Eskom’s R135.2 billion Medupi power plant will never turn a profit due to delays, design flaws and growing opposition to coal-fired power generation, says African Development Bank (AfDB).
< Cost overruns at the 4,764MW plant, along with the even larger Kusile plant, are believed to be the main reasons behind Eskom's R396 billion debt burden. The project will not achieve expected returns over its lifetime and is unlikely to stay open as long as planned as pressure to reduce greenhouse gas emissions mounts, said the multilateral development finance institution, which 16.6 billion rand in loans for construction in 2009.
“The installed Medupi project will not show a positive rate of return and will deliver internal rates of return below Eskom’s weighted cost of capital,” AfDB said in a final report published on its website last month.
“This project will not yield any financial benefit over its lifetime.”
Medupi has been touted along with Kusile as the solution to regular power cuts Eskom first implemented in 2008. Instead, it has become a millstone. An explosion at one of its units last year temporarily reduced its capacity. In addition, Eskom is being urged to accelerate the closure of its coal-fired power plants to help the country transition to green energy.
“Based on current perceptions of coal power, this power plant is unlikely to achieve its original plan 50 years of life,” said the AfDB. “The choice of mega-projects with such a long lifespan needs to be considered very carefully to avoid the challenges this project now faces in terms of cost and time overruns, as well as climate change-related environmental concerns.”
Other backers of Die Property owned by the World Bank.
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