By David McKay for Mining Mx
Zambia is to import 300MW of electricity from Eskom, the South African power utility, for six months in order to ease shortages, said Reuters.
Citing Webster Musonda, MD of Zambia’s electricity company, Zesco, Reuters said imports would begin on 1 October and would cost about $22m per month. “The negotiations have been concluded and we have an offer on the table. We will spread the cost of importing this power to our customers,” says Musonda.
Africa’s second largest copper producer, Zambia has a power deficit of more than 750MW because of low water levels at hydropower dams, said Reuters. Zambia last week announced it would increase the hours for power rationing as water levels continued to fall.
Zambia has historically priced electricity below the cost of production through subsidies. Only in recent years has the country started to gradually raise prices.
In 2017, the country’s energy regulator approved a 75% price hike for electricity retail consumers and introduced a flat 9.30 US cents per kilowatt hour tariff for mining companies, said Reuters.
Zambia’s president, Edgar Lungu, said in June the country was not slipping into a sovereign debt crisis. “Zambia is not in a position of a crisis,” he told Bloomberg News. “When you find that you are being strangled by debt, you hold back and see how you can realign your position so that in the end you continue being alive, you don’t suffocate.
“That’s where we are now,” he said.
According to the International Monetary Fund, Zambia is growing at the slowest pace in two decades. A drought has lowered water levels at hydroelectric dams whilst earnings from copper – its main export – have slumped following a decline in metal pricing.
By Jan Cronje for Fin24
Cash-strapped power utility Eskom is needing to borrow money in order to pay interest on debt, its chairperson and interim CEO Jabu Mabuza told MPs.
Eskom leadership, together with Minister of Public Enterprises Pravin Gordhan, were briefing a joint sitting of three oversight committees on the utility’s finances on Tuesday.
Mabuza, who took over the role of interim CEO after Phakamani Hadebe resigned at the end of July, said the utility found itself in an unsustainable position. Its total debt was nearing R450bn, and it was not earning sufficient revenues from its businesses to service the interest on what it had borrowed.
“We find ourselves having to borrow to pay debt,” he said.
Electricity revenues over the past 5 years had been flat, he said, while operating costs had increased. Annual tariff increases, meanwhile, were less than what it had hoped for. He said Eskom was also owed some R38bn that it has not been able to collect.
Mabuza told committee members that the energy availability factor of its power plants had dropped to below 70%, which in turn had contributed to load shedding.
Gordhan told committee members Eskom would have run out of money by October without government support.
The utility has been granted two lifelines by the state. The first is a financial lifeline of R23bn per year (for three years) announced by Finance Minister Tito Mboweni in his February Budget. The second is a Special Appropriations Bill which allocates the utility R26bn for the 2019/20, and R33bn for the 2020/21.
By Charlotte Mathews for MiningMx
The under-performance of Eskom’s fleet of coal-fired power stations is currently being concealed by falling demand. Even a 0.1% uptick in GDP growth would result in a resumption of load-shedding, Nelisiwe Magubane, chairperson of Matleng Energy Solutions and a member of the Eskom board, said on Wednesday.
Nelisiwe said Eskom was reviewing its system availability. The previous energy availability factor report of a few months ago predicted 75-80%. At this point availability was 69-70%.
Mike Rossouw, CEO of Independent Energy Thought Leader and a former chairman of the Energy Intensive Users Group, said if demand picked up, South Africa would experience loadshedding twice a day.
Magubane and Rossouw were speaking at the Afriforesight Future of Coals & Bulk Commodities Conference in Sandton.
Rossouw said the root of the problem facing Eskom was that its pricing policy was wrong. It was devised when Eskom was stable and smaller and not building new power stations. “Today it is the worst medicine for Eskom. The good news is that it can be changed overnight, without parliamentary processes, and things will start improving,” he said.
He said price and demand were inextricably linked. About 75% of Eskom’s income was derived from industry and mining, who were paying too much for power. A comparison of South Africa’s industrial and mining tariffs (rather than its average price) with the same sectors globally showed Eskom’s prices were far higher.
