20 November 2012

South Africa: Eskom's Profits Dip in Tough Environment

Cape Town — Eskom has announced that its profits for the six-month period beginning on April 1 and ending 30 September 2012 dropped to R12.6 billion from R12.8 billion a year ago.

Releasing the power utility's interim results on Tuesday, Eskom CEO Brian Dames said the seasonal nature of the business could mean an even steeper decline in profits by year end.

Dames said the past six months had been challenging. He cautioned that economic growth and the industrial unrest, particularly in the mining industry, would impact financial results at the end of the year. These two factors had contributed to the decline in income for the first half of 2012.

Eskom committed itself to reinvesting profits in maintaining power stations, servicing debt and helping to fund its capacity expansion programme, for which almost 80 percent of the required funding had been secured.

Earlier this year, Eskom was downgraded by the international credit ratings agencies, Moody's and Standard and Poor's. These downgrades, according to Eskom, highlight the need for it to be financially sustainable.

Despite the challenging past six months, Eskom, which turns 90 next March, has managed to keep the lights on in South Africa. Although inclement weather, such as snow storms in KwaZulu-Natal, had interrupted power supplies, there had not been any load-shedding since April 2008.

On its achievements in the past year, Eskom recorded that more than 32 000 homes were electrified in the first half of this year. This total was expected climb to 150 000 by the end of December.

A major driver of the South African economy, Eskom has 32 478 people working on new building projects; has spent R44.1 million, or 72.5 percent of total measurable spend; has seen 6 397 people complete their skills development training, and allocated R84.6 billion or 62.7 of local content to total contract values.

The latter, said Dames, was very important in terms of job creation and skills development.

Among the challenges facing Eskom, Dames named the increased theft of transmission towers, the safety of staff while out working and contractor safety at plants.

The non-payment and stealing of electricity were also of concern.

The financial situation in Soweto remains an area of grave concern for Eskom. Connectivity debt had swelled to R3.2 billion in the past 10 to12 years. Arrears stood at R200 million. Eskom was talking with government about resolving the situation, said Dames.

Responding to a question from Jabaar Mohamed, provincial director of DeafSA, Dames acknowledged that Eskom had not done enough advance the employment of disabled people in its own ranks.

Eskom, which is entirely owned by government, employs 44 913 people, has 4.9 million customers, has a network of 372 031 km of cables and power lines.

Meanwhile, Dames announced that Eskom's Chief Financial Officer Paul O'Flaherty has resigned and will leave the utility in July next year. O'Flaherty joined Eskom three years ago and was also a key member of Eskom's executive management committee.

Dames said the search for O'Flaherty's successor was underway.

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