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Winter electricity tariffs, low prices prompt Samancor to switch out furnaces

JOHANNESBURG – Chrome producer Samancor Chrome intends to switch out furnaces at its eMalahleni, Middelburg, Steelpoort and Mooinooi operations, owing to the higher winter tariffs charged by Eskom, paired with a “sudden” downturn in the chrome market.

The recent downturn saw chrome ore prices dropping from $350/t to below $150/t, while ferrochrome prices in China dropped from $1.15/lb to $0.65/lb.

The company said at the weekend that this would further constrain its cash position, as it was already facing financial challenges.

“Variable costs, such as the high cost of electricity and reductant prices, greatly contribute to making it unfeasible to run some of the furnaces, which are currently producing at a cost higher than the selling price,” Samancor noted.

It added that it was in the process of evaluating which furnaces would temporarily be switched off, noting that its cash position would most probably not improve during the winter months owing to the high cost of electricity.

Source : Mining Weekly

Eskom downgrade has AMSA CEO worried about steel

With ratings agency Moody’s Investors Service cutting State power utility Eskom’s credit to two notches below investment grade on Wednesday, ArcelorMittal South Africa (AMSA) CEO Wim de Klerk expressed his concern about the downgrade’s impact on the local steel industry.

Addressing delegates at a steel industry workshop focused on the 12% safeguard tariff on hot-rolled coil, starting in July, De Klerk highlighted that the economy was in trouble.

“I spend a lot of time talking to government, trying to find out where the major projects are. Money is needed to fund those projects,” said De Klerk, adding that the downgrade would result in government funds having to be set aside for guarantees to secure loans for Eskom.

He further highlighted that China’s steel capacity was a global issue also affecting South Africa’s steel industry.

“Globally, China is the largest steel producer with a massive oversupply. It is also the world’s largest steel exporter [and is] taking away South Africa’s traditional export markets . . . We can’t beat China’s prices,” he said.

De Klerk further noted that 18 countries had trade cases against Chinese steel imports, while 27 countries had started trade investigations into the Asian nation.

The AMSA CEO added that, in South Africa, Chinese imports were up six-fold in six years.

“In a stagnant economy, these imports have been at the cost of local production,” he said, adding that, without a primary steel producer and downstream manufacturing being impacted, South Africa would become a consuming nation.

He also said that there was no margin in the industry.

“There’s a belief that trade is making money and that is not true. Government is aware of these problems, trends and job losses,” said De Klerk.

He added that government wanted the steel industry to come up with solutions, citing that the intent was there but that implementation was lacking.

Addressing the upcoming safeguard tariff implementation, De Klerk said AMSA made a mistake while negotiating two years ago.

“We started safeguard tariff negotiations to protect ourselves . . . without thinking of the industry as a whole. We didn’t ensure that knock-on effects were felt downstream,” he said.

De Klerk further noted that AMSA had broadened its approach from this initial strategy, which focused primarily on securing protection for products produced by AMSA.

The intention is to collaborate with downstream customers for industrywide protection.

De Klerk further highlighted how important it was for industry to work together, noting that AMSA was ready to assist industry participants in pursuing greater protection for the downstream industry. He also insisted that additional safeguards were required to protect the domestic steel industry – upstream and downstream – as the current levels of protection were not enough to stem the influx of imports.

Source : Engineering News

Eskom’s Medupi Unit 4 synchronised to the grid

State-owned power utility Eskom on Thursday said Unit 4 at the Medupi coal-fired power station project, in Limpopo, had been synchronised to the national power grid this week.

This was the third of six units to come on stream and marked a key milestone towards the full commercial operation of the unit ahead of its scheduled commercial operation in 2018.

Unit 5 achieved successful synchronisation on September 8, 2016, and had reached commercial operation in April.

Medupi Unit 6 became commercially operational in 2015.

Source : Engineering News

Molefe removed as Eskom CEO, board might go too

Government on Wednesday ordered that Brian Molefe’s return to the helm of Eskom be rescinded and conceded that it had inflicted reputational harm on the country and the power utility.

Public Enterprises Minister Lynne Brown told a media briefing she had met with the Eskom board and instructed it to remove Molefe from the post, following a decision by an inter-ministerial commission that considered the circumstances surrounding his controversial reappointment earlier this month.

