Eskom posts massive profits

2012-11-20 12:18

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.

  • dolphindunes.guesthouse - 2012-11-20 12:29

    Amazing....yet they still want to increase tarfiffs to fund new power stations. Are they not a govt department and should service the people and not the sharholders and bosses?

      johan.uys.75 - 2012-11-20 14:09

      And the Executive Officers come up with a brilliant plan to increase profit viz increase tariffs.

      lsfreak - 2012-11-21 13:42

      Should but the performance bonus is better... I agree that if those profit's are been made why the increase ?? Since this is a "Government" dept(state owed) WTF's the need for the bonus in the 1st place :/

  • b.w.devilliers - 2012-11-20 12:35

    So why the increase if they make so much profits; are they also going to double their profit in the next 5 years?

      lydonmcg - 2012-11-20 13:45

      Because they are in DEBT. Judging by the thumbs-up's and thumbs-down's here, people can't seem to grasp that. Despite their profits, their debt is only going to increase over the coming years as they fund new infrastructure. Thus the profit is being used to off-set debt.

      guyp1 - 2012-11-20 16:22

      Then why not attempt to pay off the damn debt before trying to constantly implement new infrastructures? Why not pay the higher-ups less than a couple million a month and put that to good use... like PAYING THE DEBT OFF! Don't buy more when you don't have the money in the first place! I honestly think that the heads of Eskom don't care for those that can't afford it, they only care to make more, make Eskom bigger even though they don't have the money to do so and let it all rest on the tax-payers shoulders... While they drive their million rand cars and live in luxury around the world. Clearly they aren't making a profit if their debt is constantly rising and forcing people to pay more. As mentioned above, it only seems logical to pay off the debt they currently have, THEN proceed to expand.

  • mzwakhe.nhlapo2 - 2012-11-20 12:41


  • dominique.massonZA - 2012-11-20 12:43

    If you read the story carefully and look at the debt they are carrying then you can see why they need to raise costs. If we want a future WITH electricity then this is what needs to happen.

      TdJ01 - 2012-11-20 12:51

      Debt notwithstanding these clowns get paid bonuses on profit so I guess they will sit pretty when that happens.

      sean.r.boyce - 2012-11-20 12:54

      Well done someone who read to the end of the article. its amazing how many people shoot their mouth off with out reading the whole story...!

      andynct - 2012-11-20 13:29

      Voted down for that! Amazing how people are not interested in accuracy or truth where money is involved.

      johleneh - 2012-11-20 13:53

      But if the government did not allow Eskom to have a monopoly and privatised the industry they would NOT have to increase the tariff and the country would have more and cleaner electricity. In addition Eskom spens MILLIONS on staff & family parties & fat cat bonusses when it is NOT deserved nor justified. A year ago on a Carte Blanche episode they walked into ESKOM headoffice on a Wednesday morning and whole floors were deserted as employees did not even bother to show up, now how the hell is that running a company efficiently? They're leaches sucking the South African population dry!

      JManAtheoi - 2012-11-20 15:35

      Spot on Dominique! One must look at the entire story,and not just the headlines.

  • mark.shatkinson - 2012-11-20 12:51

    News24 looking for reactions out of readers with sensationalised headlines... Seriously, try and be a little more professional please.

  • pieterjacobushugo - 2012-11-20 12:55

    Better keep an eye on that stack of Rands

  • lulama - 2012-11-20 12:56

    yet they want increases? They must go and borrow the money from banks

  • werner.nel.712 - 2012-11-20 12:57

    The ANC, A caring government for the people...

  • theMichaelHawthorne - 2012-11-20 12:59

    Profits are the money left after cost/deductions... nobody needs to raise anything... dumb farker it needs to come down...

  • MSGRule - 2012-11-20 12:59

    Yes there are debts that require paying. Eskom is taking to much home and the cANCer parasite that is latched on tightly is driving the profits.

  • theMichaelHawthorne - 2012-11-20 12:59

    Profits are after deductions of debt... please go back to school...

      tonyzr2tx - 2012-11-20 13:45

      Debt has nothing to do with profit, interest affects profit, not debt.

      Stefan Van Der Spuy - 2013-05-06 12:21

      Going back to school applies to you too Dagga Movement...

