Eskom sees revenue shortfall, to seek higher tariff rate

JOHANNESBURG (Reuters) – South African state-run power utility Eskom said on Friday it expects a revenue shortfall of up to 225 billion rand ($21 billion) for the next four years and was looking into a number of options including a tariff increase to cover it.

In a presentation accompanying its annual results, the utility which supplies virtually all of the power to Africa's most advanced economy said the shortfall "has serious consequences for Eskom's business and future stability."

"The funding gap can be closed through a cost reflective tariff, even though we might not make profit but that means we at least cover the cost," acting chief executive Collin Matjila told Reuters at the sidelines of the results presentation.

He said the company was currently not recovering the money it used from producing electricity and would approach South Africa's energy regulator for an increase in tariff prices.

After decades of selling its product cheaply, Eskom has been sharply raising rates as it scrambles to build new stations to keep the lights on and meet rising demand.

In early 2013 the utility was granted tariff hikes of up to 8 percent over a five-year period, well short of the 16 percent it had been seeking. But it has the option to go back to the regulator to have the tariff revised.

The company said its 300 billion rand funding plan, which was to run until March of 2017, would have to be extended for another year to March of 2018.

Eskom reported a net profit in the year to the end of March of 7.1 billion rand, an increase of around 35 percent.

"The surplus will be reinvested in the company in full to support its capacity expansion programme and to service debt," the company said.

($1 = 10.7173 South African Rand)