March 6 (Bloomberg) -- Eskom Holdings SOC Ltd. began rolling scheduled blackouts in South Africa for the first time in six years after rain disrupted the state-run utility’s supply of coal, burned to generate more than 80 percent of power.
The company earlier today asked industrial users, including Sasol Ltd. and ArcelorMittal South Africa Ltd., to scale back demand by 10 percent until at least 9 p.m. The cities of Cape Town and Johannesburg issued timetables for power cuts, and the rapid-rail Gautrain network temporarily stopped services between the Marlboro and Rosebank stations in Johannesburg.
“Seven days of continuous rain have affected our power stations in Mpumalanga and is still affecting coal mines,” Andrew Etzinger, a spokesman for Johannesburg-based Eskom, said by phone. “This is the worst it has been since January 2008.”
The company, which supplies 95 percent of South Africa’s electricity, is spending 500 billion rand ($46.7 billion) to replace aging equipment and add plants to avoid a repeat of blackouts that affected homes, mines and factories for five days in January 2008.
About 23 percent of Eskom’s 42,500 megawatts of installed capacity has been out of service this year, according to Bloomberg calculations made using the company’s data.
The capacity deficit during peak use today will be about 3,500 megawatts, the worst since the blackouts six years ago, Etzinger said. Eskom declared its most recent emergency on Feb. 20 after four generating units went down.
“The reason why we’ve reached rolling blackouts is all the contributions the industrial users could make have been exhausted,” Shaun Nel, a spokesman for the Energy Intensive Users Group, said by phone. The EIUG’s members account for about 44 percent of electricity consumed in South Africa.
The rand gained 0.2 percent to 10.6392 against the dollar at 3:56 p.m. in Johannesburg, after falling as much as 0.5 percent earlier.
The yield on Eskom’s $1 billion of bonds due in August 2023 declined for a second day, falling 11 basis points to 6.05 percent.
The utility expects to continue rolling blackouts, known locally as load-shedding, until 10 p.m. and may end them earlier if the situation improves, it said in a statement. The process is in Stage 2, which allows as many as 2,000 megawatts of the national load to be shed, according to an Eskom website set up to inform customers when cuts will occur. Eskom earlier declared a Stage 3, which covers 4,000 megawatts. A megawatt is enough to power about 2,000 average European homes.
Dam levels are low at two power stations that deliver reserve power during peak times, while a lack of electricity imports from Zimbabwe added to the strain on the system, said Public Enterprise Minister Malusi Gigaba.
“It is anticipated that the emergency will continue until after the evening peak tonight,” he said. “An assessment will be made on the prognosis for tomorrow.”
A labor strike at the three largest platinum-mining companies in South Africa, the biggest producer of the metal, has brought some relief to the electricity grid, with the mines reducing power demand by about 400 megawatts, Eskom’s Etzinger said Feb. 26.
“Eskom has basically no emergency capacity, which means it cannot absorb any hits on random events,” Peter Attard Montalto, a London-based emerging-markets economist at Nomura International Plc, said in a text message.
There’s been no indication of how long the situation may last, according to the EIUG’s Nel. “It depends on what the stockpile size would be.”
There is a 60 percent chance of rain every day through at least March 12 in eMalahleni, a town in the coal-rich Mpumalanga province, according to the South African Weather Service’s website. The nearby Kruger National Park, the game reserve that’s the size of Israel, has closed some camps and will have to find alternative accommodation for tourists because of flooding, it said in an e-mail.
Power plants are unable to run at their maximum level when coal becomes saturated, as it has, because the grinding process done to feed the fuel into generators “becomes quite difficult,” Tony Stott, an Eskom spokesman, said by phone. The transportation and mining of coal also become issues after exceptional amounts of rain, he said.
Eskom will have to evaluate whether it needs to ask large users to cut demand by more than 10 percent, Water and Environmental Affairs Minister Edna Molewa told reporters in Cape Town today, following a fortnightly meeting of the Cabinet.
“The issue around Eskom is really a challenge,” she said. “We haven’t had any information about the negative impact that would be realized. It’s not an intention to strangle the big users.”
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