The real reason for load-shedding – And it’s not what Eskom is telling you

Contrary to what Eskom is telling South Africans, the real reason for the current load-shedding is its poorly-skilled staff and a subsequent decline in the adherence to standards of operating practices.

This is the view of equity research firm Primaresearch, which released a report titled “Eskom: Winter is Coming”.

Eskom’s management is telling the public that poor plant performance due to a lack of maintenance and an ageing plant infrastructure is to blame for load-shedding.

Eskom is now spending most of its resources on maintenance to prevent blackouts from becoming a long-term reality in South Africa.

Primaresearch’s report, however, highlights that the data does not show a lack of power station maintenance in recent years.

“Planned maintenance (PCLF – planned capability loss factor) since 2014 has been at or higher than management’s target of 10%,” the report said.

In 2016, the PCLF ratio was high at 13.0% of total capacity, followed by 12.1% in 2017.

“After this level of maintenance, we would have expected improved plant performance from 2018,” it said.

Primaresearch added that maintenance spending increased by 12.0% between 2010 and 2019.

“Maintenance spend has been relatively flat over the past three years, but at R14 billion per year it does not support the argument that maintenance was inadequate over the past few years,” it said.

The charts below show Eskom’s “Planned Maintenance (PCLF)” and “Maintenance spend” over the past 10 years.

The current wave of power cuts is fundamentally different

Primaresearch’s analysis shows that the current wave of power cuts is fundamentally different from earlier rounds of load-shedding.

It said the load-shedding in March 2014 was caused by abnormally heavy rains, which resulted in handling difficulties with wet coal.

Between July 2018 and March 2019, load-shedding was caused by strike action, low coal stocks, planned maintenance, and unplanned outages.

The most recent load-shedding is, however, not due to a shortage of installed capacity, but a decline in the operational performance of the plants.

This, the research firm argues, is a consequence of the focus on staff costs which led to poor adherence to standards at power stations.

It said many skilled engineers left the company over the past few years and that uncertainty surrounding the company has resulted in a significant deterioration of staff morale.

“We believe the focus on increased maintenance will not be sufficient to arrest the high level of unplanned outages,” Primaresearch said.

It argues that an increase in engineering and technical skills at the power stations are core to an effective long-term solution to Eskom’s operational failings.

Brace yourself for more load-shedding

Primaresearch warns that increased maintenance will not be enough to stave off future blackouts in South Africa.

The firm forecasts that the period from April to September 2020 could see higher levels of load-shedding if unplanned maintenance remains at current levels.

“In our view, the poor generation performance is not structural in nature and improvement in energy availability can be achieved by focusing on the company’s human capital.”

It further advised that Eskom should re-employ technical staff and engineers that left the company over the past 10 years.

“They may have to be enticed by generous sign-on bonuses, which could be linked to improved plant performance and energy availability at the station,” it said.

Other necessary interventions include a strong focus on adherence to standards of operating practices, ceasing retrenchment, and improving Eskom’s public sentiment.

Now read: Eskom has 16,000 staff too many, but they are untouchable

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The real reason for load-shedding – And it’s not what Eskom is telling you