Eskom power in jeopardy

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BR Eskom 10747

TJ Lemon

Eskoms spare supply has fallen to just over 1 percent of total capacity. This brings Eskom close to the tight margins that led to rolling blackouts in 2008. Photo: TJ Lemon.

The impasse between Exxaro and striking workers deepened yesterday, after the coal producer was granted an interdict directing striking workers to return to work after two weeks of labour unrest, which is putting Eskom’s power generation capacity in jeopardy.

Adding fuel to the fire is that 250 workers at Shanduka Coal’s Graspan Colliery, which also supplies Eskom, went on strike yesterday further increasing the spectre of blackouts as investors feared a repeat of the 2008 electricity crisis.

Brian Dames, Eskom’s chief executive, said in an interview on e.tv last night that he was concerned about the supply going into winter as Eskom would have to do some planned maintenance, which was usually only done in summer.

But Eskom was able to rely on big customers, such as smelters, cutting usage during periods of peak demand.

The rand slipped nearly 1 percent to be bid at R9.2563 a dollar at 5pm in Johannesburg, bringing its fall this year to 8.5 percent, according to Bloomberg data.

The industrial action at Shanduka came as Eskom was counting on Exxaro to swiftly quell its workers’ strike.

Negotiations between Exxaro and organised labour reached a deadlock on Monday night. The company said all its proposals, including a once-off offer of R2 000, had been rejected by the National Union of Mineworkers (NUM), which represented the striking staff.

The wildcat strikes at Exxaro have affected the Matla, Arnot, Grootegeluk, Leeuwpan and Inyanda collieries and its reductants operations.

Eskom’s Arnot and Matla power stations contribute about 10 percent of Eskom’s generation capacity.

But Exxaro said mines supplying coal to Eskom power stations had contingency plans to keep operations running.

The company said it had approached the Labour Court to obtain an urgent interdict directing striking workers to return to work.

Violence has marred the strike action. A union representative said yesterday he was arrested on Monday along with other NUM officials after they tried to enter the company’s premises at the Arnot mine in a bid to report back on the rejection of the offer by the strikers. Police confronted the officials, and demanded that they disperse, but before they could do so they were arrested, the union representative said.

On Monday police fired rubber bullets at a group of about 2 000 strikers at the Grootegeluk mine in Limpopo, wire services reported. Police spokesman Ronel Otto said protesters had hijacked two trucks and blocked roads.

Shanduka Coal chief operating officer Zirk van der Bank said yesterday that supplies to Eskom were not yet affected and the company would continue to assess the situation.

But Anton Eberhard, an electricity analyst at UCT’s Graduate Business School, said any impediments to Eskom’s supply at this stage were undesirable.

He said the latest communiqué from the utility, which showed spare supply had fallen to just over 1 percent of total capacity, indicated that “should any other power stations break, there will be blackouts”.

Although Eskom said on Monday that it had 49 days of coal stocks across its system, it reported that it had a buffer of just 480 megawatts between available capacity – including gas-fired emergency reserves – and peak demand, meaning that the spare supply was just over 1 percent.

The tiny difference between peak demand and available capacity brings Eskom close to the tight margins that led to rolling blackouts in 2008.

Eskom spokeswoman Hilary Joffe said the utility was concerned about the impact that the sustained strike could have on the security of supply, but she said plants were managing to access their coal stockpiles.

Public Enterprises ministry spokesman Mayihlome Tshwete said there had been an unofficial engagement between Minister Malusi Gigaba and some of Eskom’s executives to resolve the issue.

Cornelis Van der Waal, an electricity analyst programme manager at Frost & Sullivan, said the situation at Eskom was worrying because one would expect long-term coal supply to be stable. “Indeed there are warning lights, but the issue with the coal strikes is not a long-term risk.”

But another aspect to investors’ concerns was the consensus that even after the coal sector strikes had been resolved, South Africa would not be able to solve its power crisis, thus disrupting companies’ operations and adversely affecting their profitability.

“Electricity is [of] such [an] important nature that companies would rather stand back than invest more when there is uncertainty about supply,” Van der Waal said.

Reports last week about defective welding done by Hitachi Power Africa at the Medupi power station, as well as the failure of critical software provided by Alstom to pass a number of tests, renewed fears about the station missing the deadline for its first power contribution to the grid by the end of this year.

But Eskom had not made further requests to some of its big customers to shut down certain operations this time, ArcelorMittal South Africa said yesterday.

The unrest has rocked Exxaro shares, which extended losses yesterdayday. Shares closed down 2.53 percent at R160.10, compared with the Top40 index’s 0.4 percent fall.


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