Tag: Eskom

How loadshedding has impacted local businesses

By Prinesha Naidoo for Bloomberg/Fin24

Businesses in South Africa have spent the past week struggling to operate amid rolling blackouts that affect their operations for as many as five hours at a time.

The power cuts by cash-strapped utility Eskom, which provides about 90% of the country’s electricity, are a “hugely damaging reality check,” President Cyril Ramaphosa said Thursday amid a fifth straight day of blackouts.

The reductions may cost the country as much as R5-billion rand a day, according to the Organisation Undoing Tax Abuse, a civil-society group.

Bloomberg visited some businesses during blackouts to see how they were coping with the situation.

Suzanne van Weely said she is throwing out as many as 15 loaves of unbaked bread daily – about a 10th of what she produces at her Supercalifragilistic bakery and coffee shop in Linden, Johannesburg.

“People don’t get the things they want and they walk out,” Van Weely said. With fridges shut down, cheesecakes, mousses and trays of tiramisu “are going off. It’s all stuff that costs money to make,” she said.

Across the road, trading at her father Ronald’s store, Magnificent Paints and Hardware, is at a standstill. When the power goes out, his regular customers – local contractors – stop working and so do his orders and sales.

Three of his six delivery trucks are parked in the yard while he sits in a back office lit only by a rechargeable lamp and the light from his smartphone screen.

“The power outages are way too long,” he said. “Four and half hours is way too long – most people work for eight hours so more than 50% of the workday is lost. They should make it two hours then we can at least get some business done.”

Around the corner, the screens on electronic fuel pumps at the Linden Garage gas station are blank. While owner Marco Dalle Ave jokes that his old mechanical pumps were seemingly more advanced and better suited to rolling blackouts, he is worried about turnover and having to pay staff.

“If you can’t operate, you can’t make money,” he says. According to him, a generator would cost more than R100 000 rand – which he can’t afford.

Francois Labuschagne, who also can’t afford a generator, said electricity shortages are killing business at Print2Go, his printing shop.

“It is like the economy has just been cut in half – half of the economy is operating half of the day and it is not like there is a plan,” he said. “As a business owner, this is a ridiculous situation, we’ve got staff to pay – if the business goes under then staff lose their jobs.”

While the Rembrandt butchery has a back-up generator, power cuts still have a devastating effect, said Marco Huisamen, its manager.

With petrol prices close to record levels, running the generator is expensive and doesn’t provide nearly enough energy to keep all the lights on, fridges cold and meat band saws working all at once.

By James de Villiers for Business Insider SA

SA’s two largest cellular networks warn that network connection might be lost if load shedding continues.

Batteries take up to 18 hours to recharge, and if electricity is repeatedly disrupted, it may result in network downtime.

Cellular network connectivity might soon be disrupted if load shedding continues or worsens, South Africa’s two largest network providers said.

Eskom implemented stage four load shedding for the first time in history on Monday morning, after seven generating units tripped, leaving up to 20% of South Africa without electricity at a time. Load shedding (stage 3) continued on Tuesday and into Wednesday.

Jacqui O’Sullivan, MTN South Africa’s executive for corporate affairs, said the operational impact will first be felt where the frequency of the load shedding exceeded the capacity of the back-up batteries.

She said their batteries generally have a capacity for six to 12 hours and require roughly 12-18 hours to recharge.

“Where consecutive load shedding took place, batteries were unable to fully recharge, resulting in reduced back-up times,” O’Sullivan told Business Insider South Africa.

She said MTN spent more than R100 million in the past year dealing with acts of theft and vandalism, and had to deploy security teams to protect the equipment.

“These crimes tend to spike during load shedding when the lack of power sees substations being vandalised for copper wire which then further exacerbates the power supply problem.”

Vodacom said their clients will not be able to access any services when backup power at their towers becomes depleted.

It said when the power is restored, customers will be able to catch up on missed calls and messages which would not have come through.

“It is, however, worth noting that when compared with our total network traffic, the recent impact on Vodacom’s network has been limited due to our back-up power facilities,” a Vodacom spokesperson said.

MTN’s O’Sullivan said the uncertainty surrounding load shedding and the duration thereof, particularly, puts additional strain on their network.

