Johannesburg - Eskom, the state-owned utility straining to meet South African electricity demand, said first-half profit fell because of lower sales and the increased costs of keeping its aging power plants running.
Profit after tax declined to 9.3 billion rand in the six months through September, from 12.6 billion rand a year earlier, the company that supplies about 95 percent of the country’s power said in a statement.
“Eskom finds itself in the most challenging position in memory as a company,” chief executive Tshediso Matona told reporters in Johannesburg.
Financial performance has been “systematically deteriorating,” he said.
Eskom projects full-year profit of 500 million rand.
The company needs to fill a 225 billion-rand cash-flow gap after the energy regulator granted it only half the annual tariff raises sought for the five years through 2018.
Moody’s Investors Service reduced the utility’s rating to junk on November 7.
South Africa announced at least a 20 billion-rand rescue plan for Eskom last month, which is enough to preserve its investment-grade rating, Standard & Poor’s said on November 11.
The cash injection will come in tranches in the 2015-2016 financial year and total 23 billion rand, according to Matona.
“The long-term sustainability of Eskom will still be challenged and will require that the issue of cost reflectivity in the tariff be addressed.”
The value of electricity sales increased by 5.4 percent to 82 billion rand, while the volume declined, partly because of the impact of labor strikes, Matona said.
Primary energy costs increased 22 percent.
Renewable Energy
The company has made progress in expanding renewable generation from independent power producers, or IPPs, with 1 000 megawatts added to the grid and 4 000 megawatts under contract, according to Matona.
“With our financial performance being what it is, our capacity to take any further IPPs will be constrained unless something gives on that front.”
The utility has been struggling to maintain power supplies to the national grid and earlier this month imposed managed blackouts in the continent’s second-largest economy after a coal silo cracked and collapsed, blocking conveyor lines to units at its Majuba plant.
Eskom has also faced delays in bringing new generation capacity online.
Construction of the Medupi and Kusile plants, designed to be Africa’s largest coal-fired facilities at about 4 800 megawatts each, is about two years behind schedule.
The first of six Medupi units is scheduled to connect to the grid next month.
Crews are working in shifts covering 24 hours a day to bring the first production from Medupi online, said Dan Marokane, Eskom’s group capital executive.
Eskom’s power station fleet presents a constant risk of equipment failure, Steve Lennon, group sustainability executive at the utility, told reporters.
The Majuba plant, which is running at 70 percent of capacity, is particularly vulnerable because of temporary measures to feed coal to its units, he said.
“The risk is always there.” - Bloomberg News