Brown said she would appoint an acting CEO within 48 hours, and hinted that she could also remove the board next month over the debacle that drew criticism from the ruling African National Congress and sent the opposition to court to demand Molefe’s removal. She said she would, however, wait until after Eskom’s annual general meeting in three weeks’ time.

She would not act sooner so as not to cause “more scurrying in the markets”.

Finance Minister Malusi Gigaba concurred that “there obviously has to be some consequences for this situation that we have come out of”.

Brown said it was not clear to her at this stage whether Molefe would receive a termination pay-out, and she would discuss the issue with the board.

“I have an idea in my head but I can’t put my head on the table,” she said, adding that she had not spoken to Molefe, but left it to the board to inform him of government’s decision.

Molefe left Eskom under a cloud in November last year after he was implicated in former Public Protector Thuli Madonsela’s report on State capture.

He was reappointed to his old post two weeks ago, for the stated reason that he had mistakenly been granted early retirement which would entitle him to a pension pay-out of R30-million, a move that was vetoed by Brown.

The ministerial committee said on Wednesday it was of the view that the board could have corrected the administrative errors relating to Molefe’s contract in other ways than reinstating him.

“We are saying that the decision that was taken was unfortunate,” Gigaba said.

“The events of the last three weeks have been quite painful in a number of ways…. the board, if it sought to correct the anomalies in the issues that arose when the group CE resigned or retired, they could have done so administratively without having taken the decision that they took.

“It has caused government a lot of harm… it has caused Eskom itself a lot of reputational damage, it has caused board members a lot of reputational damage.”

Gigaba stressed that government’s decision should not be seen as a reflection on Molefe, who previously headed Transnet and served as an ANC MP for a few months this year.

“He is well capable. He has proven himself in a number of his previous responsibilities. We believe he still has an enormous contribution to make to the country, in whatever way it will be.”

He added: “There is no decision on our part of where he is going, there are no plans to appoint him anywhere else.”

Justice Minister Michael Masutha, who led the media briefing, said Eskom had been forced to make serious concessions in the papers it filed in opposing the Democratic Alliance’s court application to have Molefe removed, including that his contract wrongly allowed him to retire at the age of 50, his current age.

He said, however, the IMC’s decision should not be read as any reflection on what the outcome of the application may have been.

After the announcement that Molefe’s contract was terminated, the DA’s public enterprises spokeswoman, Natasha Mazzone, said it was imperative that a full-scale parliamentary probe be instituted into the state of affairs at Eskom.

Brown last week announced that she would be asking the Special Investigating Unit to investigate procurement problems at Eskom from 2007, to review all evidence gathered in the scope of seven separate investigations in recent years. This would include an investigation by PricewaterhouseCoopers that found that Eskom had failed to do due diligence when it hastily awarded a coal contract to the Gupta family’s Tegeta Exploration in 2015.

Molefe and Eskom chairman Ben Ngubane on Tuesday assured Parliament’s Standing Committee on Public Accounts that there had been nothing untoward about the deal as Eskom frequently concluded coal contracts without a competitive tender to prevent load-shedding.

Source : Mining Weekly

Gigaba slams Eskom’s ‘mistake’ of contradicting government policy on renewables

Finance Minister Malusi Gigaba says Eskom made a “mistake” by raising its corporate difficulties in relation to the signing of power purchase agreements (PPAs) with renewable-energy generators in a way that undermined the policy position of government on both the energy mix and the renewable-energy programme.

Speaking ahead of his departure for the Spring meetings of the International Monetary Fund and the World Bank in Washington DC, Gigaba stressed that government policy with regard to the integration of independent power producers (IPPs) into the country’s electricity network “remains unchanged” and that there should be no “uncertainty as to our commitment to the energy mix and the renewable-energy programme”.

“That is why, in view of the recent statements by some executive directors at Eskom . . . we’ve had Cabinet coming out to say: ‘We remain committed to renewable energy, to the renewable-energy targets that were outline in the Integrated Resource Plan (IRP) 2010 – we remain committed to all our plans as we have outlined’.”

Gigaba had also met with newly appointed Energy Minister Mmamoloko Kubayi to discuss the delayed signing of PPAs arising from the most recent bid windows of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The 37 outstanding contracts were scheduled to be signed on April 11, but the signing was postponed to enable Kubayi to become fully informed on the progress made under the REIPPPP and to ensure “concurrence” between herself and Public Enterprises Minister Lynne Brown.

