Eskom has warned it could report yet another record net loss before tax of R32.4 billion for the financial year ended March 31, 2023, after its half-year profit fell by nearly two-thirds.
This would be Eskom’s sixth consecutive annual loss since 2018, following a loss of R12.3bn reported in 2022, which was down from a restated R25bn loss in 2021.
The struggling power utility on Friday reported a decline in net profit after tax of R3.8bn for the six months ended September 30, 2022, down from R10.61bn a year before.
Eskom said this decline in profit was driven by rolling power cuts, rising municipal debt, contracting sales volumes and poor plant performance, in spite of the continued equity support from the government to maintain a positive liquidity position.
Eskom received R4bn of the R21.9bn equity support for the 2023 financial year by September 30, 2022, with the remaining balance received by January 2023.
The group is also being assisted by the government through the debt takeover, which will provide total debt relief of R254bn to Eskom during the period 2024 to 2026, subject to certain conditions.
Eskom’s debt remains stubbornly high at R423.6bn, with the net current liabilities of R30.1bn.
The Eskom board thus made an assessment of the ability of the group to continue as a going concern in the foreseeable future, seeing the deterioration in some of the group’s financial indicators compared to March 31, 2022.
“The board considered the impact of the cash flow forecast for the 18 months ending March 31, 2024 and the projected net loss before tax for 2023, estimated at R32.4bn,” Eskom said.
“The board considered that Eskom is in a debt reliant liquidity situation that resulted from low tariffs, stagnant and contracting sales volumes, above inflation cost increases, constrained generating plant performance and the capital programme to increase and replace generating and transmitting capacity.
“It considered the impact of the continuous deteriorating generation plant performance and increased reliance on more expensive sources, IPPs (Independent power producer) and open-cycle gas turbines, to manage supply and demand.
“It considered the impact of the continuous increase in overdue electricity receivables, including the impact of non-recoverability of long outstanding electricity receivables.”
There is continued focus on implementing various strategies in an effort to recover overdue trade receivables.
The successful outcome of these strategies remains uncertain, but National Treasury is finalising a proposal to address the overdue amounts and non-payment from customers.
Eskom said its generation capacity was managed as a critical focus area to ensure appropriate steps were being taken to manage the performance challenges.
It warned that a further worsening of generating plant performance could negatively impact cash flow due to lost revenue and an increase in costs, in particular the level of spend required on open cycle gas turbine plants.
Eskom’s generation business has remained the major drag on its financial performance, recording a massive loss of R5.2bn in the six months, up from R2.2bn in 2021.
However, the soon-to-be-separated transmission and distribution businesses continued to perform well, recording profits of just below R7bn each.
In 2021, Eskom’s auditor warned the power utility might not be able to continue as a going concern.
In spite of these challenges, the Eskom board on Friday maintained the utility’s going concern status on the back of the debt relief programme and continuing government support.
“The board considered the possible impact if key risks materialise and acknowledged that improved plant performance, addressing the escalating overdue electricity receivables, as well as Eskom’s ability to manage its liquidity position until the enactment of the Eskom Debt Relief Bill, are critical factors in the going-concern assessment,” it said.
“The board concluded, after carefully considering the progress of the initiatives above and the continued financial support from the government, including the finalisation of the debt relief package, that there is a reasonable expectation that the group has access to adequate resources and facilities to be able to continue its operations and fund the capital programme for the foreseeable future as a going concern.”
BUSINESS REPORT