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Nov 13, 2008

Eskom says electricity demand likely to fall next year

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Power producer Eskom expects electricity demand in South Africa to fall in 2009, as many of its key industrial customers adjusted outputs in light of the global economic downturn.

“The impact of the global slowdown, as well as the commodity cycles, is really impacting on our iron and ferroalloy customers hard, and you would have seen that a number of ferrochrome furnaces, would be decommissioned,” Eskom demand-side management GM Andrew Etzinger said.

Ferrochrome producer Xstrata Alloys and its South African joint-venture partner, Merafe Resources, will temporarily suspend six furnaces, while Assmang will switch off two of its ferrochrome furnaces due to lower demand.

However, he emphasised that in terms of the medium- to long-term, the utility could not make any capacity decisions based on the operational decisions of these customers to shut off the furnaces.

He reiterated that this put Eskom in a difficult position, because if a company experienced a quick turnaround in demand, a furnace could be very quickly restarted, thus, Eskom could not adjust its long-term growth forecast.

The downturn in demand could bounce back very quickly, Etzinger stated.

“If we have a long-term protracted downturn, of course, it could be longer. So we are doing our sums now on what our demand could be next year,” he added.

He said that, at the same time, Eskom was also receiving indications that certain projects for expansions of facilities were likely to be reconsidered, or delayed.

“Now there you would have the potential for capacity reduction, on the generation side with Eskom. But it is still early days, and I think a decision to delay or put on hold projects is not taken overnight, or it's not taken as easily by the same companies as to shut down a furnace for a week or two or three,” Etzinger said.

“So, we are already at the start of a process of a possible step-change in electricity demand, but we would need to see how that turns out,” he concluded.

Edited by: Mariaan Webb
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