It had been agreed that Gigaba and Kubayi would meet with Brown to address both Eskom’s concerns and its public statements that conflicted with stated policy. The issue Eskom was raising would be looked at collectively by the three Ministers, or by the Inter-Ministerial Committee (IMC) on Energy.

“The mistake that Eskom would make is to deal with corporate issues in a manner that undermines the policy decision of government.”

Nevertheless, Gigaba expressed serious misgivings about the manner in which Eskom had dealt with the IPP issue.

“If there are any concerns which have to do with corporate agreements, the strength of their balance sheet, they have to follow the proper channels to raise these issue with government as the shareholders.

“The best for Eskom would have been to go to the Minister of Public Enterprises and say to her: ‘Minister, we have the following issues’. Then the Minister will have to come to me, or call a meeting of the IMC on Energy, which will then deal with the issue collectively. But there is no single entity of government that can just make policy pronouncements on behalf of government, otherwise they will turn us into a Mickey Mouse organisation.”

The South African Renewable Energy Council (Sarec) expressed concern about the missed April 11 deadline, pointing out that “financial closure of duly procured renewable power for 37 PPAs now stands at almost two years.

Sarec chairperson Brenda Martin said that, since President Jacob Zuma’s State of the Nation Address confirmation that all outstanding PPAs would be signed, Eskom and the affected IPPs have been working to ensure that the necessary paperwork was up to date, so that financial closure could be achieved and construction could begin.

Eskom has indicated that it is willing to sign, but that it wants certainty on the cost-recovery mechanism in light of legal uncertainty surrounding the application of the Regulatory Clearing Account (RCA). The use of the RCA has been thrown into question by a Gauteng High Court ruling, which determined the most recent RCA adjustment to be “irrational, unfair and unlawful”. The National EnergyRegulator of South Africa is appealing the judgment, but will not process further RCA applications until legal certainty had been established. Therefore, it has only granted Eskom a 2.2% tariff increase for 2017/18.

In the absence of the RCA, Eskom argues that it does not have a clear mechanism to secure the revenue required to pay for the electricity arising from the renewables power stations. The utility has written to the signatories of the Government Support Framework Agreement (GFSA) – which guarantees support for the State-owned utility in meeting its obligation to buy electricity from renewable-energy IPPs – to discuss a possible triggering of government support in light of the RCA uncertainty. However, there has been no triggering of the GSFA.

PUBLIC-PRIVATE PARTNERSHIPS

The 37 renewables projects carry a combined investment value of R58-billion, as well as the potential to create 13 000 construction jobs. In addition, the REIPPPP has been held up as a model for public-private partnership in South Africa, with the previous bid windows having facilitated 102 projects, with a combined capacity of 6 370 MW and a combined investment value of R194-billion.

Gigaba indicated that he saw even greater scope for private-sector participation in South Africa’ infrastructureprogrammes and indicated that he planned to present short- and medium-term plans to Cabinet soon regarding ways to inject private capital into South Africa’s R1-trillion infrastructure programme.

The plans would reflect the fact that the balance sheets of many of South Africa’s State-owned companies (SoCs) were constrained, as well as the limitation government faced in extending further guarantees to enable those entities to raise the capital required to implement their infrastructureprogrammes. These constraints had been tightened as a result of the decisions of S&P Global Ratings and Fitch Ratings to downgrade South Africa’s foreign currency sovereign credit rating to junk.

“I have asked the department to work seriously on finalising the private-sector participation plan for the infrastructure programmes, because, quite clearly, we need to look at various sources of funding for our infrastructure build.”

 

Source : Creamer Media – Engineering News

Eskom raises power cuts as 1,500 Megawatts lost from Mozambique

Eskom Holdings SOC Ltd., South Africa’s electricity company, increased the amount of controlled power cuts nationwide after losing 1,500 megawatts of imports from Mozambique.

“They are having technical problems and so they can’t provide the power,” Eskom spokesman Khulu Phasiwe said in a phone interview.

About 300 megawatts of power imports were cut Wednesday after faults at Mozambique’s Cahora Bassa hydropower plant, and that was increased to 1,500 megawatts, according to Phasiwe. “We’ll have to wait and see” when the supply returns, he said.

