VZCZCXYZ0007
RR RUEHWEB

DE RUEHSA #0168/01 0251512
ZNR UUUUU ZZH
R 251512Z JAN 08
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 3284
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0724
RUEHRL/AMEMBASSY BERLIN 0578
RUEHBY/AMEMBASSY CANBERRA 0601
RUEHLO/AMEMBASSY LONDON 1394
RUEHMO/AMEMBASSY MOSCOW 0724
RUEHOT/AMEMBASSY OTTAWA 0554
RUEHFR/AMEMBASSY PARIS 1257

UNCLAS PRETORIA 000168 
 
SIPDIS 
 
SIPDIS 
SENSITVE 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
DEPT FOR AF/S, ISN, EEB/ESC AND CBA 
DOE FOR T.SPERL, G.PERSON, A.BIENAWSKI, M.SCOTT, L.PARKER 
 
E.O. 12958: N/A 
TAGS: ENRG EMIN EPET EINV SENV BEXP SF
SUBJECT: LOAD-SHEDDING WORSENS - COAL SUPPLY WOES SHUT MINES 
 
REF: Pretoria 132 and previous 
 
¶1.  (SBU) SUMMARY:  South Africa's state electricity supplier 
Eskom's load-shedding (rolling outages) is getting worse before it 
gets better.  Major gold and platinum mines have substantially shut 
down due to Eskom's inability to guarantee electricity supply due to 
coal supply and quality negatively affected by excessive rains.  The 
mine shut-downs are characterized as temporary, but the resolution 
timing is unclear.  An embattled SAG warned that it may have to 
invoke "emergency measures" if it cannot achieve a rapid improvement 
to the coal and electricity situation.  Over twenty per cent of 
Eskom's capacity is unavailable due to planned and unplanned 
maintenance and coal supply problems.  Business and government 
complain of inadequate coordination and planning from Eskom as it 
imposes load-shedding and direr measures.  End Summary. 
 
--------------------------------------------- 
Electricity Crisis Shuts Gold, Platinum Mines 
--------------------------------------------- 
 
¶2.  (SBU) Gold majors AngloGold Ashanti, Gold Fields, and Harmony 
Gold, as well as platinum giant Anglo Platinum said on January 25 
they had stopped underground mining operations at all South African 
mines, after state power utility Eskom could not guarantee 
electricity supply.  AngloGold Ashanti's Mponeng Mine General 
Manager told Energy Officer on January 25 they had not sent down the 
full production day-shift and were evaluating the night shift, 
because Eskom could not guarantee its "uninterruptible" electricity 
supply contract.  He said the company had made the decision for 
safety reasons, even though they have sufficient back-up capacity 
for ventilation, cooling, and emergency evacuations.  According to 
press statements, all major gold and platinum company spokespersons 
confirmed that underground production had halted. 
 
------------------------------ 
Wet Coal Supply is the Culprit 
------------------------------ 
 
¶3.  (SBU) A Chamber of Mines official told Energy Specialist that 
Eskom had called late on January 24 to advise mines to run on 
"survival power only" as a temporary measure on January 25.  He 
cited flooding of the coal stockpile at Eskom's largest coal-fired 
plant, 4,100 MW Kendal in the northern province of Mpumalanga, so 
that the plant was attempting to run on direct coal production from 
the contiguous mine.  Sustained heavy rains in northern South Africa 
are negatively affecting coal supply and quality in open pit mines, 
as well as hurting coal transport logistics. 
 
---------------------------------- 
SA May Invoke "Emergency Measures" 
---------------------------------- 
 
¶4.  (SBU) The SAG warned on January 24 that it might have to invoke 
"emergency measures" to safeguard adequate quantity and quality of 
coal to Eskom.  Public Enterprises Minister Alec Erwin announced 
there would be urgent engagement with the country's coal-miners over 
the next few days to encourage a voluntary response.  Speaking at a 
media briefing, he said: "Should there be no rapid improvement, we 
will not hesitate to use emergency measures".  Erwin referred to a 
Qwill not hesitate to use emergency measures".  Erwin referred to a 
hike in electricity prices, mandatory sectoral quotas, rigorous 
conservation, renewable energy, and penalty and incentive systems, 
but did not provide details on implementation.  He insisted that the 
SAG would not stop contracted projects or freeze new projects. 
Erwin acknowledged that the situation was exacerbated at present by 
the heavy and unrelenting rains of the past week.  He apologized for 
the "unprecedented and unplanned" outages, saying that, when it came 
to making timely plans to expand supply to cope with increased 
electricity demand, "government got it wrong." 
 
¶5.  (U) In a press statement released on January 25, the SAG stated 
that the electricity outages "must now be treated as a national 
electricity emergency that has to be addressed with the urgent, 
vigorous and coordinated actions commensurate with such an emergency 
situation."  In addition: "We are running our power system at 
utilization levels that are over-stretching maintenance and if we do 
not stabilize this, we could drive our systems into higher levels of 
stress - this we cannot do!"  Finally, "the situation constitutes an 
emergency and we are taking emergency steps to move the system out 
of its current state of criticality, including creating an emergency 
task team led by the Minister of Energy.  There is no threat to the 
successful holding of the World Cup in 2010 as plans to ensure 
electricity security in that period are well advanced." 
 