  • mogolobaneng - 2012-11-20 13:03

    Ya and they will dish out fat bonusses with an eye on the current increase to expand business that I don't really see. I am so blind I see only old power stations half working and some delapitated ruins like in Rooiberg, Limpopo.

  • merwe.schwartz - 2012-11-20 13:03

    Agree whole economy suffers from exorbitant tariffs and escom show profit. This huge profits just as CEO steps out sounds like the SAA & Andrews story, Andrews took huge bonus based on huge profits, only to learn that the profits were over stated. SAA required bail-out only two years there after!!!

  • Jonathan Paul Marais - 2012-11-20 13:05

    To these people who say read properly, u not reading between the lines, eskom bosses get paid huge incentives/bonuses for profits and surplus electricity and where will those bonuses come from???? THE PROFITS. Then they must still bankroll the salary increases, and guess what, we,the people of this corrupt country must finance this by means of a 16% tarrif increase

  • rob.bayliss.94 - 2012-11-20 13:06

    This reminds me of a Financial Controller's response to the question...What does the bottom line look like? The answer was what do you want it to look like! Profit stated before costs is Chinese Booking keeping, surely if provisions for debt repayment are needed they should come off the income statement before the profit line? Or am I being too transparent?

      tonyzr2tx - 2012-11-20 13:46

      Repayment of debt is a cash flow issue, it has noting to do with profit. Accounting 101.

      natoe.matoe - 2012-11-20 14:10

      The cost of the debt is already included in the net profit by way of interest

      rob.bayliss.94 - 2012-11-22 08:19

      Now read today's item regarding 3.3 bil of unpaid accounts in Soweto. Where does that debt sit in the income statement? Or should that also be shifted to the balance sheet as tony suggests. It all depends on how the Income Statement results are used....perhaps to justify bonuses?????? I rest my case

      Stefan Van Der Spuy - 2013-05-06 12:27

      Well the cost of debt (interest) is deducted as an expense . Income - expenses = profit. Is that what you meant Natoematoe?

  • andrew.arnesen - 2012-11-20 13:06

    This makes me wanna puke! And these pathetic excuses for public servants still claim they need increases for maintaining plants... That they can be such blatant liars when businesses are going under... Wonders will never cease!

  • paul.stanley.5621 - 2012-11-20 13:09

    One of the biggest problems with the whole pricing structure with Eskom, is not what we pay, but because BHP Billiton negotiated such a low rate years ago, and use a huge amount of electricity at well below market prices. If they had to pay at market rates, then they would close down their smelters, and we would all enjoy lower electricity costs. In addition, our goverment and Eskom have entered into agreements with Zimbabwe and Swaziland to provide them with electricity, also at lowers costs. Zimbabwe owe the SA Goverment and Eskom billions, but they have no intention of ever paying, and lets not even talk about Swaziland with their King stealing all the cash and letting his people live in poverty. These are the problems we all face living in a third world country that is run by a corrupt and inconsiderat goverment, and if we dont like it, then we should all pack our bags and leave. This will never change.

  • paul.korb.9 - 2012-11-20 13:11

    BHP Billiton agreement is a joke -Mrs Joffe all the words in the Oxford could never describe this signed agreement that we all pay for! Fat Cats playing with our resources and wealth! disgraceful and immoral!

  • gavin.knox.56 - 2012-11-20 13:11

    Profits and still in debt, now the Board and all executives can take a Million each in performance bonuses... and certainly never feel guilty about it.

  • leonard.rom.7 - 2012-11-20 13:12


  • michelle.marshall.3158652 - 2012-11-20 13:12

    blady crooks -

  • kwbateman - 2012-11-20 13:16

    Let us not forget that SARS will be awaiting their 40% of this profit.

  • - 2012-11-20 13:19

    They tell us this now, to justify the huge bonuses they will award themselves at the end of the year.

  • ken.koen - 2012-11-20 13:19

    WTF do you expect. they keep raising the prices, but don't maintain or expand the infrastructure. They don"t do long term planning or budjeting either. Now I suppose all the "comrades" at Megawatt Park will be getting extra massive bonusus for "posting a huge profit"

  • venterpb - 2012-11-20 13:21

    Would love to see their bonuses after this.

  • karel.dutoit.50 - 2012-11-20 13:23

    Gigaba said hikes where unavoidable? How so? This is robbery of the poor due to higher input cost at the factory all prices increase as a result. Like zuma all these goverment companies lie and steal.

