S-Af: Eskom Profit Plunges 86% as Coal, Diesel Costs Soar

Eskom Holdings Ltd., South Africa’s state-owned power utility, said full-year profit plummeted 86 percent as coal prices jumped and it spent more on diesel to ease a national electricity shortage.

“The underlying health metrics are not going in the right direction,” Chief Executive Officer Jacob Maroga said in a speech. “Our financial performance was severely impacted by the increasing cost of primary energy, mainly coal and diesel.”
While Eskom’s coal consumption climbed just 5.2 percent, prices of the fuel at South Africa’s Richards Bay port tripled in the past year. The utility also purchased more coal on expensive short-term contracts and put greater reliance on higher-cost diesel-fired plants as it ran short of generating capacity.

“From a financial perspective there really are problems,” Fanie Joubert, an economist with Pretoria-based Efficient Group, said from his mobile phone today. “For credit ratings agencies, there must be a red light flickering somewhere.”

South Africa is suffering a power shortage after the government delayed the utility’s expansion program. Eskom will spend 343 billion rand over the next five years to boost generating capacity by 11 percent to 47,681 megawatts.

Bloomberg