JOHANNEBSURG - ESKOM has warned of further losses in the year to the end of March 2021 as measures to improve its financial situation will take longer than expected, exacerbated by declining sales due to the impact of Covid-19.
The struggling power utility on Friday revealed that it was not generating enough cash from its operations to cover the cost of servicing its debt, as sales declined 1.3 percent year-on-year.
The utility reported a net loss after tax of R20.5 billion for the year to end of March, as the unsustainable debt burden led to a net finance cost of R31.2bn.
Eskom’s debt burden rose to R484bn during the year, but the power utility needed to reduce this to R200bn.
The municipal arrears debt increased to R28bn in March, from R19.9bn a year before.
Eskom’s chief financial officer Calib Cassim said on Friday that it had paid particular focus on capital and operating expenditure, coal inventory optimisation, revenue recovery initiatives and increased international revenues to improve the financial situation.
Cassim said Eskom performed well in this regard, achieving savings of R16.3bn against a target of R6.2bn.
He said Eskom had identified total targeted savings of R63bn by financial year 2023.
“These savings are absolutely critical, particularly in light of the impact of Covid-19, which will no doubt have a negative impact on Eskom’s finance over the next few years,” he said.
Eskom reported cost savings of R16.3bn achieved against a target of R6.2bn, largely absorbed by R7.5bn spent on diesel to minimise load shedding.
Chief executive André de Ruyter, however, said cost savings alone would not result in Eskom achieving longterm financial sustainability, as tariffs had to migrate towards cost-reflectivity.
Eskom has been in a protracted battle with the National Energy Regulator of SA, which has turned down its requested tariff hikes over the past few years.
“The financial position remains challenging, and this is largely as a result of the tariffs that are not cost-effective,” De Ruyter said.
Public Enterprises Minister Pravin Gordhan on Friday said that Eskom and government would reveal a solution to Eskom’s unsustainable debt burden before the end of this year.
The utility does not intend to request another taxpayer bailout beyond current commitments following R49bn received this year to support its status as a going concern, with R56bn committed for 2021 for debt servicing.
Eskom reported improved earnings before interest, taxes, depreciation and amortisation of R37bn, compared with R31.4bn in 2019.
Eskom’s primary energy costs rose 16 percent following the procurement of additional coal to return coal stockpiles to 50 days’ average.
De Ruyter said that the urgent need to procure coal during the crisis late in 2018 had also resulted in higher prices having to be paid by the utility to secure supply.
BUSINESS REPORT