Biggest South African Power Users Challenge Eskom Cuts

Eskom Holdings SOC Ltd.’s largest clients said they’re under no obligation to heed the South African power utility’s instruction that they curb use, raising the risk of scheduled blackouts amid supply constraints.

Eskom, which generates 95 percent of the nation’s electricity, yesterday asked its key industrial customers to cut consumption by 10 percent until Nov. 29, according to Mike Rossouw, chairman of the Energy Intensive User Group of Southern Africa, whose 32 members include local units of Glencore Xstrata Plc (GLEN) and BHP Billiton Ltd. (BHP) Eskom first declared a supply emergency on Nov. 19 after losing generating units.

“If there is no legal binding reason to do so, why would we reduce by 10 percent if other consumers are not contributing,” Rossouw said today by phone. “We cannot hold production back until Nov. 29, it’s just not possible.”

Eskom is spending 500 billion rand ($49 billion) to replace aging equipment and add plants to avoid a repeat of 2008 blackouts that halted mines, including those owned by companies such as Anglo American Plc (AAL) and AngloGold Ashanti Ltd. (ANG), for five days and paralyzed factories in the continent’s biggest economy.

Large users were prepared to cut usage on request for a day at most, Rossouw said.

“We do it because we know it is in nobody’s interest to compromise the national system,” he said. “We also do it because we assume it would be for a short duration only.”

Supply Margin

Eskom forecasts power supply to exceed demand by about 2,000 megawatts today, Andrew Etzinger, a company spokesman, said by phone. The supply margin narrowed to as little as 400 megawatts on Nov. 19. One megawatt is enough capacity to provide energy to 2,000 average European homes.

“The situation has certainly steadily improved,” Etzinger said. “If we ignore the impact of industrial costumers cutting back, then of course the reserve margin would not be that good.”

The restrictions on industrial clients remain in force, Etzinger said.

Spokesmen for Impala Platinum Holdings Ltd. (IMP), Gold Fields Ltd. (GFI) and Sibanye Gold Ltd. (SGL) said power-usage reductions have not yet curtailed production.

Eskom on Nov. 19 asked Gold Fields, whose South Deep project will be the country’s largest gold mine, to reduce usage by 25 percent, company spokesman Sven Lunsche said in an e-mailed response to questions.

User Choice

“A two-hour delay in the ore hoisting was the only significant delay experienced over this period,” Lunsche said. “South Deep has as yet not been asked for further curtailments.”

It would be up to each industrial user whether they will continue heeding Eskom’s instructions, the EIUG’s Rossouw said.

“It’s a difficult situation,” Rossouw said. “Once the users start normalizing usage it may very well lead to load shedding.”

South Africa’s Cabinet didn’t discuss the state of power supply at its fortnightly meeting yesterday, Public Service and Administration Minister Lindiwe Sisulu told reporters in Pretoria today.

“We are confident that the minister of public enterprises is seized with the matter,” Sisulu said, referring to Malusi Gigaba, whose department oversees state-owned companies like Eskom. “We are confident he will deal with it.”

To contact the reporters on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net; Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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