Big-profit Eskom prepares for next round of increases

Eskom’s profits soared to R13.2-billion on the back of increased tariffs, it announced in its annual results on Thursday. They were up from R8.4-billion last year, representing a massive 58.5% increase.

The steep rise in profits suggests that the three-year cycle of 25% tariff increases that the electricity parastatal was granted in 2010 substantially overshot the mark. This granted it ample room to drop the last round of increases for the 2012/2013 financial year to 16% instead of 25%, which Eskom announced to much fanfare earlier this year.

Meanwhile, sales growth, measured in gigawatt hours, had only increased by a very low 0.2%.

But Eskom financial director Paul O’Flaherty said the profits were in line with what the National Energy Regulator of South Africa had granted the company.
According to its accounting practices, Eskom capitalised its interest costs, he said.

With the interest capitalised, it did not reflect on the company’s balance sheet.

Tariff increases
The interest Eskom has to pay on its R340-billion build programme, which includes new power stations Medupi and Kusile, increased to R23-billion this year. It will hit R120-billion in the next five years.

The company is preparing its application for the next round of tariff increases, which it will submit to the regulator by the end of July, according to chief executive Brian Dames.

Although the company had worked to rectify the commodity-linked electricity contracts with large aluminium smelters, Dames said Eskom had yet to finalise revised contracts with BHP Billiton’s smelters in Richards Bay.

But the volatility on these contracts had been reduced substantially and this year had seen a small gain on embedded derivatives of roughly R334-million.

South Africa’s electricity system still remains very constrained. With  its buy-back programme, Eskom has been paying large customers to shut down their operations over peak hours. This cost the company a total of R1.8-billion.

Because of the continued strain on the power grid, the cost of running the open-cycle gas turbines increased by more than 280%, costing R1.5-billion last year.

The cost of primary energy, chiefly coal, increased by 29% during the year. Included in these costs is the power Eskom buys through its buy-back programme, power from independent power producers and the costs of running peaking power plants or its open-cycle gas turbines, which run on diesel.

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

Your M&G

Hi , To manage your account please click here.

You can access your digital copy of this week’s paper here.

Advertising

READ IT IN FULL: Ramaphosa’s address on the extension of...

This is the full address given by President Cyril Ramaphosa on April 9

Meet the doctor leading Africa’s fight to contain the coronavirus...

Dr Matshidiso Moeti’s father helped to eliminate smallpox. Now she’s leading Africa’s efforts against the coronavirus

Stella set to retain her perks

Communication minister will keep Cabinet perks during her two months of special leave

Covid-19 grounds Nigeria’s medical tourists

The country’s elites, including the president, travelled abroad for treatment but now they must use the country’s neglected health system
Advertising

Press Releases

Rahima Moosa Hospital nursing college introduces no-touch facial recognition access system

The new system allows the hospital to enrol people’s faces immediately, using artificial intelligence, and integrates easily with existing access control infrastructure, including card readers and biometrics

Everyone’s talking about it. Even Kentucky

Earlier this year South African fried chicken fast-food chain, Chicken Licken®, launched a campaign for their wallet-friendly EasyBucks® meals, based on the idea of ‘Everyone’s talking about it.’

New energy mix on the cards

REI4P already has and will continue to yield thousands of employment opportunities

The online value of executive education in a Covid-19 world

Executive education courses further develop the skills of leaders in the workplace

Sisa Ntshona urges everyone to stay home, and consider travelling later

Sisa Ntshona has urged everyone to limit their movements in line with government’s request

SAB Zenzele’s special AGM postponed until further notice

An arrangement has been announced for shareholders and retailers to receive a 77.5% cash payout

20th Edition of the National Teaching Awards

Teachers are seldom recognised but they are indispensable to the country's education system

Awards affirm the vital work that teachers do

Government is committed to empowering South Africa’s teachers with skills, knowledge and techniques for a changing world