Wrap Text
Eskom is on a firm operational and financial footing
ESKOM HOLDINGS SOC LTD
JSE Code: BIESKM
Date: 20 July 2017
MEDIA STATEMEMENT
Eskom is on a firm operational and financial footing
HIGHLIGHTS
• EBITDA surged 14% to R38 billion
• Revenue rose 8% to R177 billion
• Own generation cost decreased by 8.5% to R60 billion, with cost of IPPs up by
30.8% to R20 billion
• Primary energy costs down by 2.3%
• R20.2 billion cost-saving achieved
• Energy availability improved significantly to 77.3%
• Medupi Unit 5 in commercial operation (producing 794MW) since 3 April 2017
• All 4 Ingula units in commercial operation (producing 1 332MW) since January
2017
• Kusile Unit 1 and Medupi Unit 4 synchronised
• 207 189 new households connected to the national grid
Wednesday, 19 July 2017: Whereas security of power supply was the key concern nearly
two years ago, the focus has now shifted to managing surplus capacity, said Eskom’s
Interim Group Chief Executive Johnny Dladla today when releasing the company’s
2016/17 financial results.
To manage the surplus capacity, said Dladla, Eskom has adopted an aggressive sales
volume growth by encouraging electricity demand to support economic growth by
encouraging an annual growth of 2.1% in local demand and 8% in export sales over the
next 5 years.
“Eskom is ideally positioned to support the economic recovery of South Africa and enable
industrial growth across Southern Africa. We will build on the momentum of our
performance and efficiency improvements over the recent years and become a more
customer-centric organisation that partners with key sectors to increase industrial activity,
electricity consumption and job creation,” said Dladla.
Reflecting on the operational and financial performance of the company in the year under
review, Dladla said Eskom’s turnaround plan was premised on three key focal areas,
namely, improving generation performance; ensuring financial sustainability; and
completing the new build programme.
To this end, generation plant availability increased from 71.1% to 77.3% due to Eskom’s
strict adherence to its plant maintenance plans. As a result of this increased availability
and the additional new generating capacity added from Medupi, Ingula and Kusile, the
reliance on open-cycle gas turbines (diesel generators) has reduced considerably.
Eskom has not implemented load shedding for the past 23 months, and the plan is to
continue implementing appropriate levels of planned maintenance to ensure long-term
plant reliability. In terms of Eskom’s existing Generation Sustainability Strategy, its aim is
to achieve 80% plant availability, 10% planned maintenance and 10% unplanned
maintenance by 2020.
Dladla has put special focus on corporate governance and ethics as per the Shareholder
and the Board’s mandates.
Eskom’s Chief Financial Officer, Anoj Singh, said the company’s earnings before interest,
taxes, depreciation and amortisation (EBITDA), which is a measure of a company’s
operating performance, surged 14.4% to R37.5 billion in the year-ended 31 March 2017,
up from R32.8 billion in same period last year. Revenue rose 8% to R177 billion (2016:
R164.2 billion), driven largely by a 12.1% increase in export sales and a 9.4% tariff
increase that was granted by the energy regular last year.
In order to grow export sales, Singh said Eskom has concluded new export sale
agreements with a number of regional trading partners, ranging from 50MW to 200MW.
He said the company’s cost-cutting measures were also bearing fruit, with a saving of
R20.2 billion realised in the year under review, up from R17 billion achieved previously.
The savings were achieved from coal operational expenditure and other operating costs.
Primary energy costs were reduced by 2.3% to R82.8 billion compared to an average
increase of 13% over the last five financial years. Eskom’s own generation costs, including
environmental levy, of R60.1 billion (2016: R65.7 billion) generated 215 358GWh and
reflects a decrease of 8.5% compared to the previous year. Coal purchase cost per tonne
increase were contained to 3.5%, which well below inflation of 6%.
Independent Power Producers (IPPs) generated 11 529GWh at a cost of R19.8 billion
(2016: R15.1 billion), reflecting an increase of 30.8% compared to the previous year. The
average cost increased to 188c/kWh (2016:171c/kWh), as proportionately more energy
was procured from the renewable energy projects at higher costs than the other IPPs.
The cost is much higher than Eskom’s short run marginal cost and the average price of
electricity.
“We will continue to engage with Government, collaborating closely with the Department of
Energy and Nersa to manage IPP programme risks and mitigate any unintended negative
operational and financial impacts on Eskom,” said Singh.
The group’s net cash inflow from operating activities was R45.8 billion for the year (2016:
R37.2 billion), reflecting an increase of 23.1%. Cash flows used in investing activities were
R62.3 billion for the year (2016: R58.6 billion).
The group’s liquidity position, comprising cash and cash equivalents plus investment in
securities, was R32.5 billion at 31 March 2017.
Singh said Eskom has managed to secure 77% of its funding requirements, including cash
on hand, for the current 2017/18 financial year despite tough market conditions.
Furthermore, Eskom in the 2016/17, Eskom had for the first time managed to increase its
borrowings by over R60 billion in one single year, a move that is indicative of the
confidence that the investors still have on Eskom.
“We remain resolute that we will fully execute the required funding for the year, albeit
under challenging market conditions. Our liquidity levels remain healthy and Eskom’s
financial profile continues to improve and stabilise. Backed by the availability of the
government guarantees and the stable financial profile; we do not foresee significant
impediments in the execution of the remainder of the FY17/18 funding requirement,” said
Dladla.
Notwithstanding the good results, Eskom’s Interim Chairperson Zethembe Khoza said it
was a matter of great concern that there were reportable irregularities that were raised by
Eskom’s external auditors.
“It is worth noting that the Board has taken adequate steps to the satisfaction of the
auditors that the irregularities have been mitigated to an acceptable level,” said
Khoza.
He added that: “Management has shared plans to facilitate improvements in
relation to the qualified audit. The Board has impressed upon the executive team
that the issues raised will demand special attention and oversight going forward. I
would like to talk to a few matters that have been of interest to the public
recently. The investigation into Mr Koko and the alleged conflict of interest as it
related to Impulse International has been completed. The Board has taken a
decision to pursue disciplinary against Mr Koko and this will follow the normal
labour relations. The Minister of Public Enterprises has been informed of this
decision.”
ENDS
Issued by: Eskom Media Desk
Tel: +27 11 800 3304/3343/3378
Fax: 086 664 7699
Email: mediadesk@eskom.co.za
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