Financial prudence at Eskom ensures stable power supply in S. Africa

After months of constant load shedding, South Africa's major electricity supplier Eskom is on a sound financial and operational footing, which will ensure stable electricity supply in the country, the company said on Tuesday.

Releasing the company's financial results for the year ended March 31, 2016, Eskom's Group Chief Executive Brian Molefe said the stability at both Board and Executive Management levels of the company was a launchpad to drive accountability and better manage the business.

"With new leadership and intensified staff engagements, we have stabilized the organisation. Despite the challenges we face, we continue making progress in the technical and operational areas of the business," Molefe said.

Eskom, which supplies more than 95 percent of electricity consumed in South Africa, had been under fire for poor management that led to constant load shedding that began in November 2014.

Through a robust improvement plan, Eskom has risen to the challenge of completing necessary maintenance of its ageing power stations, while delivering on its new build projects, which will add capacity to the grid in the future, Molefe said.

Earnings before interest, taxes, depreciation and amortisation (EBITDA), which is a measure of a company's operating performance, surged 37.4 percent to 32 billion rand (about 2.2 billion U.S. dollars), compared to 1.6 billion dollars in the same period last year, he said.

The EBITDA margin for the period under review improved to 19.8 percent compared with 15.9 percent in the same corresponding period.

"Financial performance improved against the previous year, and all financial ratios showed improvement due to improved operating results," Molefe said. "Operating results also improved due to stringent cost containment measures."

Eskom Chairperson Baldwin Ngubane said Eskom would no longer be a constraint to South Africa's economic growth. He said the company's Corporate Plan for the five years to 2020/21 aims to re-establish Eskom as a catalyst for growth.

He said Eskom's new build program would add 8,600MW of new capacity by 2020/21. In addition, Eskom has signed 65 power purchase agreements with independent power producers (IPPs), which would add 4,900MW of IPP capacity to the grid by 2020/21.

Ngubane said South Africa's energy mix is expected to shift considerably towards renewables over the next two decades.

Although coal will remain a core part of the country's energy mix for the foreseeable future, South Africa will have to diversify toward lower carbon emitting energy sources under its agreements at the United Nations COP 21 climate change conference in 2015, he said. Enditem