Page 6 - AfrElec Week 44 2020

AfrElec ESKOM AfrElec

Eskom results: better revenues, but

higher losses and mounting debt

SOUTH AFRICA ESKOM managed to post a ZAR20.5bn working on design defects that have inhibited
($1.27bn) loss for the year to March 2020, as the performance of its new power stations, such
what it termed significant operational and finan- as at Medupi and Kusile. Eskom hopes that these
cial challenges caused a 1.3% fall in sales and a repairs will be completed in the third quarter of
declining energy availability. 2021, and would help significantly to raise avail-
It said that it was reliant on a ZAR49bn ($3bn) able generation capacity.
bail-out from the government, and that this was
set to rise to ZAR56bn ($3.5bn) in 2021. Chasing revenues
As the company announced financial results, While losses stacked up, the company has man-
it admitted that it was still reliant on further aged to make headway in finding savings and
financial assistance from the government, and chasing revenues.
that it was unable to avoid Stage 6 load-shedding It achieving savings of ZAR16.3bn ($1bn)
during December 2019, with the total number of against a target of ZAR6.2bn ($385mn) and has
days with power cuts reaching 46. identified total targeted savings of ZAR63bn
The company said that although EBITDA ($3.9bn) by financial 2023, said chief financial
rose from ZAR31.4bn ($1.9bn) in 2019 to officer Calib Cassim.
ZAR37bn ($2.3bn) in 2020, its net loss after tax “These savings are absolutely critical, particu-
climbed to ZAR20.5bn ($1.27bn). larly in light of the impact of COVID-19, which
It admitted that it had to borrow ZAR50.9bn will no doubt have a negative impact on Eskom’s
($3.2bn), more than the planned ZAR46bn finance over the next few years. The reality is that
($2.85bn). our financial results for the 2021 financial year
However, it has managed to secure 64% of its are expected to be similar to FY20, before the
funding requirements for the 2021 financial year. fruits of long-term improvements materialise,”
While the poor results are worrying and said Cassim.
indicative of the dire state of the company, its
management was keen to stress that it has begun Higher tariffs
a series of reforms to improve performance in Unpacking the financial performance, Cassim
the longer term and to arrest its operational and noted there was an improvement in Eskom’s
financial decline. financial position owing to government equity
“We have implemented assertive collection support of ZAR49bn ($3bn) during the year and
strategies against the largest municipal default- ZAR56bn ($3.47bn) allocated to FY2021.
ers, which has resulted in a 17% increase in pay- Cassim said what is well known: that opera-
ment levels from these customers during FY21. tional income is not enough to service Eskom’s
This is one of the key areas that require a con- debt commitments and therefore the support
certed effort if Eskom is to embark on a sustain- from government is necessary.
able course. Every consumer of electricity needs He did admit that this situation could not
to pay for what they consume,” said CEO André continue in the years to come.
De Ruyter. Cost savings alone will not result in Eskom
achieving long-term financial sustainability, with
Operations the company keen for tariffs to migrate towards
Eskom said it had increased the amount of main- cost reflectivity.
tenance carried out at its fleet of ageing coal-fired “In order to address our unsustainable legacy
power stations, which contributed to load-shed- debt, we either have to rely on bail-outs funded
ding increasing to 46 days. by the tax-payer, or improve our financial sit-
Coal stockpiles were significantly improved uation by NERSA allowing Eskom to charge
to a normalised average of 50 days, from 36 days cost-reflective tariffs. Paying heed to the Min-
the previous year. ister of Finance’s Medium Term Budget Policy
“The urgent need to procure coal during the Statement, we believe the latter is best for Eskom
crisis late in 2018 also resulted in higher prices and South Africa,” concluded De Ruyter.
having to be paid to secure supply. The bulk of However, Eskom has taken NERSA to court
these expensive short-term contracts have now over raising tariffs, both in the future and retro-
come to an end, and we expect our coal cost spectively, and the question of raising electricity
increase for the current financial year to be con- bills will be politically and socially unpopular in
tained well below inflation,” said De Ruyter. the years ahead.™
The company also said that it had been

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