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Energize Steam generators for Koeberg: the most expensive transport of...
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Steam generators for Koeberg: the most expensive transport of scrap metal ever

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by Chris Yelland, EE Business Intelligence  –

The delivery of the first of six new steam generators by Areva last week to extend the life of Eskom’s Koeberg nuclear power station reveals yet another scam at Eskom, perpetrated during the infamous leadership of Brian Molefe, Matshela Koko and the dodgy Eskom board at the time.

Chris Yelland

On the basis of a three-month shorter delivery time, the R5-billion steam generator replacement contract was finally awarded to French state-owned nuclear contractor, Areva, who after running into financial difficulties, is now controlled by French national electricity utility, Electricite dé France (EDF).

This followed an extended High Court, Appeal Court and Constitutional Court battle in South Africa, in which Westinghouse (ultimately unsuccessfully) challenged the irregular contract awarded to Areva on the basis that the claimed urgency of the life-extension was deliberately contrived by Eskom in order to wrongfully award the contract to Areva.

The two 900 MW nuclear reactors and the six associated steam generators were manufactured at Koeberg by Framatome (the predecessor to Areva), using designs licenced from Westinghouse. Both Eskom and Areva claimed that it was critical for the safe operation of the power plant and for security of electricity supply in South Africa, that the steam generators should be replaced during the so-called “X23” outage at Koeberg in 2018.

This was cited by Eskom as the reason for awarding the contract to Areva, where an allegedly contrived three-month “float” in Areva’s project plan was indicated as the deciding factor. This, despite Westinghouse having met all the technical and commercial requirements, with a lower contract price, and a guarantee to meet the 2018 completion date on pain of substantial penalties.

However, all has not gone well for Areva in executing the project.

Areva is said to have experienced serious manufacturing quality problems with the steam generator forgings in France. In view of the claimed time criticality of the project, to resolve these issues Eskom and Areva agreed that the uncompleted forgings would be air-freighted to China where an Areva “partner” would complete the manufacture.

Apparently, each of the six steam generator forgings required the hiring of a Russian Antonov freighter aircraft (involving six flights in total) to transport the forgings from France to China. But, according to an impeccable source, after taking a closer look at the forgings, Areva’s Chinese partner decided to scrap them and start again from scratch.

One can only speculate as to why it was not considered more economical for Areva to fly engineers from the Chinese manufacturer to France to examine the steam generator forgings, as opposed to flying all six steam generators to China for the inspection, prior to them being scrapped in China.

A former senior nuclear executive at Eskom commented to this writer at the time that: “This was the most expensive transport of scrap metal in the history of humankind”.
Eskom has since confirmed to EE Business Intelligence last week that: “The forgings did not meet the expected quality standards and could not be accepted, and therefore they were scrapped by the contractor at their own cost”.

According to Eskom, the contractual delivery date of all six steam generators was February 2018, with the contractual completion date for the replacement of all six steam generators being the end of 2019.

However, with all the delays in the project, including restarting manufacture of the steam generators from scratch in China, delivery of the first three steam generators for Unit 1 at Koeberg is only starting now, with those for Unit 2 only scheduled for delivery in the third quarter of 2021.

Regarding the replacement of the steam generators, Eskom now says that: “Installation is aligned with the outages scheduled for 2021 and 2022 respectively for the two Koeberg reactor units (Unit 1 and Unit 2)”. No mention is now made by Eskom of the criticality for completion in 2018 cited by Eskom at the time as the reason for placing a more expensive contract with Areva.

While not answering specific questions on the cost overruns arising for the project, Eskom insists that: “The estimated cost-to-completion for the project is within the original budget approved in 2014”. Of course, this is not particularly helpful, because the original budget approved in 2014 is not disclosed and may have been significantly higher that the contract price.

However, it seems clear that Eskom has paid Areva a premium for the replacement of the steam generators at Koeberg on the basis of a claimed three-month shorter completion time, when in fact completion will be some three years longer.

It’s an old trick, but it clearly still works.

Further reading

[1] A very tender process: Eskom’s Koeberg contract ruled unlawful, by Aimee Clarke and Chris Yelland, EE Publishers, 13 January 2016

[2] Westinghouse opposes Eskom, Areva appeal to Concourt, and lodges counter appeal, by Aimee Clarke and Chris Yelland, EE Publishers, 4 February 2020

[3] Eskom – changing the goalposts and rules of the game at half-time?, by Aimee Clarke, EE Publishers, 26 May 2016

[4] Eskom and Westinghouse respond to article in Energize magazine and other publications, by Chris Yelland, EE Publishers, EE Publishers, 7 June 2016

[5] Eskom wins Concourt judgement, EE Publishers, 21 December 2016

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