Eskom reports increase in revenue, records losses

Thursday, August 27, 2009
By: 
Chris Bathembu

Johannesburg - Power utility Eskom has recorded a revenue increase of 21 percent, the company's financial results released on Thursday indicated.

The revenue growth comes despite a down turn in sales volume for the 2008/2009 financial year.

Eskom's revenue grew from R44.44 million in 2007/8 financial year to R53.826 in the past financial year.

However, the results show the company's operation expenditure increased by 32 percent to a staggering 85 percent while the company also reported huge profit loses. This represented operating losses of nearly R3.2 billion and a total loss of over R9 billion.

Eskom Chief Executive Officer Jacob Maroga said maintenance of aging infrastructure, manpower and specific growth were some of the factors behind the increase in operating costs. Eskom was also forced to buy more coal and diesel at a time when prices were very high.

He said Eskom had embarked on a huge expansion programme in the previous year as the power utility worked around the clock to keep the lights burning and ensuring a lasting recovery of South Africa's power system. "For this to happen we needed to spend money," Mr Maroga said.

"The extraordinary measures have come at a cost to Eskom's bottom line. We knew if we had to do the things we needed to do to keep the lights on, there would have to be a red ink on our bottom line," he said.

He also noted that there had been no load-shedding since April last year and attributed this to the tough decisions taken by Eskom's board of directors.

"If making money was a priority we could have made more money ... but we needed to keep the lights on and we made that choice," Mr Maroga said.

He said Eskom's huge expansion and a new approach aimed at saving the country's power system in the face of load-shedding meant that the utility needed to borrow while spending more.

He said the power system looked promising and will remain tight until the next major power station, currently in the planning stage, is built.

Eskom also experienced a significant dent in sales volume recording a negative growth of 4.2 percent, for the first time in 10 years. This has been attributed to the slowdown in the economy while customer load curtailment has also been cited.

Eskom Holdings Chairman Bobby Godsell said as the financial results indicate, the operation recovery plan applied by Eskom came at a high financial cost.

He said 44 million tones of additional coal were purchased while power stations were operated at well above design levels.

"Each of these actions was both necessary and appropriate in the context of the supply crisis of the first half of 2008.

"It is however very clear to the board of Eskom that loss, of the magnitude we report today, are clearly unsustainable," Mr Godsell said.

Eskom spent R30 billion on its new power station building programme, compared to R18 billion the previous year. But Mr Godsell said the utility wanted to save R22 billion in the current financial year.

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