For some smelters, 60% of costs are electricity. At the moment 47 South African smelters were shut. Several South African mines were now smelting offshore because they could get better prices elsewhere.
As Eskom increased its tariff, demand for electricity was falling. As a result, Eskom did not have the revenue to pay for its current scale of operations, which were 500% bigger than they were in 2001 measured in number of plants, Rossouw said. The tariff allowed Eskom by the regulator should reward the utility for good behaviour and punish it for bad behaviour.
Rossouw said Eskom’s average price should not be more than 90c/kilowatt hour (kWh), and ideally it should be about 80c/kWh. Eskom has some power stations that can produce at 30-35c/kWh, but others were generating at a cost of 90c/kWh.
A price of 80c/kWh presupposed that Eskom could bring costs under control. “It makes no sense to raise prices because costs are not under control,” he said.
Rossouw said Eskom’s high costs resulted from three main factors. Firstly, it was paying excessive costs for coal as a result of too many small operators supplying bad coal intermittently and destroying road infrastructure at the same time. “(Former Eskom CEO Brian) Molefe’s ‘I don’t want the bakery I just want the bread mantra’ is nonsense,” Rossouw said, because coal and power stations were inextricable.
A second problem was that Eskom had too many assets. Breakdowns were now 20% of capacity from 3% in 2001 and fixing breakdowns required three times as many resources as planned work.
The third problem, Rossouw said, was staff and other costs. Eskom could address those costs, if it was allowed to do so. It should not be stopped from retrenching. “Every company in the world that is in trouble cuts back operations and staff,” he said.
South Africa could be heading for yet another dark period, with an Eskom strike drawing near, according to The South African.
Having just recently posted a record-breaking R20-billion loss in the last financial year, the struggle power utility is now facing labour disputes.
Between 180 and 200 senior managers are dragging the utility before the Commission for Conciliation, Mediation and Arbitration (CCMA) after not receiving salary increases and incentive bonus in the past year. The managers earn between R1.5 million and R3 million per annum.
Eskom recently granted middle managers a 4,7% increase, but they are dissatisfied and are looking for 7,5%.
Yet a recent report on eNCA states that 365 senior employees have had lifestyle audits conducted on them.
Eskom’s vast wage bill, its poor financial management and its uncontrollable debt mean that load-shedding is likely imminent. The utility is struggling to generate sufficient supply – something that will anger South Africans as rumours of a deal brokered with neighbouring Zimbabwe to supply 400MW of power per week.
This is a week that the beleaguered power utility would rather forget.
Yesterday the state-owned enterprise posted net losses after tax of R20.7-billion.
These losses were due to:
- Municipal debt rising to R20-billion
- NERSA only granting a 5.23% tariff increase
- Sales declining by 1.82%
- Wage settlements with unions that were above inflation
Soweto residents demand flat fee
The residents of Soweto, who combined owe Eskom more than R18-billion in unpaid fees, have demanded that prices for unlimited electricity be capped at R100 for each resident:
- Soweto residents demand that their debt be written off
- Of the estimated residents in Soweto, Eskom currently supplies 135 000 with legally connected power
- Only 12% (16 2200) of these customers pay for electricity
- Debt from the area has risen from R3.6 billion in 2014 to its current level of R18-billion
- Eskom is threatening to disconnect non-paying customers, remove illegal connections, and move more houses to prepaid electricity
- Soweto residents are fighting back, launching Operation Khanyisa which sees trained local members illegally reconnecting houses for no charge
Kusile in crisis
Construction on the coal-fire power station Kusile began 11 years ago, in 2008. However, not one unit is currently working:
- All six 800 MW generator units are offline
- Five years behind schedule, only Unit 1 at Kusile has been handed over for commercial service
- Units 2 and 3 are still undergoing testing and commissioning
- Major design, execution and operational problems are being experienced
Based on the factors mentioned above, a number of industry experts believe load-shedding will reappear towards the end of August:
- Major issues with Eskom’s new power plants haven’t been resolved
- Debt is mounting
- Generation remains a massive challenge for Eskom, and capacity is limited
- Operational issues have not been addressed
By Jenni Evans for News24
Johannesburg mayor Herman Mashaba is seeking an urgent meeting with the Eskom board over the power utility’s declaration that it will no longer do repairs in places illegally connected to the power grid.