Eskom increased scheduled blackouts to 2,000 megawatts in South Africa to keep its strained grid from collapse. The power cuts, known as loadshedding, are not only because of Mozambique, but also because Eskom’s fleet isn’t operating as it should. “If all our generators were running optimally we wouldn’t be importing this amount,” Phasiwe said.

 

Source – Bloomberg

 

Eskom appoints new SA contractor for Kusile

Cape Town – Eskom on Friday announced it appointed a new South African contractor to replace Alstom to execute the control and instrumentation (C&I) for the Kusile power station.

Kusile is situated at eMalahleni in Mpumalanga.

The local contractor, ABB South Africa, was selected from two suppliers which were evaluated as part of an extensive procurement process executed in parallel with the negotiation and subsequent consensual termination of the C&I contract, Eskom said in a statement.

Earlier on Friday, Eskom said it and Alstom Save had consensually agreed to terminate the C&I works contract for Kusile, effective as of 17 April 2015.

Eskom has been battling to bring its three new coal stations online, due to massive delays in construction and testing.

Out of Kusile, Medupi and the Ingula pumped-storage facility, only unit 6 at Medupi is adding power (794MW in total) to the grid.

Alstom has been operating in South African for over 100 years and employs 600 permanent staff. It has provided major equipment to 12 out of the 13 coal-fired power plants in the country as well as Koeberg Nuclear power station. 80% of South Africa’s electricity is generated from Alstom turbines.

“With the support of both organisations, a consensual termination has been reached on a co-operative walk-away basis,” the utility said regarding Alstom.

Brain of a power plant

Eskom said of ABB the procurement process, which has now been finalised, included an early design process and was focused on ensuring schedule security and the seamless introduction of an alternative contractor for Kusile.

Acting Group Executive for Group Capital, Abram Masango, welcomed the ABB appointment. He said Eskom was looking forward to working with ABB in the “execution of the control and instrumentation works, which is the brain of a power plant, at one of South Africa’s important projects, Kusile”.

“We believe that the procurement process that we followed will ensure a seamless transition and that it formed a strong basis for a competent supplier to deliver a quality product within agreed timelines,” he said.

No impact on Medupi

Eskom said the termination of the Alstom contract for Kusile would not affect the C&I works contract for the Medupi Power Station. Alstom would continue to execute in accordance with the terms of that contract, according to Eskom.

The terms of the consensual termination and settlement agreement are confidential as between Eskom and Alstom.

On its website, Alstom said it would “supply, install and commission the full turbine island, plant control system and Wet FGD Plant for the Kusile Power Station, located close to Emalahleni”.

“The Kusile power station will provide 4790 MW representing approximately 12% of South Africa’s future generating capacity.

“The Kusile plant incorporates Alstom advanced Wet Flue Gas Desulphurisation technology to reduce NOx and SOx emissions.

Source – Fin24

 

 

Steel output hit by Eskom disruptions

Johannesburg – Manufacturing production in the metals and engineering sector saw a 1% seasonally-adjusted decline between October and November last year due to electricity disruptions by Eskom, the Steel and Engineering Industries Federation of SA (Seifsa) said on Monday.

Seifsa chief economist Henk Langenhoven said that the cumulative effect of the production disruptions during 2014 now amounted to a 2.5% contraction in the first 11 months of 2014 compared to the same period in 2013.

This brought about a 12-month decline of 2.1% of production.

Over a 12-month period, the more electricity-intensive sub-industries experienced notable losses, said Langenhoven.

He claimed that production of rubber products went down by 5.9%, while plastics went down by 2%.

Basic iron and steel decreased by 0.9% while non-ferrous products went down by 3.6%.

Structural steel went down by 6.3% while general purpose machinery went down by 13%. Electrical machinery and equipment went down by 1.9%.

Langenhoven reiterated Seifsa’s previous estimate that electricity disruptions (under certain assumptions) as seen in November had the potential to wipe out 23% of production in the steel and engineering sector.

“The warnings from Eskom regarding the possibility of such occurrences during the year are of huge concern,” he said.

“The actual November production numbers are better than expected, but if the situation repeats itself during 2015, the calculations may prove ominously close to reality,” he said.

