Johannesburg - Eskom intends to apply for above inflation annual price increases when it submits its application as part of the fourth multiyear price determination (MYPD).
Chief financial officer Anoj Singh told reporters during the Eskom annual report yesterday that the above inflation electricity price increases were necessary to ultimately migrate to electricity prices that reflected the cost of producing electricity.
The current MYPD 3 ends in the 2017/18 financial year.
“We anticipate applying for annual increases above inflation over the MYPD 4 period. This marks a change from a significantly higher price trajectory, which would have seen electricity price increases exceeding 20 percent per year over the next five years – a scenario that would be unsustainable for the South African economy,” Singh said.
“A clear distinction will be made between the revenue requirement to sustain current operations, and that which is needed for (independent power producers) and new build projects.”
Singh said Eskom’s target of increasing profitability over the next five years was under threat “due to significantly increased depreciation costs, created by capitalising R300 billion in new assets, as well as higher finance costs due to growth in debt and lower interest capitalised as assets are commercialised”.
He said Eskom’s funding plan would focus on increasing borrowings from a number of sources, including export credit agencies, development financing institutions, domestic and international bond markets and the sale of non-core assets.
In the year ended March 31, Eskom’s revenue rose by 10.6 percent to R163.4bn, up from R147.7bn last year. Net profit rose to R4.6bn compared with R200 million recorded last year. Overall electricity sale volumes declined by 0.8 percent.
The agricultural sector had the highest increase in sales at 6.1 percent, followed by the commercial sector at 5.2 percent. The residential and mining sectors increased electricity consumption by 2.9 percent and 2.1 percent, respectively.
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