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Question 2213: Mr J F Smalle (DA) to ask the Minister of Public Enterprises: Question 2213

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Question 2213: Mr J F Smalle (DA) to ask the Minister of Public Enterprises: Question 2213
23/08/2013
Mr J F Smalle (DA) to ask the Minister of Public Enterprises:
  1. What are the reasons for the increase in cost for Transnet’s new pipeline between Durban and Gauteng;
  2. How will the increase in costs be funded;
  3. How will future increase in costs of this project be prevented;
  4. (a) What process was followed in the awarding of the tender for the construction of the pipeline and (b) who tendered bids for the construction?    NW2631E
Reply:
  1. According to Transnet, the increase in costs of the company’s new pipeline between Durban and Gauteng is due to the complexity of the project, which extends over long distances, going through different terrains (49 main river crossings, 95 km of major wet land crossings and 169 trenchless crossings) and subject to a number of legislative and regulatory requirements. Factors to be considered were the number of individual properties involved, negotiations with landowners and local community leaders, (servitudes rather than expropriation) as well as industrial actions/unrest and the resultant impact on productivity. These factors impacted significantly on the schedule and delivery. In addition to the schedule changes, the Transnet Board approved the revised cost estimates for the NMPP to R23.4 billion in November 2010. The revised schedule and cost are attributed to a number of factors including engineering and EIA-driven changes in scope, a construction schedule that was too tight at the outset, and significant increases to commodity (steel) and equipment costs compared to original estimates. The approved R23.4 billion escalation mentioned above has not changed since.
  2. The total project including the increase in costs is funded from Transnet’s operations and from borrowings in the global and local market on the strength of the company’s balance sheet. Transnet has received a levy of R4,5 billion (including taxes) from the National Treasury (administered by the Department of Energy) for the NMPP over a three-year-period in terms of the grant funding agreement between Transnet and the Department of Energy (DoE) in lieu of the security of supply requirement change in original scope (from a 16” to a 24’ diameter). The grant fund levy reduces the Regulatory Assets Base (RAB) which will result in lower tariffs when the pipeline is in use.
  3. The project is being managed through a strict governance process spearheaded by a sub-committee of the Transnet Executive Committee chaired by the Transnet Group Chief Executive. Lessons learnt have been incorporated to ensure prudent management of project costs.
  4. A call for Expressions of Interest (EOI) was advertised in a number of newspapers in March 2007 (Sunday Times, Business Day, City Press, The Star, etc). Based on the evaluation of the EOI, tenders were issued to shortlisted contractors with a closing date of 31 March 2008.  These tenders were evaluated and a preferred tenderer was selected.

(4)(b)  The following entities bid for the construction: 

  • GLMC-NMPP Joint Venture (Grinaker LTA, McConnell Dowell, Consolidated Contractors International Company LTD)
  • SICIM S.P.A 
  • Group Five – Amec Spiecapag J
  • Mandlethu Civils
  • CSC Pipelines JV (Cycad Pipelines, Shearwater Construction Pty Ltd, Cerimele Construction Company)
  • WBHO & Insitu JV (WBHO and Insitu Pipelines)
  • Covec SA Pty LTD
  • Imbani JV (17th Chine Metallurgical Construction Company and Daqing Oilfield Construction Company Ltd)
Page last modified:12/03/2014 13:42