Eskom CEO Brian Dames addresses the media in Johannesburg on Thursday
Eskom CEO Brian Dames addresses the media in Johannesburg on Thursday

ESKOM CEO Brian Dames on Thursday announced his resignation from the company, citing "personal reasons", as the state-owned power utility reported restrained profits for the six months to September.

Mr Dames’s resignation will take effect on March 31 2014, Eskom chairman Zola Tsotsi said at Thursday’s interim results presentation.

Higher coal costs and usage of the open-cycle gas turbines (OCGT) restrained Eskom’s profits for the six months to September, it reported.

It warned that the profit was likely to be lower in the second half of the year, which is South Africa’s summer season, when it typically sells less electricity and incurs maintenance costs.

The state-owned power utility reported a R12.24bn profit compared with a R12.63bn profit in the corresponding period last year as primary energy costs rose 25.3% to 28.3c a kilowatt-hour.

This offset the gains from increased revenue, which reflected higher tariffs. Revenue per kilowatt-hour sold rose to 69c from 64.9c a year earlier while operating costs were 55.3c, against 47c previously.

The National Electricity Regulator of South Africa (Nersa) allowed Eskom to increase tariffs by an average 8% a year over five years. Mr Dames said this was forcing Eskom to re-engineer its business to adapt to these limitations.

Mr Dames’s resignation follows closely on the departure of former financial director Paul O’Flaherty in July, who doubled as the executive responsible for the company’s R300bn capital expansion programme.

Public Enterprises Minister Malusi Gigaba paid tribute in a statement to Mr Dames’s efforts in putting the foundation of Eskom’s new power station building programme in place.

He said significant progress had been made during Mr Dames’s tenure and he left behind a capable team of executives to continue the work. Mr Gigaba stressed that Mr Dames had steered the company "meticulously with integrity".

Mr Tsotsi said Mr Dames "has served with great distinction, dedication and commitment".

Asked at the press briefing whether he had been put under pressure to resign, Mr Dames said emphatically that he had not. He said: "It was my own decision."

According to a senior mining industry source, speculation has been swirling for months that Mr Dames might leave. The source commented, “I think he had just had enough. It’s an impossible job.”

However, Eskom has been fraught with difficulties since 2008, when it became apparent that the utility could no longer keep the lights on due to insufficient generation capacity. It had since embarked on a rushed and massive build programme to construct, among others, two mega coal-fired power stations with a capacity of 4,200MW each.

The Medupi and Kusile build operations have been beset by technical and labour problems, with Medupi now more than two years behind schedule. Eskom most recently missed a second deadline to bring the first unit of Medupi on stream this month. This has now been postponed to the second half of 2014.

The utility electrified about 53,600 homes in the six months to September, compared with 32,216 households in the corresponding period last year.

Mr Tsotsi said he was confident Eskom would be able to meet all of its obligations, notwithstanding Mr Dames’s resignation. He also stressed that the company was operating in "a very difficult environment".

"It is a huge tribute to the management of Eskom that they have been able to keep the ship afloat," he said.

South African Chamber of Commerce and Industry CEO Neren Rau noted Mr Dames’ resignation “with regret” and added, “during Brian’s tenure as CEO, the philosophy of energy efficiency, reduced consumption and environmental responsibility has been strengthened”.

Deon Reyneke, head of the metal, engineering and electrical industry for trade union Solidarity said: “In difficult times, Brian Dames brought the necessary knowledge and experience to Eskom and his resignation is a setback for the power giant. Mr Dames displayed excellent leadership at a remarkably tough time and he should receive credit for that.

“I hope that an experienced successor for Mr Dames will be appointed in order to maintain stability in the beleaguered parastatal.”

The choice of a replacement is crucial given the challenges Eskom still faces in bringing on line the Medupi and Kusile power stations.

As well as the departure of Mr Dames next March, Eskom announced it had appointed Tsholofelo Molefe as its new finance director. Ms Molefe, who was Eskom’s group executive for customer services, will assume the role immediately. She replaces Mr O’Flaherty, who left the utility in July.

Mr Dames has been at Eskom for 25 years and has been CEO since July 2010. He succeeded Jacob Maroga. Mr Dames was previously head of the utility’s generation division.