Eskom reports R3.6 billion profit

Wednesday, June 2, 2010

Pretoria - Power parastatal Eskom has shown a return to profitability, reporting a net profit of R3.6 billion in its reviewed preliminary annual results for the year ending 31 March.

The improved results follow on a net loss of R9.7 billion it recorded last year. Eskom's revenue for the year is R71.2 billion, up 31.4 percent on the R54.2-billion reported last year.

The parastatal said that this turnaround creates the momentum needed to achieving long-term financial sustainability seeing that the company still faces a R190 billion funding challenge over the next seven years.

The R190 billion includes R140 billion of capital expenditure for the capacity expansion beyond the Kusile power station.

"We recognise that there are still many tough challenges before us, but Eskom is on the path to recovery for the future", said Eskom's acting chairman Mpho Makwana.

According to the parastatal finance director Paul O'Flaherty the company's financial performance improved primarily due to real savings, internal efficiencies and the successful renegotiation of the special pricing agreements of the Mozal contract with BHP Billiton which now excluded embedded derivatives.

"Thanks to this return to profitability, Eskom is now beginning to be in a better position to attract the right kind of investment necessary to raise funds for the build programme. This will restore security of electricity supply and achieve the required economic growth for South Africa," he said.

According to the parastatal, revenue increased due to the increased electricity prices following on the National Energy Regulator of South Africa decision to allow the utility to raise tariffs.

"The impact of higher tariffs, which were amended in an interim determination by NERSA in June 2009, is shown by the fact that in 2010 revenue per kilowatt-hour (kWh) at 31.9 cents exceeds total operating costs of 28.2 cents per kWh.

"In 2009, total operating costs, at 25.9 cents, were higher than the 24.7 cents revenue per kWh," said Eskom.