Tuesday, November 23, 2010

Eskom Profitable, Finds Funds for Expansion

South African power utility Eskom reported a surge in first-half profit on Tuesday, boosted by higher power tariffs, and said it had secured the necessary funding for its expansion programme.

The state-owned firm, which supplies 95 percent of electricity in Africa's largest economy, said net profit for the six months to end-September was 9.5 billion rand ($1.4 billion), compared with 1.1 billion rand in the same period a year earlier.

Revenue totalled 51.1 billion rand, compared with 38.3 billion rand in the same period a year earlier.

The utility said its first-half earnings were boosted by the high tariffs and increasing demand and low maintenance during the winter period.

Eskom was granted an annual increase in power tariffs of around 25 percent for three years and said it may apply for two additional such increases.

Eskom, which had been struggling to raise the 440 billion rand it needs over seven years to build new power plants to meet fast-rising demand in South Africa, said it had identified sources of funding for its capacity expansion programme.

“We now have the certainty we need to go ahead with the build programme,” chief executive Brian Dames told a news conference.

The government has given Eskom 350 billion rand of guarantees, a 20 billion rand equity injection and a loan of 60 billion rand. In addition, Eskom has secured funding from various international institutions, including a $3.75 billion loan from the World Bank.

Eskom has also said it would tap the US bond market in early 2011 for cash to pay for new power stations and other infrastructure desperately needed to avoid a power crunch.

Eskom is currently building two new 4800 MW coal-fired power plants. Any delay in the two plants would prolong and exacerbate a power supply shortfall in South Africa, the world's top platinum producer and a major producer of gold.

“Supply will be tight up to 2015, and particularly so next year and in 2012, until our large new power stations come on line,” Dames said.

Eskom has had a monopoly on the country's power supply but independent producers are expected to join the generation business under a new government energy plan currently under discussion.

South Africa suffered serious blackouts in early 2008 after the national grid nearly collapsed, forcing mines and smelters to shut for days and costing the economy billions of dollars.