She said the duration and frequency of load shedding compromised their batteries which increases operational costs.

“We want our customers to be able to continue communicating and working, despite the electricity interruptions and we have operations teams working 24 hours a day to mitigate the impact on our customers, as far as we possibly can,” O’Sullivan said.

SA’s go-to loadshedding app

By James de Villiers for Business Insider SA

Load shedding application EskomSePush went from 2,500 active users a week ago to over 400,000 on Tuesday. This after Eskom implemented load shedding stage 4 for the first time in history.

Two friends created the application, which is currently the most downloaded South African application on iOS, as a side project in 2014.

Load shedding notification application EskomSePush went from 2,500 active users a week ago to over 400,000 users on Tuesday, co-creator Herman Maritz said.

This after embattled power utility Eskom, for the first time in history, implemented stage 4 load shedding on Monday morning, leaving up to 20% of the country without electricity. Around a third of Eskom’s 45,000 MW capacity is offline.

EskomSePush is now the most downloaded application on the South African iOS App store, and the second most downloaded application, behind WhatsApp, in the South African Google Play Store.

Maritz said the application is likely to reach 500,000 by the end of the week, when Eskom is reportedly set to suspend load shedding.

He said they’ve received some 1,400 emails every day since Monday, from three last week.

“Sorry, we’re not replying to all the emails anymore,” Maritz jokingly told Business Insider South Africa.

Maritz co-created EskomSePush with Dan Wells in 2014 while they were building banking apps.

“We wanted to know when load shedding was happening so that we could plan around it over our December holidays,” Maritz said.

“We laughed about making this simple push notification service.”

They originally used a service called PushBullet to send us notifications, and in 2015 – six weeks after launch – they had over 100,000 users.

“[We] peaked at around 250,000 active users before load shedding was suspended later that year,” Maritz said.

The app received awards at MTN’s 2015 App of the Year awards for both People’s Choice and Breakthrough Developer App.The application automatically detects and alerts users when load shedding stage changes occur. It provides detailed information of over 50,000 locations in South Africa.

“The system is 100% automated in terms of load shedding stage changes and push notifications,” Maritz said.

Maritz, who now works as a engineer for online Classifieds OLX in Germany, said the application was until recently fully funded by themselves, but they brought in a few ads to “keep the lights on”.

“I hate ads, and we’re thinking of different solutions, but Dan needs some cash flow to keep the app running,” Maritz said.

Wells added: “We enjoy keeping it running! It’s a rush!”

The duo encouraged anyone who is an experienced mobile or JavaScript developer who is keen to work on a useful side-project to contact them at iwanttohelp@sepush.co.za.

By Sifiso Zulu for EWN

South Africans are looking to President Cyril Ramaphosa for answers after the latest round of load shedding; the most severe to hit the country.

Eskom says it had no choice but to implement stage 4 load shedding on Monday after an urgent need to shed 4,000 megawatts off the grid.

Stage 4 load shedding has never been implemented before, and this drastic measure by Eskom took the country by surprise.

But it appears that even President Ramaphosa was not expecting the latest development, saying it came as a shock and was most worrying.

Energy expert Chris Yelland agrees that this move was unprecedented and speaks to how dire the situation is at the debt-ridden power utility.

“This is uncharted territory. So, it’s much deeper than it’s ever been before, and it did come as a surprise because it was announced that six generation units shut down as a result of unplanned outages.”

Ramaphosa recently announced plans to unbundle Eskom into three entities to deal with generation, transmission and distribution.

Labour unions have vowed to fight the plan, arguing that it’s the onset of privatising Eskom.

Researcher reveals Eskom data leak

By Charlie Osborne for Zero Day 

In what may be a case of “if we ignore it, it will go away,” South Africa’s largest electricity company has become the subject of the public exposure of customer data after ignoring researcher pleas to resolve the problem.

Eskom is South Africa’s state-owned electricity company which generates approximately 95 percent of the region’s electricity, as well as roughly 45 percent of all of the electricity used across the African continent.

On Tuesday, cybersecurity researcher Devin Stokes sent a public tweet to Eskom which appears inlaid with frustration at non-communicativeness from the electricity provider.

