Eskom in Troubled Times

After the news earlier this week that Eskom’s new Medupi power station will not be coming on stream at the end of this year, as had been planned, the parastatal today put out its financial results for the year to March, and ZA Confidential was in attendance.

It announced a net profit of R5.2 billion – a big fall from last year.

The Eskom chairman Zola Tsotsi suggested that poor performance was due to the need to keep the lights on – running assets at high levels.

He spoke of ”challenges” at Medupi, but didn’t provide much detail.

He announced that Paul O’Flaherty, who has resigned, will be leaving his post as Eskom’s finance director today – prompting speedy comment on twitter that the CFO is the fall guy for failures with Medupi.

Public Enterprises Minister Malusi Gigaba did address the Medupi delay – saying he is “extremely disturbed” by the delays beyond December 2013, which had been the most recent deadline.

He said he supports penalties being imposed on the contractors, and he said that there are questions on the security of supply, on the economy, and on Eskom’s ability to manage projects.

He said Eskom is doing better now than it did during the building of its most recent power plant in the 1980s, and he noted a lot of skills have been lost to Eskom in the meantime.

And he praised Eskom for keeping the lights on since April 2008, when there had been several months of widespread power cuts, which Eskom describes as “load shedding.”

CEO Brian Dames said that there had been sound business performance in a very tough year.

Because of the tight situation with demand levels close to supply capacity, less maintenance has been done recently than had been required, even though maintenance levels have been higher recently than in the previous year.

He noted that the most recently granted tariff increases of 16% have been lower than Eskom originally wanted, but the sluggish economy has meant a 2.8 percent reduction in electricity sale so far this year.

Eskom has had a ratings downgrade, due to its link to ZA’s sovereign rating, but Dames stressed the need to prevent a further downgrade and to maintain an investment grade rating.

All in all, it was a sober and realistic affair, not leaving me with any confidence that we will be able to avoid blackouts in the months to come, but recognising that Eskom has better leadership and political oversight than had been the case in the fairly recent past.

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