Eskom hike to clobber earnings

Johannesburg - Eskom's approved tariff increase of 31.3% could increase the operating costs of industrial firms by between 10% and 15%, said an analyst.

These energy-hungry companies will also have to consider using alternative energy sources.

"A 31% increase represents quite a big knock for electricity-intensive industrial firms," said Kurt Benn, a senior portfolio manager for Cadiz African Harvest. "This will have a significant impact on their operating costs and they won't be able to pass this on to their customers straight away."

Doug Timmerman, operations director of aluminium products producer Hulamin, believes the price hike is significant and will make the group less competitive.

It will definitely put our margins under pressure, he said. We export 70% to 75% of our products, and we cannot adjust our selling prices.

Sven Lunsche, spokesperson for ArcelorMittal SA, said the increase is an incentive for industrial companies to consider using alternative energy sources.

He said two of ArcelorMittal's South African plants - Vanderbijlpark in Gauteng and Newcastle in KwaZulu-Natal - could generate 130MW each from flare gas (gas emitted from operations).

"However, because of the economic crunch these were placed on the back burner," he said.

Also commenting on alternative power generation, MD of diversified chemicals group Omnia Rod Humphris said the group has plans to generate part of its electricity needs, adding the company would make more energy-conscious decisions by training staff.

- Fin24.com