Stokes said, “You don’t respond to several disclosure emails, email from journalistic entities, or Twitter DMs, but how about a public tweet? This is going on for weeks here. You need to remove this data from the public view!”

The following image contains a screenshot of what appears to be customer and service-related data, including account IDs, start and end service dates, and meter information:

Several hours later, Stokes published a further screenshot with a live timestamp, commenting, “OK. It got worse.”

It appears that this database entry contained some of the financial data of a customer, including name, card type, a partial card number, and CVV, the three-digit security code which is required for purchases in-person or online.

According to the researcher, the electricity provider has left its billing software database exposed, lacking so much as a password.

The most recent customer estimates available, published in 2016, claim that Eskom accounts for roughly 5.7 million customers across South Africa. It is not known how many customers may have been involved in the reported breach.

However, this may not be the only security failure Eskom needs to grapple with — as one of the company’s own employees may have complicated matters further in their gaming enthusiasm.

In a screenshot posted by MalwareHunterTeam, another Twitter user warned Eskom of the existence of a Trojan on one of their networked, corporate machines. The user reported that the Trojan infected the machine through a fake SIMS 4 game installer.

The Twitter user, going under the handle “@sS55752750,” added that the offending employee is a “senior infrastructure advisor.”

While there has been no news on the exposed database, Eskom did thank the researcher who disclosed the Trojan’s existence, saying, “This has been investigated and the necessary actions have been taken. Thank you for bringing it to our attention.”

“Accidental breaches of this type further drive home the point that every company should have a formal process to accept vulnerability reports from external third parties,” Jon Bottarini, Lead Technical Program Manager for HackerOne told ZDNet in response to the news. “Exposing the vulnerability details on Twitter seems to have been the last-ditch attempt on behalf of the security researcher to try and get in contact with someone who can resolve the issue.”

Eskom told ZDNet that the company is “conducting investigations to determine whether sensitive Eskom information was compromised as a result of this incident,” but will not comment further until the investigation has been concluded.

Source: EWN

The trade union federation has warned doing so would not solve the struggling utility’s governance and debt problems.

The Congress of South African Trade Unions (Cosatu) says it does not support a proposal to split up Eskom into three different entities.

The trade union federation has warned that doing so would not solve the struggling utility’s governance and debt problems.

The proposal to split Eskom into three separate firms was reportedly made by a task team appointed by President Cyril Ramaphosa.

Cosatu’s first deputy president Michael Shingange says any unbundling would result in retrenchments.

“When you unbundle and turn debt into equity, as they say, we [Cosatu] view that as part of retrenchment. Even if you don’t pronounce that you’re going to restructure or privatise, we view it as privatisation because you are going to invite private ownership.”

EOH shocked by its inclusion in Eskom statement

By Robert Laing for Business Day 

Techology group EOH issued a Sens announcement on Wednesday objecting to a statement that Eskom issued on Tuesday, which sent its share crashing as much as 16% to an intra-day low of R26.35.

EOH was listed twice in 14 reportable irregularities flagged in Eskom’s interim results for the six months to end-September, a Sens statement the state-owned enterprise (SOE) issued showed.

The list included that there were allegations that Eskom’s former chief procurement officer, Jay Pillay, and other senior officials in procurement were involved in acts of misconduct involving EOH.

The second mention of EOH regarded the resignation of George Sebulela in October 2018.

“A member of the board and audit and risk committee, Sebulela did not declare a conflict of interest and did not recuse himself on deliberations involving the supplier (EOH),” Eskom’s statement said.

“EOH is currently engaged with the JSE and Eskom on Eskom’s Sens disclosure,” the technology group said in Wednesday’s statement. “The two allegations mentioned in the announcement are matters that have been fully investigated and the matters concluded last year. EOH was found not to be implicated in either allegation.”

Other suppliers mentioned in Eskom’s list of reportable irregularities who gained contracts without following correct procedures included Bizz Tracers, Huarong Asset Financing, Cliffe Dekker Hofmeyr, McKinsey and Trillian.

Former Absa and MTN executive Stephen van Coller recently issued a statement following his first 100 days as EOH’s CEO in which he said “specific legacy issues have affected the company’s value”.

Van Coller announced a new structure, which among other things, will improve the group’s accountability.

