JOHANNESBURG, Nov 20 (Reuters) - South Africa’s Eskom said the finance chief credited with putting the utility on a sounder footing was stepping down and full-year profit would fall after demand was choked by wildcat strikes in the mining sector.
The departure of Paul O‘Flaherty, who came in three years ago as the state-run company struggled to finance a much-needed expansion, came as a surprise and will raise new question marks about its roll-out going ahead, though the company said he had laid the foundation to fund future growth. He will leave in July.
“Eskom now has a consolidated platform in place to provide complete and accurate information on which to base decisions,” Eskom, which provides almost all the power to Africa’s biggest economy, said on Tuesday, highlighting O‘Flaherty’s achievement.
Eskom posted a fall in first-half profit, showing the mounting costs on the wider economy of the often violent strikes that swept the gold and platinum industries, leaving around 50 people dead.
Slower economic growth - also a consequence of the labour unrest - was another factor hitting profits, Eskom said,
Eskom’s net profit declined to 12.6 billion rand ($1.43 billion) in the six months to end September from 12.8 billion rand a year earlier and for the full year is seen falling well short of the 13.2 billion rand achieved for 2011.
“Profits for the full 2012 financial year are expected to be lower, with break even at best during the second half, when Eskom must take advantage of lower summer demand to do higher levels of maintenance on its power stations,” the company said.
Eskom has been struggling to ensure the lights stay on and is in a race against time to get new power plants up and running, which puts it in an unusual position.
The company needs to make profits to fund its expansion plans but must ensure demand does not become too robust and outstrip supply, leading to power cuts.
Eskom is seeking to more than double the price of its power over the next five years by applying for a 16 percent annual increase for five years from April 2013 to March 2018.
This is on top of price hikes averaging 25 percent annually in the past three years, which industries such as mining say has squeezed their margins.
$1 = 8.8145 South African rand Reporting by Sherilee Lakmidas; Editing by Ed Stoddard and Mark Potter