{"id":965,"date":"2014-07-11T15:45:42","date_gmt":"2014-07-11T15:45:42","guid":{"rendered":"http:\/\/www.thebizsense.com\/za\/?p=965"},"modified":"2014-07-11T15:47:09","modified_gmt":"2014-07-11T15:47:09","slug":"eskom-net-profit-rises","status":"publish","type":"post","link":"https:\/\/www.thebizsense.com\/za\/news\/eskom-net-profit-rises","title":{"rendered":"Eskom net profit rises"},"content":{"rendered":"

\"eskom<\/a><\/p>\n

Electricity parastatal, Eskom, on Friday reported a net profit of R7.1 billion for the year ended 31 March 2014 – up from R5.2 billion in the previous year.<\/p>\n

The utility reported a R2.1 billion gain on derivatives.<\/p>\n

The surplus will be reinvested in the company in full, to support its capacity expansion programme and to service debt.<\/p>\n

The utility\u2019s revenues and profits are higher in winter because of greater sales volumes, seasonal tariff adjustments and lower maintenance costs.<\/p>\n

Revenue for the year ended 31 March 2014 increased to R139.5 billion from R128.8 billion in the previous year, reflecting the impact of the 8% tariff increase and the flat demand for electricity (0.6% growth compared to the previous year).<\/p>\n

However, the increase in revenue was offset by escalating primary energy costs, especially on open-cycle gas turbines (OCGTs), and an increase in maintenance costs.<\/p>\n

\u201cThis translated into revenue per kilowatt hour of 62.8c (2013: 58.5c), while costs per kWh in Eskom\u2019s electricity business were 59.7c (2013: 54.2c). Primary energy costs have increased significantly by 14.2% to 32.0c\/Kw,\u201d it said.<\/p>\n

On progress at its plants, the entity said its R300 billion funding plan was progressing well with 90.5% of funding secured.<\/p>\n

\u201cHowever, the plan from 1 April 2010 to 31 March 2017 was based on the assumption of a 16% third Multi-Year Price Determination (MYPD 3) tariff increase and will need to be extended to support the capital expansion programme to 31 March 2018,\u201d it added.<\/p>\n

For some time, Eskom has said that the National Energy Regulator of SA (Nersa\u2019s) 2013 third Multi-Year Price Determination decision to allow Eskom an 8% annual tariff increase left Eskom with a R225 billion revenue shortfall over a five year period between 2013 and 2018.<\/p>\n

In its application to Nersa in October 2012 for a tariff hike, Eskom asked the regulator to grant it a total 16% hike over the course of a five-year period.<\/p>\n

The revenue shortfall created by the MYPD 3 determination requires a shift in the business.<\/p>\n

\u201cA number of options are being pursued together with government, including the regulatory clearing account (RCA) adjustment and other funding alternatives,\u201d said Finance Director, Tsholofelo Molefe.<\/p>\n

Eskom is awaiting a determination from Nersa on its submission for the evaluation and approval of the RCA balance for its previous MYPD 2 control period. The RCA submission was made during the last quarter of 2013 in line with Nersa rules.<\/p>\n

The RCA mechanism allows Eskom to adjust for variances between costs and revenues assumed in MYPD 2 compared to the actual costs incurred and revenue received by Eskom, to ensure that both Eskom and the customer are treated fairly.<\/p>\n

The resulting under- or over-recovery is then recovered through the electricity tariff in the following or subsequent years. Customers could experience an increase or decrease in the price of electricity as a result thereof.<\/p>\n

Standard & Poor\u2019s recently downgraded Eskom\u2019s credit rating and placed it on CreditWatch with potential negative implications, while Fitch Ratings revised Eskom\u2019s outlook to \u201cnegative\u201d.<\/p>\n

Credit ratings remain at the lowest end of investment grade. Eskom is at risk of a further downgrade in the next 90 days if the Eskom standalone financial profile weakens materially.<\/p>\n

The utility is currently engaging government to address the company\u2019s capital structure.<\/p>\n

\u201cEskom\u2019s financial sustainability is under pressure but we have investigated alternative funding, including possible equity and quasi-equity, in response. We have applied to Nersa for the RCA adjustment, and we have launched a business productivity programme to reduce cost, increase productivity and enhance efficiencies,\u201d Molefe added.<\/p>\n

Eskom\u2019s going-concern status will continue to be a key focus for the coming year, said Eskom acting chief executive officer Collin Matjila.<\/p>\n

\u201cEskom\u2019s going-concern status will continue to be a key focus for the coming year, as the revenue shortfall created by the MYPD 3 decision cannot be solved through cost savings and efficiencies alone \u2013 cost-reflective tariffs remain a key imperative. Eskom has to balance short-term priorities with long-term sustainability requirements,\u201d he said.<\/p>\n

The return-to-service programme has been concluded with the successful commissioning of the final unit at Komati power station. A total of 3 741MW has been returned to service.<\/p>\n

The delivery of Medupi Unit 6 (794MW) remains a key focus area and the synchronisation (first power to the grid) date is scheduled for the second half of 2014, with commercial operation (full load) following approximately six months thereafter.<\/p>\n

Meanwhile, Kusile power station\u2019s Unit 6 is due to be synchronised in the second half of 2015, with the first unit of Ingula pumped-storage due for synchronisation in the second half of 2015.<\/p>\n

Total energy procured from Independent Power Producers (IPPs) for the year is 3 671GWh at a cost of R3 266 million, at an average cost of 88c\/kWh. \u2013 SAnews.gov.za<\/p>\n","protected":false},"excerpt":{"rendered":"

Electricity parastatal, Eskom, on Friday reported a net profit of R7.1 billion for the year ended 31 March 2014 – up from R5.2 billion in the previous year.<\/p>\n","protected":false},"author":1,"featured_media":967,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[238,27,1],"tags":[243,678,677],"class_list":["post-965","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-eco","category-featured","category-news","tag-eskom","tag-parastatal","tag-revenue"],"_links":{"self":[{"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/posts\/965","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/comments?post=965"}],"version-history":[{"count":3,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/posts\/965\/revisions"}],"predecessor-version":[{"id":969,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/posts\/965\/revisions\/969"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/media\/967"}],"wp:attachment":[{"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/media?parent=965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/categories?post=965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thebizsense.com\/za\/wp-json\/wp\/v2\/tags?post=965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}