Are Eskom’s prices too low?

Source: Fin24

Eskom’s balance sheet has been providing a subsidy to consumers over many years, but this is not sustainable anymore and has reached a breaking point, the state-owned power utility said on Monday evening.

Eskom continues to share the rationale for its average annual electricity increase application of 15% for the fourth Multi-Year Price Determination (MYPD4) and Regulatory Clearing Account (RCA) balance application for 2018 made to the National Energy Regulator of South Africa (Nersa).

Nersa’s public hearings on the application continue and the latest one took place in Rustenburg for stakeholders in the North West.

“The main cause of the required price increase is the phasing-out of the current price subsidy, which does not preclude the subsidisation of specific targeted customer categories in future,” said Deon Joubert, Eskom’s corporate specialist for finance.

“Eskom is cognisant of the potential impact of the increase in various sectors, but it finds itself in a very difficult financial position… however, an objective analysis indicates that its debt situation is mainly or more than 80% a function of having had to take responsibility for the build programme, without the electricity price responding as was required.”

Eskom argued that, while higher tariffs are bound to dampen demand, a reluctance to raise prices towards cost-reflectiveness will deny Eskom the ability to fund investments and maintenance required to sustain an adequate security of supply.

“An inadequate security of supply has more negative repercussions to economic growth and social welfare than a tariff increase,” said Eskom.

Looking closely at unit costs, a World Bank analysis concluded that Eskom’s unit costs are very low relative to other sub-Saharan Africa utilities, Eskom said in a statement.

It found that Eskom’s unit cost was the 3rd lowest.

“Similarly, Eskom’s average price is very low relative to other sub-Saharan Africa utilities – but they are all pricing their electricity at unsustainably low levels and are thus in – or heading to – significant financial difficulties,” said Eskom.

The report calculated that 81% of the gap between Eskom’s current price and its costs is due to under-pricing, Eskom said.

In its presentation, Eskom looked at how its actual and projected electricity price from 2010 to 2024 compared to external references.

“On analysis, it became evident that similar to Nersa’s future price path, the various MYPD price paths Eskom requested would plateau once prices reached levels reflective of prudent and efficient costs – which Eskom calculated to be midway between Nersa’s previous upper- and lower price boundaries,” said Eskom.

Eskom: a powerless state entity

By James-Brent Styan for Fin24

A week before South Africa shut down for the December holiday, the country was hit with nationwide rolling blackouts.

Things had not been so bad electricity-wise in years.

In fact, since 2014, load shedding had disappeared as Eskom seemed to have gotten its act together.

Indeed, in May 2016 former President Jacob Zuma promised that South Africa will “never, never, ever again” have load shedding.

Alas, it turned out to be a hoax, one that could still lead to thousands of job losses and holds the very real possibility of bankrupting the country.

The Eskom disaster could not have come at a worse time as SA is struggling with high unemployment and low growth.

At the beginning of January, the World Bank released its 2019 Global Economic Prospects publication in which it stated that economic growth in sub-Saharan Africa is expected to reach 3.4% this year.

However, it’s projecting that South Africa’s economic growth will be only 1.3% in 2019.

According to the National Development Plan, in order to tackle the country’s very real socio-economic challenges, SA would need average economic growth of 5% per year by 2030.

Eskom’s problems will no doubt drive the nails even deeper into the coffin of economic growth.

In fact, while 2018 turned out to be an annus horribilis for Eskom, with stage 2 load shedding returning, 2019 may be even worse.

Eskom itself is already planning for stage 8 load shedding.

That could mean load shedding of up to 12 hours per day.

This is an unlikely scenario, but not out of the question – the level 8 load shedding schedules exist.

Eskom’s core issues

Eskom has two fundamental problems. The first is its ability to keep the power on. The second is its finances.

All the other issues – like coal problems, bad debts and political interference – simply exacerbate these two fundamental problems.

The first problem is critical for SA. If Eskom cannot guarantee that the power will remain on, SA will be unable to attract foreign investors – especially the sort we need most, those investors who want to build big factories or mines that are labour-intensive and will help create jobs.

In the past, SA managed to attract investors with the promise of cheap electricity.

Today, not only is electricity no longer cheap, it is also no longer reliable.

