South Africa suffers record power outages in 2 years

South Africa suffers record power outages in 2 years

South Africa is suffering from the worst power outages in more than two years due to the state electricity company's multiple plant breakdowns after illegal protests followed a deadlock in wage negotiations.

Eskom Holdings SOC Ltd., which generates the vast majority of the nation's power, will implement 6,000 megawatts of cuts for six hours from 4 p.m. on Tuesday and Wednesday to prevent a complete shutdown of the grid. That is enough energy to supply almost 4 million South African homes.

The outage was caused by unlawful and unprotected labor action, which has caused widespread disruption to Eskom's power plants, the company said in a statement.

The rand weakened by 1.1% to 16.034 a dollar at 3: 34 p.m. in Johannesburg. The last time rationing was so severe was in December 2019, when mining and manufacturing output were curtailed. The capacity of the utility is about 45,000 megawatts. Eskom's credit risk went up, with the yield premium of its 2028 dollar bonds over similar-maturity US treasuries widening to 847 basis points, the most since Nov. 2020.

It is a further headache for Eskom Chief Executive Officer Andre de Ruyter, who has been in his position for more than two years and has overseen a series of missed targets to improve the utility's operational performance. The country experienced record outages in 2021 despite the stability of management over the past decade. There have been 60 days of blackout this year.

The company continues to lose money, and relies on government bailouts to service 396 billion rand of debt.

According to Fanele Mondi, CEO of the Energy Intensive Users Group, who has members such as Anglo American Plc and Glencore Plc account for about 40% of the nation's electricity consumption.

The stage 6 loadshedding will hit mining and metals processing, which are high energy users, companies said Tuesday.

Read more: Why a Broke Utility is Maiming South Africa s Economy: QuickTake

Eskom, which supplies nearly all of South Africa's power from coal-fired plants, has subjected the country to intermittent outages for more than a decade because it can't meet demand. Two newly built coal-fired plants have proved unreliable, and the company has had to take defective generating units offline for repairs.

The plan to add capacity from private suppliers has been slowed due to court challenges and government inaction. Eskom says that the country needs additional 4,000 to 6,000 megawatts of generating capacity to ensure a secure energy supply.

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