Eskom - that state enterprise everyone loves to hate when the lights go out - has turned the corner.
Not only has it managed to make a decent profit this year, but it’s also inked deals worth R20 billion, which will go a long way towards filling its financing void.
Good stuff! Perhaps we can soon look forward to winters without outages, to seasons where a generator is not an absolute must.
Eskom has been issuing media release after media release beating its own drum, pointing out that the grid is more stable, and that its projects are on track.
Yet a closer look at the numbers reveals that much of what the power utility says is smoke and mirrors.
For the year to March, profit came in at R4.6 billion - a huge leap from last year’s R200 million, which admittedly had several once-off items skewing the numbers.
This was off revenue of R163.4 billion.
However, electricity use from industrial users - the biggest client pool, if you will - dropped 6.2 percent. And Eskom sold 12 percent more to our neighbours.
Let’s stop right there and ponder.
Eskom says the grid is more stable - could this be because people are using less electricity? I know I am, it’s becoming unaffordable, and now Eskom wants hikes that are above inflation , ostensibly to bring the selling price in line with the cost of production, and to fund new builds.
Remember that, we’ll get back there in a bit.
Eskom is also selling power to our neighbours. Yes, they need juice too - but doesn’t charity begin at home? Should we not be keeping our power in-house so that we can, oh I don’t know, ramp up our manufacturing capabilities, boost exports, and generally help the economy grow beyond what the IMF predicts will come in at a mere 0.1 percent this year.
And then there’s the fact that the utility made a profit. A nice one. And, since it hasn’t declared a dividend, this is likely to go into a category called accumulated profit, which one can only hope goes back into the grid.
Investing
Eskom is indeed investing in the grid - the board has approved a revised borrowing programme of R327 billion to fund expansion between this past April and March 2021.
At the time of the results, Eskom had committed funding of R31.7 billion, or 46 percent of the funding requirement of R68.5 billion for the 2017 financial year, and subsequently inked deals that will see it raise another R20 billion.
On top of that, government had injected equity of R23 billion.
That’s a total of R74.7 billion.
On top of that, the monopoly in power supply had accumulated profit of about R100 billion - which depends on whether you look at the table showing what’s attributable to government, or the other page that shows accumulated profit group versus company accumulated profit.
Regardless, that’s a lot of profit sitting in the bank.
That takes us up to R174.7 billion.
Turning to cash and cash equivalents, and investments in securities, adds another R38.7 billion to the balance sheet.
That’s a total of R213.4 billion - just R113.6 billion short of the amount it needs for its 2021 plan. And it has five years to raise that money.
Maybe I’ve misread the accounts, or misunderstood something, but frankly a line item that says accumulated profit is pretty clear.
Perhaps Eskom is planning for the inevitable cost overruns?
Eskom’s two new power plants - saviours of industry and consumers alike - are running billions more than what Eskom initially budgeted. Chris Yelland took a good look at what Kusile and Medupi were meant to cost , and what they are going to end up costing.
It’s scary that all these cost overruns and stoppages and missed deadlines are not more of an issue for Eskom’s owners.
After all these numbers - 111 pages on just the financial statements - what boggles my mind the most is that Eskom wants above-inflation price hikes to help it expand the grid.
That I just do not get. It seems like Eskom is hoarding cash, sitting on it for a rainy day, and adding as much as possible to its kitty as quickly as it can.
Granted, it owes R307 billion in long-term liabilities, but the bulk of these bonds and loans only start becoming due from the next decade, and some are due well into the 2030s. And Eskom could always roll them over; plenty of companies do that all the time.
Frankly, it’s time the electricity sector was deregulated and proper competition allowed. That, or it’s time to go off grid.
Consumers cannot afford this increasing burden for much longer - and consumers account for about 60 percent of gross domestic product one way or another.
We’re going about this the wrong way. It’s time to take a step back and look at what’s best for SA, not what’s best for Eskom.
* Nicola Mawson is the online editor of Business Report. Follow her on Twitter @NicolaMawson or Business Report @busrep.
IOL