HomeIndustry SectorsFinance and PolicyEskom reports first half profit of R12.2 billion

Eskom reports first half profit of R12.2 billion

Eskom reported a profit of R12.2 billion for the six months that ended on 30 September 2013. The company has indicated, consistent with the seasonality inherent in the sales and maintenance profiles, that this profit will be eroded somewhat in the second half of the financial year.

Revenue in the first half of the 2013/14 financial year increased 6.1% to R77.8 billion as electricity tariffs rose. The benefit was offset by escalating operating expenditures mainly due to an increase in primary energy costs. The volume of sales also declined marginally (0.1%).

CEO Brian Dames says, “Despite a highly constrained system, we’ve taken significant steps with our partners to avoid rotational load-shedding and we are addressing the tariff constraints in every aspect of our business.”

First-half profit declined marginally to R12.24 billion from R12.63 billion in the same period last year due to increased operating costs. The embedded derivatives contracts contributed to profit in the first half mainly because of changes in the dollar-rand exchange rate and changes in interest rates. The second half of Eskom’s financial year falls within the summer season, during which Eskom typically records lower sales and maintenance expenditure.

Revenue per kilowatt hour sold increased to ZA69 cents, compared to 64.9 cents in the same period in the previous year, while operating costs rose to 55.3 cents from 47 cents.

Primary energy costs increased by 25.3% from ZA22.5 c/kWh (September 2012) to  28.3 c/kWh for the half year to 30 September 2013 mainly due to higher coal costs (up 13.3%) and as a result of the utilisation of open cycle gas turbines (OCGTs) the cost of which increased by R2.3 billion.

Eskom is making steady progress in bringing new capacity online to ease strain on the system. The extensive programme to return to service previously mothballed power stations has concluded with commissioning of the final unit at Komati. The Sere wind farm construction has gained momentum and the first wind turbine has been erected. In addition, Eskom’s new build projects at Medupi, Kusile and Ingula hold promise for the future as an example of South Africa’s ability to undertake large infrastructure initiatives, with the first power expected from Medupi in the second half of next year. The new build programme which will be completed in 2020, has to date added 6,137 MW of capacity, 5,198 km of transmission network and 24,065 MVA of substation transformers.

Eskom is also making significant progress in providing electricity to households without power for the first time. About 53,600 homes were electrified during the first half of the financial year, compared with 32,216 during the same period last year. Since inception of the electrification programme in 1991, a total of approximately 4.4 million homes have been electrified.

Eskom has welcomed the entry of independent power producers and signed power purchase agreements for 1, 041 MW capacity with IPPs as part of the second bid submission under the Department of Energy’s (DoE) renewable energy IPP procurement programme. In June 2013, contracts for 1 005MW of the DoE open-cycle gas turbine (Peakers) programme were signed and the first project under the renewable energy IPP procurement programme was connected to the grid on 27 September 2013 and commissioning is in progress.

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