At the moment, Eskom has a total installed power generation capacity of roughly 45 000 Megawatts (MW).

But only about 30 000MW can be relied upon to actually work. The rest is broken or shut down.Eskom’s plant performance – or ability to keep the power on – can be measured by looking at the Electricity Availability Factor (EAF).

Ideally the number should be around 85%, with 10% kept in reserve and 5% out for maintenance.

At Eskom’s interim results for the six months to 30?September 2018, the entity stated that EAF was 75.01% to September 2018 and had dropped to 74.2% in October 2018. (Issues like poor coal and old plants contribute to the poor performance).

According to a status update from Eskom in November 2018, the number has kept plummeting to below 70%.

In response, it operates its emergency open-cycle gas turbines at ever-increasing rates to meet demand and avoid load shedding.

It is uncertain how much longer this can be kept up.

The second problem of course affects the first.

Eskom’s finances are dire. In 2008, Eskom held an A1 investment grade credit rating.

At the end of 2018, rating agency Standard & Poor’s maintained Eskom’s rating at CCC+, several levels deep into junk territory (and with a negative outlook).

This rating is unlikely to recover anytime soon and that means Eskom’s debt crisis will only deepen.

Eskom currently borrows money to repay debt. If Eskom were a private sector company it would have been closed down.

Luckily, it is owned by the government, and similar to other struggling parastatals, like SAA for example, government is still bailing Eskom out.

This, of course, comes at a cost to other vital programs.

For example, instead of providing toilets to the 4 000 schools in SA that still rely on pit toilets, the state must use money to rather keep SAA and Eskom going.

Debt is not a problem if a company makes profits and is able to service its debts timeously.

But Eskom is making record multi-billion rand losses.

Eskom suffered a net loss of R2.3bn in 2018, while the 2019 financial results will in all likelihood see the largest recorded loss in Eskom’s history.

The utility noted that a loss before tax of R11.2bn has been budgeted for the 2018/19 year to March 2019.

In September 2018, Eskom indicated that the actual final loss would be worse than budgeted.

Eskom is expecting its debt to increase from R387bn to R600bn within the next four years (as per its results presentation for the year to 31 March 2018).

In 2014, total debt was R255bn.

How are regular South Africans affected?

In 2009, Eskom was selling one kilowatt hour of electricity for 24c.

This year, it is projected to be 97c. That is a fourfold increase and excludes the added costs that municipalities levy.

These tariffs are set to continue to increase exponentially over the next few years, as it is the most viable way for Eskom to get out of its hole.

Eskom’s latest application for tariff increases is in fact happening while you read this.

Public hearings began on 14 January and will continue to 4 February.

If Eskom gets what it wants, the basic price of electricity will increase by 15% per year over the next three years, starting from April.

But even if that increase is granted, there is still no guarantee that SA will be free of load shedding over the next three years.

The increased cost of electricity will also increase municipalities’ inability to repay Eskom. Municipalities – especially in rural areas – already and increasingly cannot afford to settle their accounts with Eskom.

At the end of March 2014, total municipal debt to Eskom was R2.6bn. By the end of March last year, total municipal arrears debt had increased to R13.6bn.

The top 20 defaulting municipalities constituted 82% of total municipal arrears debt, almost 48% of which is owed by Free State municipalities.

In total, 23 municipalities of 257 in the country today have a total arrears debt of more than R100m each.

These numbers exclude the total arrears debt of Soweto. Soweto’s debt is notable because of the size and the difference in response compared to poor, rural municipalities. (It is important to note that Soweto is not a municipality and is provided with power directly by Eskom.)

The total Soweto debt, including interest, was R8.6bn in March 2015.

Total invoiced Soweto debt in March 2018 was R12bn, of which arrears debt constituted about 98%.In addition, Soweto’s debt was written off in 2003.

So this is new debt.

With SA going to the polls this year, this political hot potato will in all likelihood continue to be ignored and Eskom will be unable to collect the R12bn owed.

The crisis that’s coming

Even if Eskom gets all its ducks in a row regarding maintenance and energy availability, it cannot avoid the fact that its existing fleet is old and falling apart.

These plants were always meant to be decommissioned after 40 to 50 years, but Eskom has been running some beyond the 50-year limit.

