South Africa's latest power cuts highlight Eskom challenge

* Eskom cuts 2,000 MW from national grid

* Highlights continued crisis at state utility

* Raises risks for economic outlook

* Critical month for energy policy (Adds quotes from Johannesburg residents)

By Alexander Winning and Onke Ngcuka

JOHANNESBURG, Oct 16 (Reuters) - South Africa was hit by power cuts on Wednesday after a number of Eskom generating units broke down, highlighting the challenge facing President Cyril Ramaphosa in rescuing the state power firm.

Eskom said it would cut 2,000 megawatts (MW) of power from 9 a.m. local time (0700 GMT) until 11 p.m. (2100 GMT) on a rotational basis across the country, the first power cuts in around seven months.

The rand fell as much as 1% against the dollar at one stage after Eskom's comments, which will put more pressure on the country's weak economy ahead of a review by Moody's, the last of the big three credit rating agencies to have an investment grade rating on South Africa.

Eskom produces more than 90% of South Africa's electricity but has been hobbled by technical faults at its fleet of mainly coal-fired power stations.

Johannesburg residents, who have grown used to frequent power outages over the past decade, expressed renewed frustration about the impact on their lives.

"It's almost year-end and this is when we make money," said Bridgette Moyo, 29, a hair stylist. "We make money out of this business through electricity; if it's not there then we are going down."

Eric Gyimah, 26, a media consultant, said the power cuts were a "huge inconvenience".

Eskom said close to a quarter of its roughly 45,000 MW capacity was offline on Wednesday because of unplanned breakdowns and faults including boiler tube leaks and broken a conveyer belt for coal.

Those problems were compounded by the fact that supplies of water for its pumped storage and diesel for its open-cycle gas turbines had run low, the company said.

Eskom Chief Operating Officer Jan Oberholzer told state broadcaster SABC that the power system could be back to normal in a week's time.

A financial crisis at the company rooted in soaring expenditure, huge cost overruns on two coal power stations and years of low tariff awards resulted in a loss of more than 20 billion rand ($1.3 billion) in the year to the end of March.

Eskom executives had achieved some improvements in plant performance earlier in the year, but analysts said the company's spare capacity had declined in recent weeks.

UNDER PRESSURE

Ramaphosa, who came to power in February 2018 with a pledge to fix ailing state firms, is under pressure to revive the flagging economy.

Gross domestic product is forecast to grow less than 1% this year, with the problems at Eskom one of the main contributing factors.

Ramaphosa has announced plans to split Eskom into different units for generation, transmission and distribution to make it more efficient, but that will take many years to implement.

The government has also pledged to provide a cash injection of 59 billion rand over the next two years, on top of 230 billion rand of bailouts spread over the next decade.

Foreign and local investors want to see signs that Eskom's recovery is gathering momentum.

The power cuts come at a critical time for energy policy, as cabinet ministers prepare to debate the country's long-term electricity generation plan.

Publishing that plan is seen as crucial to unlock sorely needed investment in power generation.

The government is also expected to name a new chief executive for Eskom after the previous CEO stepped down in July and publish a paper detailing further steps to reform the utility.

Moody's is scheduled to review South Africa's credit rating on Nov. 1.

($1 = 15.0134 rand) (Reporting by Alexander Winning and Onke Ngcuka Editing by Louise Heavens/Susan Fenton/Dale Hudson/Jane Merriman)

First Published: 2019-10-16 08:30:57
Updated 2019-10-16 14:16:59


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