Eskom , which supplies 95 percent of South Africa's electricity, doubled profits to 8.36 billion rand ($1.22 billion), up from a restated 3.62 billion for the previous period. Although there seems to be much back slapping and self congratulation at the utility , the increased profits are largely as a result of increased tariffs rather than any managerial skill on the part of Eskom executives. Rather one needs to feel sorry for the poor consumers who are now paying for Eskom's mismanagement.
The numbers are however not as rosy as Eskom would have you believe and further investigation into the financials reveal a few startling facts:
- interest cover of only 1,5
- a debt equity ratio of 162%
- a hedge book of R28 Billion and a derivative loss of R1.7 Billion
- return on assets of 2,9% , a third of their borrowing costs , evidence that Eskom is destroying wealth on a monumental scale.
On the positive side however Eskom is committed to developing alternative energy sources and is investing heavily in wind and solar farms to supplement the coal generation plants. Alternative energy is expensive to develop and don't produce nearly enough electricity to sustain a growing economy. However these developments are an important contribution in reducing the reliance on carbon fuels,
Although the financials may well be positive , there are still many concerns about the future of electricity generation in South Africa. Consumers who have largely funded the utility will no doubt feel ripped off as the improved profitability is largely attributable to increased tariffs paid by consumers.
The Annual Report is 330 pages long overtaking ABSA's report of 250 pages long. I am sure that both these organizations profess to be Green and environmentally friendly - how many trees were sacrificed to print these bloated financial reports. One can only wonder what drivel these reports actually contain - surely a succinct report says more about an organization than a bloated report filled with waffle and corporate speak.