Eskom to declare force majeure on wind farms

Eskom has told independent producers of wind-generated power that it will declare force majeure on their power purchase contracts due to a lack of demand for electricity during the lockdown.

Since the start of lockdown, energy demand has plummeted as businesses, mines and smelters close completely or go into care and maintenance.

On Monday, demand was 9,500MW below normal, leaving Eskom with a surplus of energy that it is unable to sell.

Eskom has 20-year contracts with most independent power producers to pay for the energy they deliver.

Force majeure — or “superior force ”— is a doctrine in law in which unforeseeable circumstances prevent someone from fulfilling a contract through no fault of their own. It is most often used when a company is unable to pay suppliers.

Eskom spokesperson Sikonathi Mantshantsha said the energy generated particularly by wind producers in the early hours of the morning entered the grid at a time when energy demand was at its lowest.

“We have issued a force majeure to wind-power producers so that we may curtail them for a few hours every so often. In the event they are curtailed then we will give them back that opportunity at the end of the 20-year contract, on a day-for-day basis. They will suffer no losses,” he said.

Eskom also told new independent power producers that have recently completed their builds that it would not connect them to the grid during the lockdown, also invoking force majeure. It would also not assist projects under construction to be classified as an essential service, so they must either obtain a permit to continue construction independently or cease building.

The action by Eskom follows those declared by several mining operations in recent days, including Sibanye, Amplats and Implats as the economy comes to a sudden stop as a result of the Covid-19 global epidemic.

Concerns are growing that the hardship for companies and the losses to production will result in a spike in business failures and sharp contraction of the economy. Retailer Edcon last week told suppliers it could not pay them after losing 45% of its income in the two weeks before the lockdown, with CEO Grant Pattison saying he was not sure the company would reopen when the lockdown ends.

Eskom, which is struggling with a debt load that is approaching R500bn, is particularly vulnerable and will be hit hard by lost revenue. Even before lockdown, Eskom was not generating enough revenue to cover the cost of operations and debt servicing.