Addressing reporters on Eskom's financial results for 2007/8 on Thursday, Mr Maroga said apart from the rising costs of primary energy sources, an increasing national demand for electricity with a much-diminished reserve was also a challenge.

"[They] have undoubtedly been Eskom's biggest challenge for the past financial year," the chief executive said at the Power Utility's head office in Megawatt Park on Thursday.

However, he said the state utility had still performed well under the circumstances.

In the year under review, revenue increased by 10.9 percent to R44.4 billion while group operating profit, before the impact of embedded derivatives and the net finance costs declined to R3.2 billion compared to R6.5 billion in 2007, said Mr Maroga.

"Cash generated from operations declined to R7.4 billion compared to R15.7 billion in the previous year," he added.

Primary energy costs, on the other hand, have increased by 40 percent to 18.3 billion up from R13 billion in the same period last year.

The growth in sales has amounted to 2.9 percent compared to 4.9 percent in the same period last year.

Mr Maroga further said there has been a significant irrecoverable increase in primary energy cost

He added that over the past two financial years, the cumulative variance in excess of what was allowed in the Regulator's Multi-Year Price Determination has amounted to R7.5 billion.

With regards to generation, Mr Maroga said the key generation technical performance measures were also under pressure due to low reserve margins.

He said the challenge of operating a power system that has a low reserve margin should never be underestimated. "This challenge is serious, deep and material and will take a few years to reserve."

He said: "Our response to this challenge has to be comprehensive, with interventions on both the demand and supply side."

There has been no load shedding since the beginning of May following the introduction of the power system stabilisation programme.

"Technical performance of plant has improved, but a challenge of increasing electricity saving of 10 percent is still to be achieved," said Mr Maroga.

The CEO announced that R46 billion is to be invested in a capacity expansion programme during this financial year.

Public Enterprises Minister Alec Erwin commended the job done by Eskom despite the recent challenges of power supply.

"Although this was the toughest year Eskom has every faced before, they have managed to put urgent necessary measures to keep the systems working.

"We all understand the situation and we will also look at the debt committed and see what can be done to rectify the situation," said Mr Erwin.

He thanked Mr Maroga and his staff for the job they have done despite challenges of power outages.

The outgoing Eskom Chairman Valli Moosa also extended his appreciation to the power utility for its endless efforts to address electricity challenges in the country.

"Eskom has continued to try and bring urgent necessary measures to the current situation and I have no doubt that they will continue their efforts in trying to stabilise things back to normal again," Mr Moosa said.

BuaNews