Eskom is on a sound financial and operational footing

HIGHLIGHTS

EBITDA surged 37.4% to R32 billion

Net profit: R4.6 billion

R17.5 billion cost-saving achieved versus targets of R13.4 billion

Liquid assets of R38.7 billion, an increase of 123%

57% of funding for 2016/17 have been secured

Tuesday, 05 July 2016: Eskom is on a sound financial and operational footing compared to a year ago.

Releasing the company’s financial results for the year ended 31 March 2016, Eskom’s Group Chief Executive Brian Molefe said today that the stability at both Board and Executive Management levels of the company was a launchpad to drive accountability and better manage the business.

“With new leadership and intensified staff engagements, we have stabilised the organisation. Despite the challenges we face, we continue making progress in the technical and operational areas of the business. Through our robust improvement plan, we have risen to the challenge of completing necessary maintenance of our ageing power stations, while delivering on our new build projects, which will add capacity to the grid in the future,” Mr Molefe said.

Earnings before interest, taxes, depreciation and amortisation (EBITDA), which is a measure of a company’s operating performance, surged 37.4% to R32 billion compared to R23.3 billion in same period last year. The EBITDA margin for the period under review improved to 19.8% compared with 15.9% in the same corresponding period.

Revenue rose 10.6% to R163.4 billion (2015: R147.7 billion), and net profit for the year was R4.6 billion (March 2015: R200 million).

“Financial performance improved against the previous year, and all financial ratios showed improvement due to improved operating results, as well as the conversion to equity of the subordinated Government loan and equity injection of R23 billion,” Mr Molefe said, adding that: “Operating results also improved due to stringent cost containment measures.”

Eskom Chairperson Dr Baldwin Ngubane said Eskom would no longer be a constraint to South Africa’s economic growth. He said the company’s Corporate Plan for the five years to 2020/21 aims to re-establish Eskom as a catalyst for growth.

“Our Corporate Plan will drive ongoing improvement in our operational and financial sustainability, while stimulating economic growth and driving socio-economic development. We recognise the need for fundamental operational change if we are to provide an affordable, sustainable electricity supply to all South Africans,” Dr Ngubane said.

He said Eskom’s new build programme would add 8 600MW of new capacity by 2020/21. In addition, Eskom has signed 65 power purchase agreements with independent power producers (IPPs) for RE-IPP bid windows 1 to 4.5, which would add 4 900MW of IPP capacity to the grid by 2020/21. 

Dr Ngubane said: “South Africa’s energy mix is expected to shift considerably towards renewables over the next two decades. Although coal will remain a core part of the country’s energy mix for the foreseeable future, South Africa will have to diversify toward lower carbon emitting energy sources under its agreements at the United Nations COP 21 climate change conference in 2015.”

There has been a turnaround in Generation performance during the last six months of the financial year, with plant availability showing steady improvement. The plant availability averaged 73.5% in the fourth quarter. Unplanned outages improved from an average of 16.2% in April 2015 to 11.5% in March 2016. This is attributable to a focus on reducing partial load losses, as well as previous planned maintenance starting to bear fruit.

As a result of the improved performance of our baseload power stations, spending on open cycle gas turbines (OCGTs) was reduced from about R1.2 billion in April 2015 to R25 million in March 2016.

The national grid improved largely due to the commissioning of Medupi Unit 6, coupled with lower demand, improvement in plant performance and increased production from the IPPs. Strategies are in place to address system constraints; further easing is expected as Ingula, Medupi and Kusile are progressively commissioned, coupled with further increased production from the IPPs.

“Going forward, we remain focused on minimising load shedding, increasing maintenance, accelerating the new build programme, energising our workforce, and implementing key safety improvements, as well as operational efficiencies and cost containment measures,” said Mr Molefe.

“It is my pleasure to acknowledge the hard work of all Eskom employees. We have turned a corner on the road to sustainable and reliable energy generation in South Africa, and this is due, in large part, to their commitment and hard work.”

Statement issued by Eskom, 5 July 2016