POLITICS

Eskom has made significant strides – Brian Molefe

CEO notes that in the past 108 days only 2 hours and 20 minutes of load shedding recorded

Eskom on a path to operational and financial stability

HIGHLIGHTS

  • Net profit up 22% to R11.3 billion
  • EBITDA rose 9% to R24.9 billion
  • Cash flow from operations increased 13% to R23 billion
  • Funding of R46 billion secured, liquidity position improved
  • Gearing improved to 60% from 66%
  • Debt-to-equity ratio improved to 1.50 from 1.90
  • 41 778 additional households electrified

Tuesday, 24 November 2015: Announcing Eskom’s interim financial results for the six months ended 30 September 2015, Group Chief Executive Brian Molefe said today that the company has made significant strides in key areas of the business, a move that has placed the company on a path to operational and financial stability.

Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 9% to R24.9 billion (2014: R22.8 billion) on the back of an 8% growth in the revenue of R87.9 billion. Net profit for the period grew 22% to R11.3 billion compared to R9.3 billion previously.

Total operating costs increased with 7% to R71.3 billion (September 2014: R66.6 billion). Primary energy costs rose by 7.7% to R41 billion, while repairs and maintenance grew by 11.2% to R3.7 billion, due to our strategy to perform more planned maintenance.

Employee benefit costs and other operating expenses were contained with employee benefit costs increasing by 4.8% to R13.8 billion while other operating costs declined 4.2% to R5.1 billion. Year-to-date cost savings initiatives of R8.9 billion were achieved under the Business Productivity Programme which assisted in containing costs to these levels.

Molefe said balancing supply and demand remained a challenge for the first quarter of the financial period. The second quarter showed significant improvement where there was 108 days with only 2 hours and 20 minutes of load shedding recorded on 14 September 2015.

“We are progressing well in the maintenance of our power generating plant whilst keeping the electricity system stable. Our new build programme is progressing well, with the contribution of Medupi Unit 6 boosting our capacity and creating the necessary space for maintenance,” Molefe said. He added that: “Our turnaround plan to stabilise and improve the availability of our generating plant includes moving to full philosophy maintenance as more space becomes available, and improving efficiencies by locking down outage schedules.”

Plant energy availability factor has improved to 74.4% on 16 November 2015 due to the positive impact of planned maintenance, from an annual year-to-date average at 30 September 2015 of 70.3%. The Tetris maintenance planning tool has helped in the successful execution of planned maintenance without load shedding.

Eskom fully supports the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (RE-IPPP) and acknowledges that independent power producers (IPPs) must play in the South African electricity market, and remain committed to facilitating the entry of IPPs to strengthen the system adequacy and meet the growing electricity demand. Total capacity of 5 817MW has been contracted with IPPs, of which 3 900MW relates to contracts under Department of Energy’s RE-IPPP.

Bid quotes for windows 3.5 and 4.1 have now been issued.

At 30 September 2015 municipal arrear debt stood at R5.6 billion, with the top 20 defaulting municipalities contributing R4.3 billion or 76% of the total arrear municipal debt. Eskom has signed payment agreements with 50 defaulting municipalities, including 15 of the top 20 municipalities. The South African Local Government and the National Treasury have played a pivotal role in encouraging municipalities to settle their debts with Eskom.

Eskom’s liquidity continues to improve, enabling the company to successfully negotiate credit facilities that make it possible to fund itself. At 30 September 2015, Eskom had secured funding of R46 billion against a year-end target of R55 billion; R19.8 billion has been drawn down to date. The Government loan of R60 billion was converted to equity. The shareholder provided a further R10 billion in equity, with an additional R13 billion expected by March 2016.

“Going forward, our focus will remain on minimising load shedding, ensuring adequate liquidity, filling key vacancies and improving staff morale. We are also targeting operational efficiencies and an improvement in safety,” Molefe said.

Statement issued by Eskom, 24 November 2015