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South African miners hit again by Eskom's power cuts

Highlights

Sibanye-Stillwater, Amplats affected by power cuts

South Africa's president increases embedded generation cap

Load shedding to slow Q2 economic growth: analyst

South African mining companies are being affected by frequent and prolonged power cuts enacted by state power utility Eskom on May 16 because of recurring breakdowns and failures at several of the country's ageing coal-fired power stations.

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Sibanye-Stillwater, the world's largest platinum miner and second-largest producer of palladium, told S&P Global Platts June 11 that its production had "not significantly" been affected by the latest round of load shedding.

The company said it had established and agreed to protocols together with Eskom to better manage power outages and minimize the impact on its operations during the lower stages of load shedding and at times when the utility has low reserves of power.

Noting decadelong power constraints and outages, Sibanye-Stillwater senior vice president and head of investor relations James Wellsted told S&P Global Platts in an interview that Eskom generally provides an advanced warning of planned load shedding in order for the company to respond by reducing or curtailing its demand.

"Stage 1 and 2 typically requires a 10% reduction in demand," Wellsted said, noting that the company can achieve this over periods of low demand in a number of ways by shifting and reducing its energy-intensive activities.

"When you get to Stage 3 and 4, it does have more of an impact," Wellsted said, noting that it would have to then shut down mills and concentrators, which have a high energy intensity.

Anglo American Platinum

At one of the world's largest platinum producers, Anglo American Platinum (Amplats), spokeswoman Jana Marais told S&P Global Platts June 11 that the company's South African operations have been affected by Eskom's load shedding and load curtailment.

"While we have emergency-response plans to manage risks and evacuate employees safely in the event of power outages, load shedding has had an adverse impact on our operations," Marais said, noting that the company would continue to support the utility as it works to improve the reliability of its fleet.

Amplats said the creation of a supportive investment environment for embedded generation projects would "add additional power to the national grid, ease the burden on Eskom, and facilitate development of sustainable energy solutions that will unlock economic growth in South Africa."

Platinum group metals and chrome co-producer Tharisa told S&P Global Platts that as a low user of power, with a maximum energy requirement of 25 MW, it is "unaffected by load shedding" but that it has standby generation to withstand the effects of stage 4 load shedding.

Tharisa's head of investor relations and communication, Ilja Graulich, said in severe cases of load shedding, it chooses to not draw power from the Eskom grid, instead allowing other high-intensity operations, such as underground mines, to use the power.

Staged power cuts

Eskom, which generates around 95% of the country's power, continues to implement staged power cuts across the country in response to unplanned maintenance and breakdowns at its power stations, which have been "exacerbated by the high winter demand," Eskom said in a statement June 9.

Eskom said that for June 9, breakdowns had removed 13,995 MW of the utility's generation capacity from its total nominal generating capacity of 44,172 MW.

Eskom acknowledged a request for comment June 10 but had not responded to questions from S&P Global Platts by June 11.

With Eskom confirming in a statement June 9 that it expected capacity constraints to continue for the foreseeable future, Aleix Montana, Africa analyst at Verisk Maplecroft, said South Africa's chronic power supply problem has long dogged its economic outlook.

"While the economy returned to growth in the first quarter of 2021, the latest bout of load shedding will negatively impact the Q2 figures," the analyst said June 11 in response to questions from S&P Global Platts.

Montana said the mining sector, which is one of the main drivers of South Africa's economic recovery from the coronavirus pandemic, will be weakened by Eskom's inability to meet the country's energy demand, noting that "the intensity of load shedding will likely force miners to halt or reduce certain operations."

Embedded generation cap increased

South African President Cyril Ramaphosa announced June 10 that that government would amend Schedule 2 of the country's Electricity Regulation Act to increase the National Energy Regulator of South Africa's (NERSA) licensing threshold for embedded generation projects from 1 MW to 100 MW.

The amendment will exempt generation projects up to 100 MW in size from the NERSA licensing requirement, whether or not they are connected to the national grid -- removing a significant obstacle to investment in embedded generation projects.

"This intervention reflects our determination to take the necessary action to achieve energy security and reduce the impact of load shedding on businesses and households across the country," the president said in a speech.

Marais said Amplats welcomed the embedded generation announcement, as a "positive step in solving South Africa's energy crisis," in which the mining sector can play an instrumental role.

Montana said that although the government's new regulation will make it easier for companies to produce their own power, "operators will continue to depend on Eskom in the short term."