This follows a meeting between Mashaba and Eskom officials on Monday to deal with complaints by Soweto residents about illegal electricity connections, vandalised infrastructure and extended blackouts.
“Due to the complex nature of the issues discussed between myself and the Eskom team, during a meeting at Megawatt Park, it was decided that it would be prudent to include the Eskom board in our deliberations,” said Mashaba in a statement.
“I have therefore requested an urgent meeting with the board of Eskom and its shareholder within the next 24 hours. The team at Eskom has indeed committed to ensuring this does take place.”
Mashaba felt it was important for the city and Eskom to work together to find solutions to issues faced by Sowetans and other residents affected by ongoing blackouts arising from Eksom’s credit management processes.
Last week Eskom threatened that it will not repair infrastructure in areas where there are illegal connections or the safety of staff cannot be guaranteed.
“Eskom will only restore supply to legal and paying customers in the areas, on condition that the community allows safe access to Eskom staff to conduct audits and remove illegal connections,” the statement said.
It was previously reported that Soweto has been ranked as one of the top defaulters in the country, where residents owe Eskom more than R17bn.
Mashaba said last week after Eskom’s warning that he felt compelled to intervene on behalf of residents who will be affected by the actions of a few.
South African consumers will experience their first price drop at the pumps in six months as the price of fuel decreases by nearly a rand today.
Petrol 95 will fall by 95 cents a litre and 93 octane by 96 cents, while diesel (0.05% sulphur) will decrease by 74 cents and diesel (0.005% sulphur) by 75 c/l.
However, analysts are pointing out that consumers will have little to celebrate as electricity tariffs hikes kicked in on 1 July.
Despite the fact that the average car will cos R30 to R40 less to fill, consumers are unlikely to achieve much relief.
- Bus and taxi fares are unlikely to go down
- Electricity tariffs are increasing
- The petrol price decrease only accounts for about R2.50 for every R1 000 people have
In February, the Soweto debt was sitting at R17-billion in unpaid electricity bills.
Eskom spokesperson, Dikatso Mothae said the power utility “continues with initiatives to improve revenue recovery from residential customers”.
These include removing illegal connections, conducting meter audits, repairing faulty or tampered meters and limiting ghost vending of prepaid electricity, installing smart and/or prepaid meters within protective enclosures to prevent tampering, converting customers from post-paid to prepaid and stepping up disconnection of customers not honouring their current accounts
In his State of the Nation Address last week, President Cyril Ramaphosa announced that the ailing Eskom will continue to received further bailouts.
He said the government has a strategy to deal with Eskom defaulting on its loans.
“We will, therefore, table a Special Appropriation Bill on an urgent basis to allocate a significant portion of the R230-billion fiscal support that Eskom will require over the next 10 years in the early years,” Ramaphosa said.
The president also said that Eskom is working hard to recover money owed by municipalities and customers.
Additionally, he said that “the days of boycotting electricity payments are over”.
Meanwhile, according to Mothae, municipal debt is sitting at R20-billion as at the end of March 2019.
“We continue to have discussions with Municipalities, Provincial Government and National Government and the Inter-Ministerial Task Team to find a resolution. We are continuously reviewing Payment Arrangements with municipalities, issuing default letters and then as a last resort we start a PAJA [Promotion of Administrative Justice Act] process when they default which leads to planned power interruptions,” she said.
“However, we normally get interdicted by customers or customer groupings preventing us from interrupting electricity supply and Municipalities typically take payment holiday during these interdicts. Eskom has now started to issue summons to municipalities for the amount in the Acknowledgement of Debt,” Mothae added.
Earlier this year, the Orlando Action Committee said it was willing to negotiate with the President Cyril Ramaphosa on electricity payment.
