ESKOM has begun to turn the corner with its annual results on Tuesday
showing a vastly improved financial position and much better
performance of its generating fleet.
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| https://youtu.be/GH4ILb64r_0 |
Eskom’s performance is considered crucial to improving SA’s economic
outlook and could help the country avoid a debt-rating downgrade likely
to be considered at the end of 2016.
Although operational and revenue performance has improved, the cost
to completion for Medupi and Kusile has been revised dramatically
upwards.
Medupi is now expected to cost R135bn, up from the last estimate of
R105bn and Kusile R160bn from R118.5bn, excluding interest. The first
cost estimate for Medupi in 2007 was R69.1bn
The results were marred by a dispute that emerged shortly after
results were announced between the company and Anglo American over how
much the mining company was being paid for coal from the New Denmark
mine. Eskom claimed it was being charged R1,600 per tonne, but Anglo
claimed on Tuesday evening it was being paid half that amount.
Eskom’s key improvement was in the performance of the power stations
which are critical to its turnaround. Since 2010, the deterioration of
its plants has led to an escalation in breakdowns, load shedding and a
vicious cycle of neglected maintenance.
Presenting the results, CE Brian Molefe said on Tuesday that Eskom’s
energy availability factor — that is, the percentage of the generating
fleet that is in good working order — rose to 78% in the past three
months. This is after reaching an all-time low of 71% over the 2015-16
financial year. Best practice is for plant availability of 90%.
Overall revenue grew to R163bn this year, up 10.6% from 2015. Profit
improved to R4.6bn up from R0.2bn the year before. The company also says
that it has secured 57% of its funding for the next year.
Molefe said Eskom was now able to generate surplus electricity. "In
2015 we were talking about a shortage of about 3,000MW to overcome our
supply issues and now we are in a position where we are able to meet
demand and export a lot, and that is the position of comfort that we are
in." Export sales grew 12% in the past year.
But while plant performance has improved, the company was also helped
by low demand in the domestic market. Revenue from rail was 7.9% down
followed by industrials which bought 6.2% less electricity. Molefe said
these were due to low commodity prices which affected exports. Overall
demand declined 0.8%.
"The Transnet coal line as well as iron ore line in Saldanha are our
main customers for electricity. Decline in demand was because of
traction in low commodity prices and the decrease in exports from coal
and iron ore," Molefe said.
In the coming year, international sales will grow in importance as a
source of revenue, while local sales are expected to be more or less the
same if not slightly less because of low commodity prices.
EE Publishers energy analyst Chris Yelland said the improvement in plant performance was key for Eskom.
"The energy availability has gone up significantly and that is contributing to a surplus supply.
"Nersa has time and again pointed out that Eskom needs to improve its
energy availability as this is where the improvement is coming from
which is very positive," he said.
Power and utilities director at PwC Angeli Hoekstra says that the
anticipated electricity supply out of Kusile and Medupi was enough for
the economy in the medium term at present rates of growth. "If the
economy recovers substantially … we will need more electricity. In the
near future we will have a lot of electricity but in the longer term, we
will need to build more capacity," she said.
Hoekstra said that the renewable energy independent producer
programme and the new coal independent power producer programme meant
that in the short to medium term there was sufficient supply.
The lack of security of electricity is estimated to have shaved 1%
off last year’s GDP and was named by ratings agencies as a key factor
inhibiting growth and affecting SA’s rating.
The Eskom turnaround seems also to have impressed ratings agencies
who recently said growth prospects for SA were looking up in 2017
following improved electricity supply.
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