Eskom CEO Resigns as South African Power Utility’s Profit Drops

Eskom Holdings SOC Ltd. said Chief Executive Officer Brian Dames resigned as the supplier of more than 95 percent of South Africa’s power’s profit fell 3.2 percent amid higher production costs and constrained supply.

Dames will remain at the company until March and a search for his successor has started, Chairman Zola Tsotsi said in a presentation in Johannesburg today. Tsholofelo Molefe, the company’s group executive for customer services, was appointed finance director, he said. Her predecessor, Paul O’Flaherty, resigned on July 10 and Treasurer Caroline Henry has acted in the position since.

The utility is spending 500 billion rand through 2017 to replace aging equipment and add plants to avoid a repeat of 2008 blackouts that halted mines, including those owned by companies such as Anglo American Plc (AAL) and BHP Billiton Ltd. (BHP), for five days and paralyzed factories in the continent’s biggest economy. Eskom last month declared emergency measures to avoid outages as the deficit between power capacity and demand shrank.

Eskom “has kept lights on by skin of our teeth,” Tsotsi said.

Profit after tax declined to 12.2 billion rand ($1.2 billion) in the six months ended September from 12.6 billion rand a year earlier, the company said in a presentation on its website.

Sales increased 6.1 percent to 77.8 billion rand and revenue for each kilowatt-hour was 69 cents, down from 64.9 cents a year earlier. Operating costs per kilowatt-hour rose 18 percent to 55.3 cents.

Energy Costs

The Medupi and Kusile coal-fired facilities and the Ingula hydro-power plant that the company is building will add 10,896 megawatts to South Africa’s national grid, expanding Eskom’s production by more than 25 percent.

The projects have been stalled by labor disruptions and equipment malfunctions. Stockpiling of coal for Medupi stopped in March after workers at Exxaro Resources Ltd. (EXX), an Eskom contractor, went on strike. A month later Eskom said Hitachi Kaefer would test and repair about 9,000 faulty welds on a boiler at the project. Construction at Kusile, in Mpumalanga province, was disrupted in April because of a labor dispute.

Energy costs climbed 25 percent to 31.3 billion rand from a year earlier, with expenses from running open-cycle gas turbines more than tripling to 2.3 billion, Henry said.

“That impacts the most in terms of primary energy costs,” she said.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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