ESKOM's secret deals revealed

So the truth is out. The DA has released the secret ESKOM report (downloadable from their web-site here) that includes the details of the low-cost deals with some of the big electrical consumers in South Africa.

Here is my summary:

• Motraco, a Mozambican electricity distribution company, pays 12c/kWh. This agreement is in place until Dec 2025. Motraco owes ESKOM R100million.
• ESKOM’s projected cost of production in 2008/2009 was 32,2 c/kWh.
• Gross profit margin is 35.2%, Net profit margin is 6.9%.
• Net reserve margin in Mar 2009 was 8.5%. Critical is considered 15%.
• BHP Billiton consume 9.3% of all the electricity ESKOM consumes. Despite this, because of the commodity linked contracts, the revenue from BHP Billiton was 50% less in 2009/2010 than in 2008/2009. BHP contributes 0.1% to the SA GDP.
• ESKOM pays R108/ton on long-term coal contracts, but during the coal shortages, paid 150% more - R270/ton. The contributed heavily to ESKOMs R8.3billion shortfall in 2009/2010.
• ESKOM’s bad debt amounts to over R2.8billion. Soweto owes R1.8billion of this.
• An accounting provision is made for the Chief Executive Officer of R41.3m /year. This is why Jacob Maroga claimed R85m in severance (2 years package).
• Staff turnover of up to 7.3%.

There is another summary on Moneyweb.

In a nutshell, we have a poorly performing utility, selling a large chunk of its electricity well below cost that the rest of the consumers need to subsidise. If they can’t even get their coal contracts, large customer contracts and CEO contracts right, how can we trust them?

Frank