Eskom latest: S&P positive credit watch; blackout levels lowered

S&P Global Ratings put Eskom’s debt assessment on positive watch.

The move follows the announcement last month that Eskom will receive R254 billion in debt relief from the government, the ratings company said in a statement on Tuesday. S&P expects the move “will address Eskom’s near-term debt obligations once implemented and give Eskom room to focus on operational improvements and electricity-sector reform targets,” it said.

S&P could raise Eskom’s CCC+ rating by one or more notches based on the expectation that the utility’s liquidity position will strengthen and that the risks of a near-term default event will reduce once the debt relief agreement is implemented. Moody’s Investors Service raised its outlook on Eskom ratings to positive for the first time in 15 years after Finance Minister Enoch Godongwana said in October that the government would take over some of the company’s debt.

Blackout levels lowered (March 14, 1:58 p.m.)

Eskom will implement so-called stage-three load shedding — in which 3 000 megawatts is removed from the national grid — from 5 a.m. until 4 p.m. starting Wednesday, according to a statement on Twitter. The utility will still cut 4 000 megawatts in the afternoons and at night this week.

Tight reserve margin (March 14, 1:46 p.m.)

Eskom will maintain a reserve margin of only 2 200 megawatts, which is equal to a buffer of 7% on average during evening peak demand, Cape Town-based news website Netwerk24 reported, citing the utility.

The reserve margin is the difference between net system capability and peak demand and provides for unforeseen faults, which could lead to a mismatch between demand and supply of power, and a collapse of the grid.

Contingency plans to protect food production (March 14, 1:45 p.m.)

South Africa’s government has contingency plans in place to safeguard key food-production facilities against an escalation in power cuts, the nation’s agriculture minister said.

Measures have been taken to ensure abattoirs can continue operating and animal vaccines are protected, Agriculture, Land Reform and Rural Development Minister Thoko Didiza said in an interview.

Order for supply, installation of wind turbines (March 14, 10:10 a.m.)

Independent power producer Red Rocket SA placed an order with Denmark-based Vestas Wind Systems for the supply and installation of wind turbines to produce 373 megawatts of electricity.

The order is for Red Rocket’s Brandvalley, Rietkloof and Wolf wind parks in the Western Cape and Eastern Cape provinces, Vestas said in a statement on Tuesday.

The projects are part of the so-called Bid Window 5 of South Africa’s Renewable Independent Power Producer Programme that’s aimed at supplementing electricity supply because Eskom can’t meet demand with its aging coal-fired plants.

Food inflation concerns (March 14, 9:51 a.m.)

South Africa’s central bank is concerned that power cuts are driving up food prices and general inflation expectations.

In addition to the global dynamic to elevated food costs, domestic electricity shortages are disrupting the production and storage of food, Reserve Bank Deputy Governor Rashad Cassim said in a speech published on the central bank’s website on Tuesday.

Rolling electricity blackouts that are being implemented by state power utility Eskom are also adding to the local news flow being mostly rand-negative, which is a further risk to inflation, Cassim said.