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Executive summary
Eskom’s results for the financial year to 31 March 2006 reflect broad-based robust performance in the company and subsidiaries with the balance sheet debt-to-equity ratio at a very healthy 0,18 for the group. The operating financial performance for the company was encouraging given low sales growth and technical problems experienced during the year. Safety, lower than budgeted sales volumes, unplanned automatic grid separations and higher than budgeted primary energy costs were areas of concern and is receiving management attention.
Eskom raised €500 million (offshore) and R2,5 billion (local) in capital markets, and R1,6 billion of the mortgage book of Eskom Finance Company was securitised on 31 May 2006.
As the supply of affordable and reliable electricity underpins development, Eskom takes its responsibility for satisfying the energy requirement of a growing South African economy very seriously. It has embarked on a R97 billion capital expansion programme to ensure continuity and reliability of supply to its customers. The group capital expenditure for the period was R10,9 billion against a budget of R9,7 billion as expenditure was accelerated to meet growing electricity demand.
Highlights of the review period included:
- benchmarking Eskom’s sustainability performance against the JSE’s Socially Responsible Investment (SRI) index indicated a score that meets the minimum requirements for inclusion in the index, and one that is comparable to top performers in the category for high environmental impact
- an unqualified audit opinion of non-financial information, and independent assessment of sustainability reporting
- the implementation of a multi-faceted demand-side management programme which achieved electricity savings 17% ahead of target. Initiatives include raising awareness on using energy more efficiently and shifting energy usage patterns
- the introduction of a multi-year price determination, enabling better long-term planning by stakeholders
- exceeding annual electrification targets by connecting 106 968 new customers (bringing the total to date to 3,3 million)
- 98% of municipalities are now participating in the free basic electricity initiative, benefiting 1,0 million households – although there is still a long way to go to ensure all qualifying consumers receive their free monthly electricity best-ever performance in reducing particulate emissions with a 19,2% year-on-year reduction
- introduction of Eskom’s long-term climate change strategy, which includes assessing alternative energy sources, energy efficiency measures and research and development
- significant progress in Eskom’s research and development programmes spanning renewable energy sources and optimal use of non-renewable sources
- further enhancements to already-stringent corporate governance practices
Lowlights of the review period included:
- the most significant challenge was the protracted disruption to power supplies to the Western Cape, which were the cumulative result of several technical malfunctions – some isolated and some inter-related – and extraordinary circumstances, such as fires and fog that caused pollution on the lines with consequential flashovers. Refer to the director's report for further details
- slow progress in the electricity distribution industry restructuring programme
- not achieving our safety targets, despite intensive, group-wide campaigns that span all operations, employees and suppliers.This has led to a renewed and focused commitment to provide a safe and healthy working environment for all employees and contractors. Refer to the directors' report for further details
Summary – performance against targets
Further detail on these performance areas appear in the report as indicated.
