is complete. The handing over of the top tier of the Y-site area took place in May 2010.

New Multi-Product Pipeline (NMPP) During the 2010 financial year, Transnet increased the estimated total cost (ETC) on the NMPP from R12.6 billion to R15.5 billion. The increase was a result of: Delays in securing terminal sites; Increases in steel costs and pipeline construction costs and indirect costs; Additional costs including backup power generation, NKP compliance and fibre optic cabling. A major achievement of the NMPP project is the successful use of Horizontal Directional Drilling (HDD), the largest drilling machine in Southern Africa. It was used to drill through distances up to 1,1km at a depth of up to 50m, and even below the heaving Gauteng highways, without any disturbance. Natalspruit is home to one of Gauteng’s most significant wetlands, and the 16” pipeline, traversing it had to be laid to minimise the environmental impact. In the end, no damage was caused, which was extremely significant for the Company as it strives to balance high quality engineering with strict environmental requirements. The inland sections will be brought into operation in 2011, and construction of the 24” trunk line has started and should be finished in December 2012. Transnet has plans in place to ensure security of supply at all times.

 

Project	Total Cost (R billion)	Implementing Agent
Transport
Gautrain rapid rail link	25.2	Gauteng Department of Roads and Transport
Water
Mokolo-Crocodile Water Augmentation Project	14.7	Trans-Caledon Tunnel Authority
Olifants River Water Resource Development Project (Phase 2)	13.7	Department of Water Affairs and the Trans-Caledon Tunnel Authority
Housing
Cornubia housing development	5.1	Housing Development Agency & eThekwini Metropolitan Municipality
N2 Gateway	2.3	Housing Development Agency
Hospitals
Frere Hospital	2.5	Eastern Cape Department of Health
Limpopo Academic Hospital	1.5	Limpopo Department of Health
Cecilia Makiwane Hospital - phase 1	1.4	Eastern Cape Department of Health
Natalspruit Hospital	1.4	Gauteng Department of Health

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