¶6.  (SBU) Eskom has described 20 percent of its almost 40,000 MW 
capacity as unavailable over the last week because of planned and 
unplanned maintenance.  Its reserve margin is identified as anywhere 
from zero to eight percent.  Eskom said on January 25 that 10,000 MW 
- or 25 percent - of its capacity was unavailable, finally forcing 
the unprecedented call to the mining industry to effectively shut 
down.  Eskom has also admitted to facing a dire skills shortage. 
Senior Eskom officials corroborated separately to Energy Officer and 
Energy Specialist that the company was experiencing significant 
skills shortages.  Finally, the Eskom officials noted that Eskom's 
fairly old infrastructure was exhibiting increased need for 
maintenance and repairs due to age, high usage, and deferred 
maintenance.  They also corroborated problems with coal supply, 
quality, and handling. 
 
-------------------------- 
How Do We Get Out of This? 
-------------------------- 
 
¶7.  (SBU) Eskom and the SAG have mooted many ways to mitigate the 
electricity supply deficit from rationing (per Brazilian 
experience), voluntary or mandated conservation, solar power 
(residential water heaters and traffic lights - if it ever stops 
raining), other renewable energy measures, and co-generation.  Eskom 
targets five-year capital expenditures of around $ 43 billion and 
calls for substantial price increases over time to reach 
international standards.  An Eskom report indicated that reserve 
margins will remain well below the international standard of 10-15 
percent through 2014 when significant new coal-fired plants come 
on-line.  An advisor at the Presidency complained to Economic 
Officer that Eskom was not coordinating its actions, and even 
suspected that it was hyping the problem to get the government to 
approve capital injections and back out of the Coega mega aluminum 
smelter project (owned by Rio Tinto-Alcan, near Port Elizabeth). 
Before the current crisis, Eskom and the SAG were proposing greater 
cooperation with industry and better planning and warning for 
enforced load-shedding.  AngloGold Ashanti's Mponeng Mine's General 
Manager told Energy Officer that they had had a good relationship 
with Eskom and - until January 25 - had had no reason to question 
their "uninterruptible" supply.  In addition, the mine was able to 
help Eskom with over 20 percent voluntary sustained reduction in use 
of power. 
 
¶8.  (SBU) South Africans continue to endure the strain of 
load-shedding across the country and its negative impact on traffic, 
security, business, and lifestyle.  The press is full of stories of 
costs to small and large businesses.  Supermarkets, cinemas, and 
many small businesses regularly go dark.  The cable car at Table 
Mountain in Cape Town even stopped for a few hours due to 
QMountain in Cape Town even stopped for a few hours due to 
load-shedding and failure of emergency systems, trapping dozens of 
tourists in a suspended cable car.  There is a run on generators - 
for those that can afford them, so there are reports of shortages of 
generators.  Some industry observers have warned of potential diesel 
fuel shortfalls in northern South Africa. 
 
¶9.  (SBU) There is also confusion about the status of South Africa's 
exports to neighbors.  In Minister Erwin's press conference, there 
was emphasis that there would be no cutting of power supply to other 
countries to improve South Africa's supply, perhaps reflecting 
political allegiance to the Southern African pool system.  While 
South Africa exports nominal amounts to Namibia, Botswana, and - 
previously - Zimbabwe, it imports 1,400 MW from Mozambique and plans 
to import large amounts from Lesotho.  The amount of imported power 
from Mozambique has gone down from time to time during recent 
episodes of load-shedding and Eskom's projections show it in 
question.  Eskom officials have told Embassy officers that the 
export contracts with neighbors are "infirm" and therefore 
interruptible in the event of no surplus supply (like now).  The 
Namibian press has reported that its imports are reduced or stopped 
and that the local power utility has to use expensive local 
generators to produce power. 
 
---------------------------------------- 
COMMENT - Load-Shedding as a Way of Life 
---------------------------------------- 
 
¶10.  (SBU) The proximate cause of load-shedding has shifted from 
excessive demand to problems with supply.  It appears that 
load-shedding will remain a sustained problem over coming years 
while waiting for new supply.  There is broad recognition that the 
government dithered over grappling with the potential role of the 
private sector, and subsequently failed to heed warnings from Eskom 
and its own 1998 energy policy that it needed to bring on new plants 
in the face of growing demand from both economic growth and 
increasing electrification.  The South African grid will remain at 
risk to unplanned maintenance outages in its aging and inadequately 
maintained infrastructure.  There is likelihood that the SAG will 
cut corners from an environmental perspective to seek to bring on 
line new and de-moth-balled facilities, while it runs its existing 
stock flat-out. 
 
BOST