R 300 million for new substation
Concern has been raised about the excessive costs of the planned Duma Substation.
LYDENBURG – Concern has been raised about the excessive costs of the planned Duma Substation.
A contract was apparently signed on March 6 this year between a Chinese company, China Sinogy Electric Engineering Co (CSEEC), Thaba Chweu Municipality (TCM) and National Treasury for the construction of a 40-megavolt-amp substation.
Steelburger/Lydenburg News was reliably informed that this project would cost roughly R300 million.
On June 18, 2014 a council meeting was held where amendments were made to the contract entered into by CSEEC, TCM and National Treasury. The newspaper managed to obtain a copy of the minutes where the public private partnership (PPP) was amended.
After the changes no word was spoken about the station until the paper was informed that the contract had allegedly been signed.
Not only was this contract awarded to CSEEC, but the amount for the substation exceeded a tender cost the paper had received from a private company for the construction of a substation three times the size of Duma. The construction of the other 42-megavolt transformer will cost around R100 million.
In other words, a substation 33 per cent bigger than Duma will actually costs a third of the money that will be awarded to CSEEC for its 40-megavolt station.
Steelburger/Lydenburg News also managed to obtain a copy of the PPP agreement. CSEEC will also, according to the agreement, be awarded with
332 hectares of municipal property. This is situated about 10 kilometres outside town on the Roossenekal Road.
CSEEC released a press statement on May 23 stating, “On March 6, the engineering, procurement and construction (EPC) contract for Duma 132kilovolt/40megavolt substation project in South Africa was officially signed.
“Mr Luan Xiang, vice-president of CSEEC on behalf of the ECP contractor and Mr Wu Wensheng, representative of the investor, were present at the signing ceremony of the contract. This ECP project in South Africa signified a new breakthrough of CSEEC on overseas power market (sic).”
The source also told the newspaper that only two hectares were required to construct such a station. “CSEEC will upon completion of the station take over all the electricity accounts to pay off their station before TCM will see a cent of that money. In fact, TCM will have less money to pay Eskom once the substation has been built,” said the source.
The document was stamped by CSEEC South Africa and TCM.
The newspaper sent through several queries to National Treasury, TCM and CSEEC.
Phumza Macanda, chief director of communications at National Treasury, said, “It’s not clear why you are directing these questions to National Treasury.
The entity that signed the contract would be best placed to deal with your query.”
When the newspaper, however, explained that this was an agreement entered into between the three parties involved, no response was received. There is also no indication of when the construction of the substation will start. The chief financial officer of TCM, Mr Gareth Mnisi told the newspaper that this was not a new appointment.
“A fully funded public private partnership agreement was entered into during the 2012 financial year. The building of the substation will not be funded by National Treasury. This is foreign direct investment into Thaba Chweu Local Municipality wherein the CSEEC will be utilising their own funds. No South African company was willing to fund the entire project from their own funds.”
Mnisi also stated, “The ability to provide leads to the attraction of investors. We are actually implementing a national priority through the construction of the Duma Substation.
“As we speak there are five big applications in our town-planning unit which are put on hold purely because of the lack of sufficient electricity in Lydenburg, being a hospital, school, a Group Five hotel and a mall.
“In light of the above, how can you conclude that is no need for further electrical infrastructure? That is very reckless in my opinion. A key point to take note of is that this project has the full backing and support of Eskom.”
CSEEC did not comment on the questions.
