Is the load-shedding holiday over?
Eskom intensified its plant maintenance and fast-tracked the recovery of stock levels from December 13 to January 13, when there was a low demand for electricity.
But Eskom’s energy availability factor for the year declined by 6.9% from 78.8% in 2017 to 71.9% in 2018, according to energy expert Chris Yelland. For the last week of December it reached a new low of 63%. The energy availability factor refers to the availability of Eskom’s plant fleet once they have taken into consideration planned maintenance and unplanned breakdowns.
Planned maintenance outages amounted to 15% of the outages in the third week of December and 18.4% in the last week, said Yelland. Unplanned breakdown outages amounted to 19.5% and 17.5% of the fleet respectively.
Yelland said the high level of planned maintenance outages was expected because demand is low over the holiday period, allowing Eskom to do additional maintenance.
But, he said: “The level of the unplanned breakdowns have been extraordinarily high. That’s roughly 20% of their fleet which is down [because of] unplanned breakdowns.”
Eskom’s target for planned and unplanned outages is 10% for both.
Yelland said the high level of unplanned breakdowns pushed the country into stage two load-shedding last year. “If they get the same level of unplanned shortages this year as they had last year then the chances are we are going to go into load-shedding. But you can’t say for sure.”
In December, Public Enterprises Minister Pravin Gordhan, in a joint press briefing with Eskom chief executive Phakamani Hadebe and board chairperson Jabu Mabuza, told the public that there would be no loadshedding during the holiday period.
Inadequately maintained and ageing power plants as well as coal shortages had resulted in Eskom struggling to meet demand for electricity.
Gordhan said, ideally, there would be no stage two load-shedding when South Africans returned to work after the December break.
Eskom’s long-term plans are to restore its energy availability factor to 75% by November, in line with the nine-point system recovery plan to improve generation performance.
“It would be a wrong interpretation of what Minister Gordhan said to think we can just solve Eskom’s problems in a few weeks,” Yelland said.
He said Eskom would have identified many of the problems during the holiday period, but, without “deep maintenance”, which would require an extended shutdown, their operations will not have improved significantly.
The utility concluded 35 new coal contracts in 2018 and, in anticipation of the rainy season, it created three days of compacted strategic stockpiles at its power stations.
The rain expected between December and March “could impact coal handling and feeding to the boilers with a potential impact on generation production,” Eskom said in a statement released in December.
Tebogo Tshwane is an Adamela Trust journalist at the M&G
Brace for pain
If you have big plans for 2019, beware. Another tough year is probably ahead. The World Bank has warned that the global economy is expected to grow by only 2.9% this year and 2.8% in 2020-2021. International trade and investment has softened, trade tensions remain elevated and some large emerging markets have experienced substantial financial pressures. Things are likely to get worse rather than better. The bank has noted that downside risks have become more acute. “Disorderly financial market developments could disrupt activity in the affected economies and lead to contagion effects,” it said in its biannual global outlook. “Trade disputes could escalate or become more widespread, denting activity in the economies involved and leading to negative global spill-overs.” This is not good news for an already weak local economy. The bank is predicting that it will grow at 1.3% this year, rising to 1.7% and 1.8% respectively for 2020 and 2021.
Temporary relief
On a mildly better note, the manufacturing sector ended last year in positive territory, though it may not be sustained. The Absa Purchasing Managers Index in December came in at 50.7, up from 49.5 in November. This is the first time the gauge has risen above 50 points since February 2018, which indicates the sector is growing. But economists say this may not hold. Investec economist Kamilla Kaplan warns that a meaningful rebound in activity in the sector is likely to be cut short by slowing global trade. On the local front, if load-shedding begins anew, and depending on its extent and severity, production could be negatively affected.
US debt fears
Debt in the nonfinancial business sectors of the United States is growing faster than the economy and the utilities and real estate sectors are the most indebted. This is according to the Institute of International Finance’s Financial Strengths and Vulnerabilities Index, which focuses on a range of corporate financial vulnerabilities. The index says the utilities and real estate sectors have a high debt/cash ratio of 30 times and 16 times respectively, whereas the information technology and health sectors have the lowest ratio and relatively large cash holdings to provide a buffer should there be any adverse shocks. As the Federal Reserve undergoes policy normalisation, there’s a risk that rising interest rates could pose a serious threat for over-indebted sectors. “It is worth noting that an increasing number of medium-to-large US firms are having difficulty servicing debt while many smaller firms look vulnerable to higher short-term borrowing costs and a potential slowdown in corporate earnings growth.”
World Bank president resigns
The World Bank’s president, Jim Yong Kim, is serving his last weeks in office after announcing on Monday that he will join a private-sector infrastructure investment fund. Reuters reported that he resigned well before his term ends in 2022 because of differences with the Trump administration about climate change and the need for more development resources. Effective from February 1, World Bank chief executive Kristalina Georgieva will assume the role of interim president. Kim said: “It has been a great honour to serve as president of this remarkable institution, full of passionate individuals dedicated to the mission of ending extreme poverty in our lifetime.”