Eskom’s profit and performance surprise
ESKOM yesterday surprised analysts by revealing a R3.6bn profit for the past financial year and by making an outlandish claim that it had improved the performance of its plants by 10%.
Although profits declined from the R7.1bn achieved last year, the outcome was much better than had been expected.
The utility has been struggling to generate sufficient cash flow as lower sales, due to load shedding, and higher costs, due to the excessive use of diesel turbines, have put the utility under severe pressure.
Credit analyst at RMB Elena Ilkova said the R3.6bn was above expectation.
“It has been expected that Eskom would break even as the best-case scenario. We will need to know whether it was revenue that was greater than expected or was it delayed expenditure,” she said.
The announcement was made by Public Enterprises Minister Lynne Brown after the Eskom annual general meeting yesterday. The full financial results will be released on Tuesday. Ms Brown’s statement also made the claim that “accelerated maintenance had increased plant capacity from 65% to 75%”.
Unexpected plant breakdowns has been the key reason for load shedding. Due to past ill-considered decisions “to keep the lights on at all costs” maintenance had been neglected, leading to falling plant availability.
While Ms Brown claims the situation has now dramatically improved, figures from Eskom’s annual reports as well as the National Energy Regulator of SA’s (Nersa’s) quarterly system adequacy outlook show this is not the case. Plant availability has been on a steady decline since 2010 when it stood at 85.2% and reached 75.1% last year. Eskom spokesman Khulu Phasiwe said the exact figure in the annual report for 2015 was 73.7%, indicating that in the past financial year the decline has continued.
Nersa’s latest quarterly system adequacy report for the period ended June 30 had the plant availability at 70.8%.
Ms Brown said the percentages quoted on improved plant availability came directly from Eskom. Mr Phasiwe said plant availability had dropped to 65% “in 2013” but this is contradicted by Eskom’s own reports.
Eskom’s aim is to restore availability to 80% while best practice worldwide is an avail-ability of 90% with 5% under planned maintenance and 5% as a reserve margin.
Despite Eskom’s profits the utility is a long way from reaching financial sustainability. In a presentation by CE Brian Molefe to stakeholders in the past few months, it was projected that the utility would need to raise R55bn in debt for the year 2016.
While this is possible, its debt is becoming increasingly expensive.