Eskom projects no power cuts this winter, warns of lingering risks

South Africa’s state power utility said it should be able to avoid instituting electricity cuts this winter thanks to a marked improvement in the performance of its plants, while highlighting longer-term supply risks and mounting overdue debt as key concerns.

Eskom projects no outages between April and August, and should be able to maintain about 6 gigawatts of surplus generation capacity during peak usage times, Chief Executive Officer Dan Marokane said in an interview on Wednesday.

Businesses and households had to contend with energy shortages for years before Eskom stabilised the system, crimping output and weighing on the rand and government bonds. The utility’s upbeat winter outlook is the latest sign that Africa’s biggest economy may have turned the corner and that a rally in the nation’s assets, which was interrupted by the war in Iran, may still have some way to run.

The so-called energy-availability factor from Eskom’s plants has risen to to 65.4%, from 54.6% three years ago, with unplanned losses of generation capacity dropping significantly. The utility supplied electricity 98.9% of the time in the past financial year and outages haven’t been instituted for more than 300 days.

The firm has also sharply reduced its use of diesel in power-peaking plants, saving almost R27 billion ($1.6 billion).

Risks remain, however. The debt municipalities owe to Eskom has climbed to about R110 billion, straining its balance sheet and complicating its borrowing plans.

“Our biggest Achilles heel here is municipal debt,” Marokane said. “If the municipalities were paying us even half of what is due and outstanding on an annual basis, our requirement to go borrow will be very low.”

Eskom plans to tap capital markets around 2028, but its ability to do so cheaply will depend on continued operational improvements, progress on reforms and further credit-rating upgrades — all of which remain tied to resolving its financial and structural constraints.

Meanwhile, delays in bringing new generation capacity online are raising questions about South Africa’s ability to maintain a reliable power supply as older coal-fired plants are retired. While the government has awarded tenders to build a number of renewable energy projects, only about half of them have been completed, and key gas-to-power developments face regulatory and execution hurdles.

“A conversation we need to have as a country is one that deals with how we safeguard energy security going forward,” Marokane said, adding that plant closures are conditional on sufficient new and dispatchable capacity being available.

Failure to deliver that capacity could create supply gaps by the end of the decade, Eskom and grid operator assessments show, potentially forcing the authorities to reconsider the timing of decommissioning.

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