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Emerging market economist Peter Attard Montalto of Nomura presents an update on power utility Eskom:
THERE is some rare positive news for SA on the electricity front, though the rand is seemingly ignoring this for now, given weak global data backdrop/commodities story, etc.
Half the generation capacity (900 megawatts) was returned to the grid on Monday by the Koeburg nuclear power station. It had been taken out by a fault and took two months to fix.
On top of that the Cahora Bassa power line from Mozambique - which has been out of action since the start of the year due to flooding - has been restored, adding back 650 MW of power to the system.
These two events will more than double the spare capacity between demand and supply on the grid - but it is still below international safety standards.
Interestingly, we found out on Tuesday morning that Eskom had to struggle to use the logistically awkward and costly method of rail shipments of coal around the country to redistribute over 10 million tons of coal to strike-affected coal-powered plants since the start of this year alone, compared with only around 3.8 million tons for an average full year.
This at the same time that coal producers want to switch to export-parity pricing, which is significantly higher (while Eskom's tariff award was halved).
This fits into the background though, even with capacity back online, as the CEO of Eskom on Tuesday was unable to give lawmakers any reassurances that there would not be load-shedding through next few winter months.
This comes even with the reduction in industrial use we have seen taking consumption down around -7% year- on-year. Eskom is resting its hopes on an aggressive 2 GWs of capacity maintenance in the coming months.
However, the risks of this strategy are high, with an unusually cold winter forecast.
Eskom are trying to balance the potential winter demands with the significant risk (we'd say certainty) of the Medupi power station not coming on-grid in December (we think March or even later is the target date) and then having a summer demand shortfall in Q1.
All this means that short run the electricity risks have eased, but the long run story is still the same.
Focus for Q2 can now turn to the other key issue of labour relations, which are brewing below the surface and likely to come out into the open as we move through May.
That said, a feedback loop from additional mining sector labour disruption back into electricity production concerns may well re-emerge.
THERE is some rare positive news for SA on the electricity front, though the rand is seemingly ignoring this for now, given weak global data backdrop/commodities story, etc.
Half the generation capacity (900 megawatts) was returned to the grid on Monday by the Koeburg nuclear power station. It had been taken out by a fault and took two months to fix.
On top of that the Cahora Bassa power line from Mozambique - which has been out of action since the start of the year due to flooding - has been restored, adding back 650 MW of power to the system.
These two events will more than double the spare capacity between demand and supply on the grid - but it is still below international safety standards.
Interestingly, we found out on Tuesday morning that Eskom had to struggle to use the logistically awkward and costly method of rail shipments of coal around the country to redistribute over 10 million tons of coal to strike-affected coal-powered plants since the start of this year alone, compared with only around 3.8 million tons for an average full year.
This at the same time that coal producers want to switch to export-parity pricing, which is significantly higher (while Eskom's tariff award was halved).
This fits into the background though, even with capacity back online, as the CEO of Eskom on Tuesday was unable to give lawmakers any reassurances that there would not be load-shedding through next few winter months.
This comes even with the reduction in industrial use we have seen taking consumption down around -7% year- on-year. Eskom is resting its hopes on an aggressive 2 GWs of capacity maintenance in the coming months.
However, the risks of this strategy are high, with an unusually cold winter forecast.
Eskom are trying to balance the potential winter demands with the significant risk (we'd say certainty) of the Medupi power station not coming on-grid in December (we think March or even later is the target date) and then having a summer demand shortfall in Q1.
All this means that short run the electricity risks have eased, but the long run story is still the same.
Focus for Q2 can now turn to the other key issue of labour relations, which are brewing below the surface and likely to come out into the open as we move through May.
That said, a feedback loop from additional mining sector labour disruption back into electricity production concerns may well re-emerge.
