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South Africa Facing 2,000 Megawatt Power Gap in March

Electricity supplies in South Africa, the continent’s largest economy, will become more constrained during the next two months, resulting in a possible shortfall of as much as 2,000 megawatts in March, the state-owned power utility said.

“Even if we pull all the levers, there’s still a gap,” Brian Dames, chief executive officer of Eskom Holdings Ltd., told reporters in Johannesburg today. With electricity demand expected to rise 2 percent this year, only energy savings by consumers can prevent blackouts, he said.

The risk of power outages has also increased during the past three months because of equipment failures at power plants, and more recently, as heavy rains curbed the supply of coal to Eskom’s plants, Dames said. Anglo American Plc and BHP Billiton Ltd. have said supplies to the utility have been disrupted.

South Africa, the world’s largest ferrochrome producer, suffered blackouts in 2008 as a shortage of capacity led to the temporary shutdown of some of the largest platinum mines and deepest gold operations. Anglo, BHP and Xstrata Plc are among the country’s largest power users.

“It sounds very similar to the last crisis with equipment failures, wet coal and the like, which begs the questions of if they learnt the required lessons that time around,” Peter Attard Montalto, an economist at Nomura International Plc, said by e-mail today. “Investors need to be cautious that as the economy recovers the situation is only going to be worse next year before the next power station comes online.”

‘On Alert’

About 10,000 megawatts of Eskom’s capacity is currently unavailable because of planned maintenance and because of equipment failures, and demand is expected to rise to about 30,000 megawatts this week, Dames said. Eskom’s capacity, including possible power imports, is about 43,000 megawatts, he said. In addition to South Africa, the utility also supplies electricity to neighboring Namibia, Botswana and Zimbabwe.

“Eskom is on alert for the next two years,” Dames said.

Eskom may increase incentives offered to large industrial customers for reducing consumption at times of high demand to relieve pressure on the system, Andrew Etzinger, Eskom’s demand manager, told reporters today. The utility is also in talks with its 500 largest users about a possible mandatory conservation scheme, it said in a copy of a presentation handed to reporters.

Eskom, based in Johannesburg, canceled some projects and delayed others last year as it struggled to raise funds for its planned 485 billion rand ($72 billion) of investments over the seven years to 2012.

Tried And Failed

The company is building new plants and reviving mothballed sites in an effort to meet demand. South Africa has almost doubled loan guarantees to 350 billion rand and invested 20 billion rand to help it overcome shortfalls.

Medupi, being constructed in the north of South Africa at a cost of 126 billion rand, is the first large new plant to be built in the expansion program that started in 2004. The government prohibited Eskom from expanding for the four years prior to that while it tried and failed to attract private investors to the industry.

The first unit of Kusile, Eskom’s second new plant being built at a cost of 142 billion rand, is scheduled to begin operating in 2014. Eskom aims to double its capacity to about 80,000 megawatts by 2026, requiring investment of more than 1 trillion rand.

Eskom could sign agreements with private power producers by April this year to add 400 megawatts, it said in a presentation.

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