Eskom today reported a
sound financial performance for the fourth consecutive year, earning a surplus
which will be reinvested in full in the company to support its expansion and
service debt.
“We have delivered sound
business performance, indicative of the progress being made, during a tough
year. We have continued to put the building blocks in place to become a
sustainable company which can power the South African economy and improve the
quality of life of our people, now and into the future,” said Eskom Chief
Executive Brian Dames. “We have kept the lights on for the past five years and
made significant progress on our new build programme, as well as driving energy
efficiency and increasing our role in South Africa’s development.”
Eskom showed net profit
of R5.23-billion for the year to end-March 2013. Eskom tends to earn most
of its profit in the first half of the year, which covers the winter months
when tariffs for large customers are higher and maintenance costs are lower.
“We have three big agenda
items for the year ahead. We are committed to keep the lights on while
the power system remains constrained, and while increased levels of plant
maintenance are required for our Generation, Transmission and Distribution
assets. We will focus on ensuring that the new base-load power stations
deliver first power to the national grid. And we must re-shape our
business to adapt to the limits imposed by the 8% annual average tariff
increase granted by the National Energy Regulator of South Africa (NERSA) for
the next five years,” Dames said.
Revenue for the year to
end-March 2013 increased to R128,8 billion, from R114,8 billion in the previous
year, with a decline in electricity sales offsetting a 16% increase in tariffs
(which was reduced after Eskom applied to the National Energy Regulator (Nersa)
to reduce the increase from the original 25%). Sales volumes declined by 3.7%
to
216 561GWh, the lowest
since 2006, reflecting lower than expected economic growth, as well as the
impact of industrial action, the power buyback programme and the very
successful demand side management programme.
This translated into
revenue per kilowatt hour of 58.5c (2012: 50.3c), while costs per kWh in
Eskom’s electricity business were 54.2c (2012: 41.3c). Primary energy costs
rose by 36.1% to 28.1 c/kWh, making up almost half of operating costs.
The cost of coal burnt
increased by 24.2%, driven mainly by higher costs and lower output from the
cost-plus mines feeding Eskom power stations.
Eskom made significant
progress on its new build programme during the year under review, despite the
challenges experienced. A record R60 billion was invested in infrastructure
during the year and since the new build programme began in 2005, Eskom has
delivered 6 017 MW of new generating capacity as well as 4 686 km of new
transmission lines and 23 775 MVA of new substations.
The year under review
also saw progress towards the introduction of renewable energy on to the grid,
as well as on its commitment to increase the participation of independent power
producers in the market. Eskom started construction on its own wind farm, the
R2.4 billion Sere project, as well as signing power purchase agreements for
more than 2400 MW of renewable energy with new independent power producers
(IPPs) procured by the Department of Energy.
As at end-March 2013,
Eskom had contracted total capacity of 1 135 MW from a range of IPPs (2012: 1
008 MW). The total paid to IPPs and municipal generators during the year under
review was R2.9 billion or 83.6 c/kWh (2012: R3.3 billion or 77 c/kWh).
Total debt increased to
R202,9 billion as at end-March 2013, as Eskom continued to draw down funds for
its new build programme. The funding plan for the build programme is well
advanced with 82.9% now secured, enabling Eskom to complete all committed
projects. “Financial sustainability will be crucial, as is the support of
government, to ensure we can maintain an investment-grade credit rating and
raise the debt we need, at rates which are affordable for the country,” Dames
said.
“We are pleased with
Eskom’s steady financial performance and we commend them for managing a tight
electricity system and keeping the lights on in very difficult conditions,”
said the Minister of Public Enterprises, Malusi Gigaba. “We will continue to
work with Eskom to improve operational performance, maintain financial
sustainability and deliver on the build programme. It is imperative that it
succeeds in what it does, particularly with regard to delivering on new
electricity capacity that the economy requires for growth, investment and job
creation.”
Eskom reports annually on
its triple bottom line, providing measures of its socio-economic impact and its
environmental and safety record along with its financial performance. A total
of 144 558 homes were electrified during the year to 31 March 2013. Since
inception of the electrification programme in 1991, a total of more than 4.3
million homes have been electrified. Broad based black economic empowerment
attributable spend amounted to R103.4 billion or 86.3% of total measurable
spend for the year (2012: R72.1 billion or 73.2%), supporting transformation in
the economy. This includes R26.5 billion on black owned companies, R5.7 billion
on companies owned by black women, and R1.2 billion on companies owned by black
youth. In Eskom’s new build programme, 83% of the contracts since inception
have been awarded to South African companies to support job creation and
industry development.
Eskom continued to
develop skills, training 2 144 engineers, 835 technicians and 2 847 artisans as
well as 5 701 participants in Eskom’s youth programme. Eskom also invested
R194.3 million in corporate social initiatives, impacting organisations with
more than 650 000 beneficiaries.
“We have had four years
of sound financial results that show stability, predictability and progress.
Initiatives have been implemented to transform Eskom and improve its
operations,” said Eskom chairman Zola Tsotsi. “Eskom is 90 years old this year
and it is investing in the future. We are looking ahead to provide the
electricity South Africa needs to power growth and development.”
It was announced in
November that Paul O’Flaherty, Eskom’s Finance Director and head of Group
Capital, had resigned and would be leaving after the 2012/2013 annual results.
Today is therefore his last day at Eskom. “Paul has made an enormous
contribution to Eskom and to South Africa since he joined us in 2010,” said
Dames. “He was just what Eskom needed at the time, and we have become great
friends and worked very well together. On behalf of all at Eskom, I thank him
very much and wish him all the very best for the future.”
Eskom Treasurer Caroline
Henry has been appointed acting Chief Financial Officer while Dan Marokane,
Group Executive Technology and Commercial has been appointed acting head of
Group Capital, demonstrating the depth of skills and ensuring continuity at
Eskom.
