Eskom sheds billions in profit

2014-11-25 15:12

Following a weekend in which it became clear that Eskom’s ability to generate enough power has diminished substantially, financial results released today make it clear that money is as short as power supply.

Its first half profits for the 2015 financial year of R9.3 billion are down 24% on last year’s R12.2 billion.

And by the March year-end, profits are expected to drop much further to R500 million as winter revenue is traditionally higher than revenue as we go into summer. At the same time, maintenance increases in summer, leading to higher costs.

Group revenue was 5.4% higher at R81.9 billion, largely due to the 8% tariff increase offset by less demand.

But costs are much higher – exacerbated by high primary energy and coal costs and the continued use of the expensive open-cycle gas turbines, originally intended only for use at peak demand times.

Eskom finance director Tsholofelo Molefe said National Treasury’s support package, which included funding of at least R20 billion, will support liquidity in the short-term, but warned that “in the long-term it remains absolutely imperative that the tariffs must reflect the cost to supply electricity”.

Eskom has secured R66 billion of the R200 billion funding plan for the next few years.

Eskom has been downgraded by Moody’s and warned that any further downgrade “would seriously impede Eskom’s ability to raise external funding or significantly increase the cost at which Eskom is able to borrow”.

Eskom continues to be incapable of reining in debt from municipalities – and total municipal arrear debt spiked to R4 billion from R2.6 billion six months ago.

Eskom indicated supply will remain “tight” until there is a substantial increase in new capacity - and it is understood Medupi, which was originally meant to be up and running by now, will continue to report delays.

It hinted at delays to the Medupi Unit 6, first synchronisation on December 24. Despite the fanfare, synchronisation does not equal actual operation of the unit, which is six months after and will make very little difference to the crisis, which will require the commissioning of many units.

Unit 5, the next in line, will not meet the target date of commissioning “as resources were redeployed from Unit 5 to Unit 6 in an attempt to recover the schedule at Unit 6”.

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