Thu, 12 Dec 2019

Eskom has blamed Wednesday's severe power constraints in South Africa, which triggered stage 2 load shedding, on a broken coal conveyor belt at Medupi power station.

In addition, five electricity generating units are unavailable due to boiler tube leaks. The utility also blamed outages on delays in the return to service of units that were on planned maintenance, and said it is struggling with limited diesel supply.

In a statement on Wednesday, Eskom said a conveyor belt supplying Medupi power station in Limpopo with coal failed on Saturday. This cut the station's power output by half.

Since Saturday, the utility has used pumped storage and open cycle gas turbines "extensively" to make up for the electricity shortfall. But now dam and diesel levels are running low.

Stage 2 load shedding has been implemented from 9:00 to 23:00.

How Medupi and Kusile are sinking South Africa

South Africa last experienced load shedding in March this year, in part because a cyclone in Mozambique affected power imports from the country. Eskom also didn't have enough diesel at the time.

- Eskom Hld SOC Ltd (@Eskom_SA) October 16, 2019

A new plan to deal with Eskom, which will probably be split into generation, transmission and distribution units, is supposed to be discussed in cabinet on Wednesday.

Earlier this week, President Cyril Ramaphosa said government will announce its plan to address Eskom's R450bn debt pile in coming days.

"I think Moody's and others will be happy with the announcements made," Ramaphosa said. But the new round of load shedding almost certainly increases the risk of Moody's downgrading South Africa to junk.

Load shedding has a severe impact on the country's economic outlook.

More than 270 hours of load shedding contributed to South Africa's economy shrinking by 3.2% in the first quarter of this year. While it avoided falling into a recession in the second quarter, the economy has been struggling.

Moody's is the only big ratings agency that hasn't yet lowered South Africa's credit rating to "junk". It is due to announce its decision on SA's rating in two weeks' time.

If SA lost its investment rate grade from Moody's as well, it will cost the country its place in the most important group of government bonds. The Citigroup's World Government Bond Index contains only bonds that are investment grade. All the many overseas investment funds that are only allowed to invest in investment grade bonds would be forced to sell their South African government bonds. This will drive up the cost of government debt.

The rand, meanwhile, weakened by almost a percent to R14.99/$ on Wednesday morning.

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