 

Source – Fin24

Eskom Warns of Power Cuts

Johannesburg – Load shedding occurred on Sunday to ensure South Africa’s power grid did not suffer a blackout, Eskom said.

This followed the collapse of a coal silo – number 20 – at the Majuba power station early on Saturday afternoon, thereby severely impacting the station’s ability to produce power.

Steve Lennon, group executive for sustainability, told journalists at Eskom’s Megawatt Park headquarters in Johannesburg that it was essential a blackout be avoided “at all costs”.

“To do that we need to make sure the system reserves are built up. By yesterday our system reserves were basically exhausted,” he said.

“We’ve been spending today, and continuing to spend today (Sunday), building up our system reserves so that we can go into the week with a secure system.”

Eskom CEO Tshediso Matona said earlier that at 12.30pm on Saturday, staff at Majuba reported a physical crack at the silo.

“The sight of a crack enabled the personnel on site to be evacuated,” Matona said.

At 1.12pm, the silo collapsed, with no injuries reported.

The station’s output was 3 600 megawatts (MW) at the time of the collapse, and reduced to 1 800 MW.

Output had subsequently been reduced to 600 MW, with Eskom using that figure as their base in regards to supply planning.

Any increase in output at the station beyond that would be seen as an upside.

An investigation would take place into the collapse, which the company said was isolated, and was expected to last around three months, with the collapse being recorded on video assisting in this regard.

Eskom expected possible load shedding on Monday between 6 and 8pm, Wednesday 6 to 10pm and throughout Thursday.

If it was possible to avoid this happening, the company would do so.

Capacity was sitting at around 31 500 MW, and demand evening peak on Monday forecast at 31 317 MW.

Lennon said: “You can see exactly how tight that risk is.”

Thava Govender, group executive for generation, said Majuba had six units, with the collapsed silo being the focal point where the primary coal conveyor belt met the rest of the plant’s distribution system.

The collapsed silo fed coal into units three and four, while units one, two, five, and six were supplied coal from two other silos, which received coal via the now-collapsed silo.

Unit one was now being supplied coal through trucks, 15 an hour, depositing coal by the remainder of the conveyer belt system, and using a manual or buffalo feeder to allow the units to receive coal.

Unit two had been shut down but Eskom sought to bring it back online on Monday.

“These (buffalo feeders) are not readily available. We use them when we have problems with coal so we’ve been sourcing them,” Govender said.

“We’ve managed to get one now. That’s going to be for unit one.”

The buffalo feeder would be sufficient to feed unit one and two up to half load initially, before later improving, with Eskom seeking to do the same operation for units five and six on the other side of the plant.

The coal would be supplied from the coal stock yard.

“The second buffalo feeder is arriving sometime midnight tonight, and we’ll also start coal there as well,” he said.

“Units three and four is unfortunately a problem, because when this silo collapsed, it collapsed onto this area where you could also have potentially put a mobile feeder,” he said.

“So if you want to get coal into these two units, you actually have to clear the debris away, create an access for the mobile feeders as well and that’s what we need to do.”

Govender said, “on gut feel”, it would be at least two weeks before Eskom could start considering feeding units three and four with coal.

It was also possible to feed unit three from unit two, but this would take time, as unit one and two would need to be stabilised first.

 

Source – IOL

 

Eskom no longer load shedding, system ‘constrained, but stable’

The load-shedding website operated by State-owned power utility Eskom was indicating that “no load shedding” was taking place on Friday morning, having shown ongoing rotational shedding throughout the day on Thursday.

Eskom also formally lifted, at 22:00 on Thursday night, the emergency announced at 6:00 that morning and cancelled the load shedding, which had been initiated from 9:00 on March 6.

The utility said that the system remained “constrained, but stable”.

The emergency and subsequent load shedding was attributed to a combination of factors, including the depletion of dry coal stockpiles at some plants, which resulted in lower power output as a result of wet and poor quality coal.

But three units had also been lost at the Kendal power station, in Mpumalanga, while there had been reduced output from Duvha, where conveyor belts were being reconstructed following a fire in December.

Low dam levels at the Drakensberg and Palmiet pumped storage power stations were also identified as a cause, along with a loss of imports through the Zimbabwe Electricity Supply Authority.

A briefing was schedule for midday, at which outgoing CEO Brian Dames would provide and update on the state of the power system.

Source – Mining weekly