Plans tabled in Parliament in 2015 stated that a total of 14 800MW of Eskom-owned power stations has to be decommissioned by 2030.

It appears that several units have already been taken offline at old power stations like Komati and Hendrina.

There is a chance that some of these plants could continue to operate a while longer, but at significant cost.

And it’s clear that Eskom no longer has money.

So, while it is true that a new build programme is ongoing (Medupi and Kusile), the new build programme will not be sufficient to replace the power stations that will have to be decommissioned over the next ten years.

And there is no more money to expand the build programme.IPPsOne option to address the demand for electricity is Independent Power Producers (IPPs).

IPPs go some way to reducing the country’s dependence on Eskom, which is a giant monopoly.

However, IPPs have their own problems.

Currently there is 3 774MW of IPP power operational in SA.

In April 2018, Eskom signed agreements with 27 new RE-IPP projects totalling an additional 2 405MW.

Because Eskom runs and owns the transmission grids (the power lines criss-crossing the country), Eskom buys the electricity the IPPs generate and then distributes it.

So the cost for IPP electricity must also be covered by the tariffs Eskom charges consumers.

In addition, the cost of IPP electricity is still higher than the electricity generated by Eskom.

In the 2018 financial year, Eskom purchased 9 584 GWh from IPPs at a cost of R21.3bn (March 2017: 11 529 GWh at R21.7bn).

This came in at an average cost of 222c/kWh (March 2017: 188c/kWh) that Eskom paid.

The average price that Eskom sells electricity for was 85.06c/kWh.

This means that while the IPP portion of total electricity sold by Eskom is small, it is not recoverable via the current tariffs Eskom can charge.

The other challenge with renewable power generation is availability.

In 2018, renewable IPPs in SA achieved an average load factor of 31.5% during the year.

In 2017 it was 30.7%. That means – in a nutshell – if the IPPs were needed 100% of the time, they would only have been able to provide power for 31.5% of the time.

Over the next decade, South Africans will in all likelihood enjoy very little reassurance about the state of Eskom.

But there are two final issues that may take some of the pressure off Eskom. One is the private sector, especially in terms of renewable energy, as well as businesses going off the grid as they opt not to rely on Eskom.

The other is economic growth.

If the country keeps sputtering along on 1.3% economic growth, then load shedding may be manageable, a fact that is utterly depressing.

If a miracle occurs and the economy picks up, load shedding will most certainly become a major reality moving forward.

The country simply, at this stage and for the foreseeable future, no longer has the power generation capacity to drive a growing economy.

Eskom expects to report record R15bn loss

By Paul Burkhardt, Bloomberg/Fin24

Eskom, South Africa’s struggling power utility, expects to report a loss of more than R15 billion in the year to March 31, a record for any state company.

The anticipated loss, revealed by Chief Financial Officer Calib Cassim at a tariff application hearing in Cape Town on Monday, will exacerbate Eskom’s already dire financial position – it is saddled with R419 billion of debt – and increase pressure on the government to help bail it out.

The utility has said its situation is unsustainable and suggested the state take some of its debt onto its own balance sheet, an option not favored by President Cyril Ramaphosa.

Eskom’s loss estimate may be on the conservative side, according to Peter Attard Montalto, the London-based head of capital markets research at Intellidex, a research company.

“We are now expecting a loss closer to R20 billion for the year, despite a reduction in the investment pace,” he said.

The loss of about R15 billion was targeted notwithstanding that Eskom may need to spend more on capital expenditure and maintenance, the utility’s media desk said in an emailed reply to questions.

A turnaround plan is currently being discussed with the government, and will be made public once the process has been concluded, while talks are being held with a number of lenders to secure required funding, it said.

The Department of Public Enterprises, which oversees the utility, didn’t immediately respond to messages seeking comment.

Eskom has proposed that it be allowed to raise tariffs by 15% annually for three years to help it bring its debt under control, but Attard Montalto sees it as unlikely that South Africa’s power regulator will grant its request because it abides by a strict formula when determining how costs should be allowed to feed into prices.

“With Eskom likely to get a lower award than asked for, it is likely to run a significant loss in the next fiscal year as well,” he said.

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