Eskom, the state-owned utility is straining to meet South African electricity demand. It said that profit fell because of lower sales and the increased costs of keeping its power plants running.
Profit (after tax) declined to R9.3bn in the six months through September, from R12.6bn a year earlier.
“Eskom finds itself in the most challenging position in memory as a company,” chief executive Tshediso Matona told reporters in Johannesburg. Financial performance has been “systematically deteriorating,” he said. Eskom projects full-year profit of R500m.
The utility has been struggling to maintain power supplies to the national grid and earlier this month imposed managed blackouts in the continent’s second-largest economy after a coal silo cracked and collapsed, blocking conveyor lines to units at its Majuba plant.
Eskom has also faced delays in bringing new generation capacity online. Construction of the Medupi and Kusile plants, designed to be Africa’s largest coal-fired facilities at about 4,800MW each, is about two years behind schedule. The first of six Medupi units is scheduled to connect to the grid next month.
“Crews are working in shifts covering 24 hours a day to bring the first production from Medupi online,” said Dan Marokane, Eskom’s group capital executive.
The Majuba plant, which is running at 70% of capacity, is particularly vulnerable because of temporary measures to feed coal to its units.
South Africa announced a R20bn rescue plan for Eskom last month, which is enough to preserve its investment-grade rating, Standard & Poor’s said on November 11. The cash injection will come in tranches in the 2015-2016 financial year and total R23bn, according to Matona.
“The long-term sustainability of Eskom will still be challenged and will require that the issue of cost reflectivity in the tariff be addressed.”
The value of electricity sales increased by 5.4% to R82bn, while the volume declined, partly because of the impact of labor strikes, Matona said. Primary energy costs increased 22%.