JOHANNESBURG – Eskom said on Wednesday that its operational and financial performance continued to deteriorate in the six months ending in September, with the situation expected to worsen before it is expected to improve by 2023.
Releasing the company’s interim financial results for the period under review, Eskom's group chief executive, Phakamani Hadebe, said revenue rose marginally to R98.1 billion from R95.5 billion previously, largely driven by a 5.2 percent tariff increase that was implemented in April this year.
But Eskom's net profit decreased by 89 percent to R671 million from R6.3 billion last year. Hadebe said Eskom was facing severe challenges both operationally and financially.
"There will be pressure in the short- to medium-term as we transition towards financial and operational sustainability, a move that will require resolute, tough and decisive leadership. Eskom has defined an ambitious turnaround plan, largely within its own control, to improve financial performance by 2023," Hadebe said.
He said Eskom was currently in a debt reliant liquidity situation as a result of low tariffs, limited growth in sales, increased costs, and the rising capital investment programme.
In addition to this, Hadebe said Eskom was facing reduced generation performance, low coal stockpiles, and increases in municipal debt.
“Notwithstanding the above challenges, Eskom’s board and executive management team have dedicated their efforts on five key priorities to create a platform for future growth," he said.
"These include addressing poor governance controls; improving liquidity; ensuring a financially viable entity; completing phase 1 of the of the strategic review, and executing a nine-point generation recovery programme."
Newly-appointed chief financial officer, Calib Cassim, said most of Eskom's financial ratios had deteriorated during the period under review, and that the situation was expected to worsen further in the second half of the financial year.
When it comes to costs, Eskom said the recent wage increases for workers in the bargaining forum were also highlighted as having put pressure on costs as employee costs rose 12 percent to R16.9 billion, up from R15.1 billion in the same period last year.
Eskom said independent power producer costs surged 29 percent, mainly due to volumes being 25 percent higher, although coal costs were contained to seven percent.
Historically, any profitability generated during the first half of the year is eroded during the second half, due to lower summer tariffs and higher planned maintenance.
Eskom said the full impact of the wage settlement will also be experienced over the next six months, combined with higher diesel usage to avoid or minimise load shedding.
"Eskom cannot solve the financial and operational sustainability challenges that it faces alone. The shortfall in tariff cannot be solved though cost reductions alone, and further indebtedness adds to the problem," Cassim said.
Jan Oberholzer, chief operating officer, said the power system would remain constrained for the foreseeable future, until generation plant performance and coal stock levels improved. This means that load shedding in the coming months remains a risk.