Following our long-term analysis of Eskom, we argue that the current wave of power cuts is fundamentally different from earlier rounds of load shedding.
We make the case that, contrary to management’s claims that poor plant performance due to a lack of maintenance and an ageing plant infrastructure, the outages may be a consequence of the focus on staff costs, which resulted in a decline in the adherence to standards of operating practices.
We believe the focus on increased maintenance will not be sufficient to arrest the high level of unplanned outages, but that an increase in engineering and technical skills at the power stations will be a more effective long-term solution to Eskom’s operational failings.
We forecast 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.