Eskom warns Russia’s invasion of Ukraine will hit electricity in South Africa

Russia’s invasion of Ukraine and its impact on the global economy will have a knock-on effect on Eskom and electricity supply in South Africa, the power utility’s executives said in a media briefing on Tuesday (8 March).

Chief financial officer Calib Cassim said the invasion had led to an escalation in oil and gas prices which still needs to be factored in by Eskom. Eskom regularly makes use of Open Cycle Gas Turbines (OCGTs) and burns through diesel to supplement energy supply.

Cassim cautioned, however, that from a ‘bottom-line point of view’, the power utility can only afford to pay so much for fuel.

Cassim said Eskom was now looking to hedge some of these prices, but if the price of oil is to double as is forecast, then it will impact the amount of energy that Eskom can produce going forward.  He added that Eskom cannot absorb these additional costs by itself.

This was echoed by chief financial officer Jan Oberholzer who said that Eskom was currently evaluating the other ways the invasion will impact the company, including the cost of coal.

“We are in the process of doing that, but we are really concerned about what the impact of the war up there will have on our operations down here in South Africa.”

Eskom says it was also in the process of evaluating how the war will impact supply-chains and logistics, although neither Russia or Ukraine are direct suppliers.

Oil pushed higher on Tuesday as the US moved a step closer to imposing a ban on Russian crude imports following its invasion of Ukraine, ratcheting up economic pressure on president Vladimir Putin.

Futures in New York rose to near $123 a barrel after settling at the highest level since 2008 on Monday.

The fallout from the war has upended markets, driving everything from wheat to nickel and natural gas higher and leaving the world bracing for an inflationary shock. Oil has rallied more than 30% since the invasion and traders and banks are betting prices will keep climbing.

Key US lawmakers announced the outline of bipartisan legislation to bar oil imports into the US, while European Union governments are divided about whether to join the action.

TotalEnergies SE became the first big oil company to publicly say its traders will no longer buy Russian crude, though most buyers are already shunning its supplies, resulting in an embargo in all but name.

With further reporting by Bloomberg.


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Eskom warns Russia’s invasion of Ukraine will hit electricity in South Africa