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Eskom posts massive profits

Nov 20 2012 12:18
James-Brent Styan
Cape Town – Eskom has reported an interim profit for the six months to end-September 2012 of R12.6bn.

The state-owned power utility reported a net interim profit of R12.8bn for the first six months of 2011 and R13.2bn for the full 2011 financial year.

Eskom’s revenue for the period increased to R73.4bn, up from R63bn in the same period in the previous year. This was driven mainly by last year's 16% increase in electricity tariffs.

Eskom CEO Brian Dames said all profits are reinvested in full in Eskom's business.

"The profits are used to service debt and support the funding of our capacity expansion programme."

He said profits for the full 2012 financial year are expected to be lower, with breakeven at best during the second half of the year, when Eskom must take advantage of lower summer demand to do higher levels of maintenance on its power stations.

It was also announced on Tuesday that Paul O' Flaherty, Eskom's chief financial officer, will leave the company in July 2013 after serving in this capacity for three years. O'Flaherty said he wants to move on to new challenges.

"My job was to put in place the financial foundation for a new era of growth and improvement. Today Eskom is ready for that new era and it is an opportune and logical time for me to move on.

"To stay longer would require a commitment to a much longer time frame than I had envisaged. My job is done and my successor can take it further," he said.

Eskom recently submitted its application to energy regulator Nersa for a third multi-year price determination (MYPD3), requesting a further average 16% tariff increase per year over the next five years.

Since 2005, Eskom has spent R156bn (excluding capitalised interest) on its build programme, which has so far already added 5 776 MW of generation capacity to the national grid, as well a 4 327 km of transmission network and 22 445 sub-station transformers.

"We are working hard to deliver on Eskom's new build programme, with a special focus on bringing in the first unit of Medupi online next year," Dames said.

Eskom's funding plan is well advanced and about 80% of the funding needed for the new build programme has been secured. Eskom's gross debt stood at R213bn at end-September 2012 and is expected to go as high as R360bn.

The embedded derivative liability at end-September 2012 was just under R5bn.

This is in effect a loss reported by Eskom due to a special pricing agreement it has with BHP Billiton's aluminium smelters in KwaZulu-Natal. Eskom has submitted an application to Nersa to review these special pricing agreements.

 - Fin24

Follow James-Brent Styan on Twitter by @jamesstyan.

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