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Rolling Black Outs

19 June 2018 by lberuti

Eskom Holdings SOC Ltd generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers, and to municipalities throughout South Africa. The utility, which controls almost all the country’s electricity, has been entangled in a dispute over pay with its workers for some time and power generation has been disrupted since industrial action started on June 13. The disruption is in part the result of road closures which have prevented coal deliveries to storage facilities. Amid allegations of intimidation and sabotage at some power stations, Eskom had to introduce rolling black outs, as the dispute coincides with rising consumption during South Africa’s winter. Today, the company eventually tabled a deal offering a 4.7% increase and a four-year agreement linked to inflation in order to resolve the conflict. But, according to the company, bringing full stability back to the grid will only be achieved with the return of employees and a return to normal will take about 10 days. Since the beginning of the stand-off, investors have pushed Eskom’s 5-year risk premium 100bps wider at 513bps.