The Sunday World reported that Gauteng townships have become “a nightmare” for Eskom employees, who are often “intimidated and assaulted when working in these areas”.
By Michael Cohen and Paul Vecchiatto for Bloomberg
It isn’t difficult to find the main culprit behind South Africa’s biggest economic contraction in a decade: Eskom Holdings SOC Ltd., the state-monopoly power provider.
Gross domestic product slumped an annualized 3.2% in the first quarter, after expanding 1.4% in the prior three months, as a series of power cuts — courtesy of Eskom — hammered manufacturing, mining and agricultural output. The utility provides about 95% of the electricity used in Africa’s most industrialized economy.
”Eskom has a grip on the South African economy that is unlikely to be seen anywhere else in the world,” Kevin Lings, chief economist at Stanlib Asset Management Ltd. in Johannesburg, said by phone. “Eskom powers all tiers of the economy right down to the households, and so when it cannot supply electricity all sectors suffer. It is unlikely to change because there is currently no well-articulated plan to cure its problems.”
Eskom, which is buckling under the weight of more than $30 billion in debt, staged days of rolling blackouts, mostly in March, to prevent a collapse of the national grid as its fleet of poorly maintained power plants struggled to keep pace with demand. The outlook looks more promising for the second quarter: The power cuts have abated and the authorities have given assurances that there will be sufficient supply for the winter.
Even so, the economy’s shock performance, which far exceeded the 1.6% median contraction forecast of 16 economists, illustrates the urgency of the need for the government to diversify the power supply. The International Monetary Fund Monday said Eskom was a “major downside risk” to South African economic growth.
A program to purchase green energy from independent producers is in limbo. And little visible progress has been made in implementing President Cyril Ramaphosa’s plan to split Eskom into generation, distribution and transmission units. The proposal, designed to make it easier for other producers to supply the grid, is opposed by labor unions.
The bleak prospects of a speedy resolution to South Africa’s energy crisis are reflected in GDP forecasts for the rest of the year: The central bank anticipates an expansion of just 1% in 2019, the government 1.5% and Bloomberg Economics less than 1%. That’s well below the 3% Ramaphosa was targeting before he took power in February last year, and is a huge obstacle in way of his drive to attract $100 billion in new investment and tackle a 27.6% unemployment rate.
By Crecey Kuyedzwa for Fin24
Zimbabwe has started to institute planned rotational power cuts to reduce stress on its national grid, following low water levels at Kariba Dam, generation constraints at Hwange Power Station and limited imports from Eskom in South Africa and Mozambique.
Power utility Zimbabwe Electricity Transmission & Distribution Company on Sunday published load shedding schedules for the whole of the country.
“The power shortfall is being managed through load shedding in order to balance the power supply available and the demand,” it said in a weekend statement.
While Eskom in South Africa has eight stages of load shedding, Zimbabwe has announced only two stages for now.
The power supplier divided the country into seven regions, and then further into districts or suburbs. It has given each district or suburb a numerical code.
This code is then checked against a regional table which has two time periods: Morning peak – between 05:00 and 10:00, and evening peak, between 17:00 and 22:00.
When power is cut, suburbs that fall within the time period lose power.
The same suburbs or districts will not generally have power cuts over the same day’s morning and evening peaks. When load shedding moves to Stage 2 and “increases beyond the planned limit” power to additional suburbs will be cut. The power cuts will be in five or eight hour blocks in different areas of the region or district.
Zimbabwe has had to implement power cuts, in part, due to poor rainfall in 2018 and 2019 that led to reduced inflows into Kariba Dam. The dam’s hydroelectric power stations supply electricity to both Zimbabwe and Zambia
Over the years Zimbabwe has been topping up its power supply by importing an average 100MW of power from Eskom and Mozambique, but will be forced to look for more given the current crisis.
Power imports from South Africa’s Eskom also cannot be guaranteed, with the power utility facing a fair share of its own challenges.
Analysts say the impact of the power cuts will be significant to industry, which cannot easily turn to the use of generators amid limited availability of fuel.