  • stephen.j.dickson.3 - 2012-11-20 13:31

    The so-called experts on this page that say read the full article and between its lines have obviously got it to good in this country and are more than likely part of the Eskom hierachy,shareholders or some parasitic creditor that leeches off Eskom.......bottom line.

  • zelda.dickson - 2012-11-20 13:31

    So why are they putting up costs and not spending that money to improve our supply. They are just making their own bank account look good while the public gets poorer.

  • tony.becker.961 - 2012-11-20 13:31

    And now all of stupid idiots will strut around patting each other on the backs and hand out massive bonuses to each other - Clowns

      BigChiefPlumbPudding - 2012-11-20 13:43


  • Jason - 2012-11-20 13:35

    16% increases on the way for SAA??

  • BigChiefPlumbPudding - 2012-11-20 13:42

    This will only cover a few bonuses. Where will the rest of the money come from?

      louise.johnson.58958 - 2012-11-20 13:51

      Why not ask BHP Billiton for some cashback :)

  • david.vanderwesthuizen - 2012-11-20 13:43

    this is were the terrorist are holding a whole country hostage with electricity prices

  • gazaspells - 2012-11-20 13:53

    this is unacceptable, they should break even, this shows that the electricity charges in south africa are way too high

  • nhlapop - 2012-11-20 14:00

    Yet they want 16% tarrif increase, fat bonuses will follow.I dont care anymore.

  • anna.turner.9237 - 2012-11-20 14:00

    We paying for their mess up...should have planned expansion 18 years ago...idiots...!

      louise.johnson.58958 - 2012-11-20 14:15

      Where did all the money ESKOM had 18 years ago go? Perhaps Johhny & Jack know.

  • dhavandran.palavar - 2012-11-20 14:03

    theres no porfit just the increase in tariffs without really do any provision for the increased demand. so expenses have not really increased but bonuses have . wait for the nex price increase and they will post a bigger profit. thugs!

  • bheki.khumalo.58 - 2012-11-20 14:05

    Massive profits, more bonuses, mission accomplished for fat cats. Yerrrrrr....

  • melissa.leon.564 - 2012-11-20 14:08

    STATE-OWNED what more can you expect! if they can out people off STATE-OWNED land to make a profit then why not increase ELEC!!Then they want to know why there is no repect for them!!Its a Disgrace!!

  • antoinette.jordaan - 2012-11-20 14:09

    I'm just wondering.........isn't paying debts supposed to be an expenditure? So, if they have huge debts, like they say they do, why do they still have enormous profits? Surely they should be paying off the debts? Dunno............I must be silly.

  • nosiphom.mazibuko - 2012-11-20 14:10

    And they will pay obscene bonusses at our expense!

  • magriet.buys - 2012-11-20 14:19

    What a disgrace, whilst the poor get poorer, they will increase their tarrifs yet again!!!

  • peter.vanrensburg.5 - 2012-11-20 14:21

    And I've go to sit and watch some woman on Carte Blanche tell us all that they (Eskom) are struggling!!, how does she sleep at night? this is all just so sickening!!.

  • Daniel Mah - 2012-11-20 14:22

    and their still gonna go ahead with tariff hikes

  • spiekeries - 2012-11-20 14:27

    Look at that Brain Dames, looking all spiff in his suit, but that ladies and gentleman, is the face of the company who is strangling us tax payers to death

  • peter.hall.3956 - 2012-11-20 14:37

    We are going to pay and pay till we are broken!!! The masses have to start paying taxes, 8Mil people cant float this country anymore!!!!!!!

  • tertius.aswegen - 2012-11-20 15:03

    Exactly sit there with her jannie jammergat face yet massive profit... really sickening

  • mark.higgens.9 - 2012-11-20 15:37

    Yet they can't keep my effing lights on (general power failure Midrand for the past plenty hours)

  • gabrielle.brookstein - 2012-11-20 16:31

    if theyre posting profits then there is no need to increase electricity again and again and again,...

  • jason.marshall.1804 - 2012-11-20 16:41

    They better keep the money in a save place till they pay for the service and upgrades, else the politicians will start spending it...

  • Billy - 2012-11-20 16:49

    ok, so are these "profits" used to justify their bonusses and invite a friend family days too?

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