Eskom posts record R23.9bn financial loss
Eskom earned less revenue than anticipated as a result of not recovering electricity payments, and spent more money, especially on diesel, to run its emergency generation fleet because there were more days of blackouts.
Eskom made a whopping R23.9-billion financial loss during the year ending March 2023, which marks the largest in its 100-year operational history.
The figure widened by two times since the previous year, when the power utility recorded a R11.9-billion loss.
Eskom unveiled its financial results on Tuesday, 31 October. They have been submitted late to Parliament, with the utility missing the 30 September submission deadline.
Its loss for the year comes despite a 9.61% electricity tariff increase and a R21.9-billion bailout from National Treasury. These circumstances would, in theory, help Eskom to increase its revenue or money generation potential. And it did, since its revenue increased by 5% to R259.5-billion.
However, Eskom earned less revenue than anticipated as a result of not recovering electricity payments, and spent more money, especially on diesel. It spent R29.7-billion on diesel that is used to run its emergency generation fleet (open-cycle gas turbines) and generate power. This was more than double the previous financial year’s spend.
Eskom had to rely on open-cycle gas turbines because 2023 is shaping up to be the worst year for power disruptions. According to Eskom acting CEO Calib Cassim, there have been 280 days of blackouts in 2023, which is substantially worse than the 65 days recorded in 2022.
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Worsening blackouts have negatively affected the economy, businesses and public finances, pushing Finance Minister Enoch Godongwana to unveil a Medium-Term Budget Policy Statement on 1 November that misses the 2023/24 February Budget targets by a mile. Tax revenue is likely to undershoot requirements by at least R50-billion, forcing Godongwana to cut department budgets and crucial service delivery programmes.
Debt and interest costs are still a big problem for Eskom, weighing on its money-generation potential. Its debt stock swelled to R423.9-billion – about a 7% increase over the year – due to the weakening rand and borrowing activities.
In February, the government came to Eskom’s rescue by taking over a portion of its debt (R254-billion), giving it breathing room to fund its operations instead of servicing hefty borrowings. Of the R254-billion, Eskom received R16-billion in August 2023 and R20-billion in October 2023, said Martin Buys, Eskom’s acting CFO.
Another pressure point is Eskom’s inability to recover electricity payments from municipalities. Arrear municipal debt has continued to escalate to unsustainably high levels, amounting to R58.5-billion in 2023 compared with R44.8-billion in 2022. The offending municipalities are mostly in Mpumalanga and the Free State.
Treasury and Eskom have launched a scheme in which the arrear electricity debt of municipalities will be written off over the years subject to certain conditions, including keeping up with current account payments to Eskom.
Cassim said 28 municipalities have been approved to participate in the debt relief programme so far. Collectively, these municipalities account for R26.7-billion of the R58.5-billion.
Cassim said the 2023 financial year would be the last year that Eskom posts significant financial losses once the full debt relief programme from the Treasury is delivered, and the utility starts recovering arrear payments from municipalities.
The process to appoint a permanent Eskom CEO to replace André de Ruyter is near completion. New Eskom board chair Mteto Nyati said the board has suggested three potential candidates to Public Enterprises Minister Pravin Gordhan. “The process is now with the minister,” he said. DM