Eskom Profit More Than Doubles on Prices; Expansion Progressing
Eskom Holdings Ltd., a South African state utility supplying about 95 percent of the nation’s power, said full-year profit more than doubled after it raised prices.
Profit jumped to 8.4 billion rand ($1.2 billion) in the year ended March 31, from 3.6 billion rand, Johannesburg-based Eskom said in its annual report released today. Sales rose 29 percent to 91 billion rand, while volumes gained 2.7 percent.
The regulator allowed the company to boost average tariffs about 26 percent this year to fund 500 billion rand of spending through 2017 to expand capacity and avoid a repeat of 2008 shortages that shut gold and platinum mines. Eskom has warned supplies will be “tight” at least until the first unit at its new Medupi plant begins generating power late next year.
“Eskom is well on track to be financially sustainable,” Chief Executive Officer Brian Dames said in Johannesburg. “Profit has increased, essentially driven by the tariffs.”
The company, whose biggest customers include Anglo American Plc (AAL), Xstrata Plc and AngloGold Ashanti Ltd., raised charges by an average 25 percent last year and 31 percent in 2009, saying prior increases lagged behind generating costs. It had struggled to fund the expansion program, prompting the government to provide about 350 billion rand of loan guarantees last year.
The expansion is “progressing well” and a “clear funding plan is in place,” Dames said. Eskom raised $1.75 billion in its first U.S. denominated bond issue this year and gained loans from the World Bank, the African Development Bank and the U.S. Export-Import Bank, among others.
Eskom isn’t planning to issue its second international bond in the “short-to-medium term,” Paul O’Flaherty, Eskom’s finance director, told reporters. Eskom will consider the issue when market conditions become “favorable” to do so, he said.
Eskom’s primary energy costs, mainly coal purchases, jumped 23 percent to 35.8 billion rand in the year under review as prices for the fuel rose and the volume of coal burnt climbed 1.6 percent to 124.7 million tons. Future coal cost increases will probably be about 12 percent to 14 percent a year, Dames said. Eskom, which generates more than 80 percent of its electricity from the fuel, had an average 41 days of stockpiles as of March 31, according to the annual report.
The generator isn’t expecting power outages, even as demand climbs towards an expected winter peak of 37,500 megawatts next month and after the utility couldn’t carry out enough plant maintenance in the summer, Dames said. “There is a growing maintenance backlog that will require plant shutdowns and this must be addressed over the coming year,” he said.
Eskom, looking to double its 41,194 megawatt capacity, would like to build a nuclear plant with a partner, he said.
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