Parliament's portfolio committee on energy heard on Tuesday how a weak rand and geopolitical volatility hamstrung the finances of the Central Energy Fund (CEF), at a time South Africa faces a power crisis.
However, the CEF reported 2022/2023 first quarter profit of R5.2 million, higher than the budgeted for net loss of R79. 3m.
CEF is involved in the search for appropriate energy solutions to meet the energy needs of South Africa, the Southern African Development Community and the sub-Saharan African region, including oil, gas, electrical power, solar energy, low-smoke fuels, biomass, wind and renewable energy sources.
CEF also manages the operation and development of the oil and gas assets and operations of the South African government.
In the first quarter of the 2022/2023 financial year, the total revenue for the period, of R117m, trailed expectations of R104m, attributed to poor production volumes not meeting Eskom’s standards and labour unrest.
CEF executives said the three quarter reporting period, with the financial year to be concluded in several weeks, was underpinned by geo-political challenges - including the Russia - Ukraine conflict, which had seen more demand for South African energy stocks, particularly coal, as well as the lingering Covid 19 epidemic in China - all of which put more pressure on exports rather than utilisation of the energy assets for domestic use.
“Rolling blackouts are a hardly a novelty in South Africa but amid a global energy crises, countries worldwide are struggling with electricity supply with energy prices in Europe increasing with no alternative choice,” the CEF said.
Also to blame for the CEF's weak financial performance was the weakening price of the rand against the dollar, escalating prices of the barrel price of oil during the financial period and Opec's curtailment of fuel production.
Global inflation is forecast to also rise to 5.8% in 2022 from 4.7% in 2021. but decline to 6.5% in 2023 and 4.1% by 2024.
Executives said though there were signs of a turnaround for the CEF as PetroSA was gaining momentum in securing its supply lines and diversification, which should see it make meaningful orders in the fourth quarter ending in March 31 this year.
“We need to take charge of security of supply. The 200-day mark reached on load shedding was an eye-opener. We have to look at how we can alleviate that situation,” executives said.
Some hope has been pinned on National Treasury and the National Electricity Regulator of South Africa (Nersa) coming to the party with reviewed tariffs to give the CEF some leg-room.
PetroSA, the fuel storage and processing subsidiary of the CEF, racked up a close to R400 million cumulative loss over the past three quarters.
Its gross profit was lower than anticipated at a R364 million loss versus a forecast of R208m profit
Parliament's portfolio committee on energy also heard on Tuesday how weekly war room efforts to shore up PetroSA might yet slowly bear fruit as the chalkboard of the CEF lines up with perennial losses from PetroSA, ill-timed acquisitions of assets which placed the energy entity deeper into the red.
“A lot of costs have had to be taken in as operational capital expenditure as opposed to capital expenditure because we were not capitalised by National Treasury as we had initially planned,” CEF management told the Zet Luzipo-led Portfolio Committee.
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