Escalating Energy Costs

Energy Cost in all forms (coal, gas, oil and electricity to name a few) is expected to escalate by (significantly) more than inflation over the foreseeable future.  This is especially true in the case of Electricity cost in South and Southern Africa.

Eskom is busy with a massive capacity expansion project - to put this into perspective, the project size of the new Medupi Power Station being built in Lephalale is 4 times larger than that of the Gautrain - and that is only ONE new Power Station...

These new projects, mine expansions, new transmission lines, etc. is going to put significant upward pressure on the price of electricity over the next couple of years.

As is the case with any commodity, the price rises when demand outstrips supply.

It is no secret that the demand for electricity has caught up with the supply capacity and that the demand, at times, exceed the supply capacity - when this happens, we experience load shedding. 

If you combine this knowledge with the fact that it will take at least until 2013 before the first new unit at Medupi comes on-line, you begin to appreciate the unavoidable fact that electricity prices has only one way to go and that is UP.  

As a result, electricity cost escalation is expected to be well above the general level of inflation .

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