Energy / 29 November 2019, 08:30am / Siphelele Dludla
JOHANNESBURG – Eskom has delivered another dark forecast for the country as it is set to make another R20 billion loss this coming year while its financial woes continue unabated.
This is despite Eskom yesterday reporting a surprise net profit after tax of R1.3 billion for the six months to September, an improvement over the R627 million posted for the same period last year.
Loss-making Eskom poses the biggest risk to the economy, with the government promising to give the utility a R59bn cash injection on top of previous hefty bailouts.
Earlier this year, Eskom posted an annual R20.7bn net loss after tax – up from R2.3bn the previous year – the biggest financial loss for corporate South Africa in years.
Delivering Eskom's interim results, Jabu Mabuza, the group’s interim executive chairperson and acting group chief executive, said Eskom’s financial and operational performance remained a challenge.
Eskom’s debt had continued to increase and was now standing at R454bn.
Debt servicing costs were rocketing, with capital of R48bn and interest of R38bn.
In addition, Mabuza said some financial ratios were expected to deteriorate further before improving.
A decline in sales continued, with local sales volumes falling by 1.29percent compared to September 2018, mainly in industrial and distributor categories.
“While we continue to face operational and financial challenges, for the interim reporting period ending September 2019 we are proud to have realised a healthier earnings before interest, tax, depreciation and amortisation of R30.6bn compared to R28.3bn in September 2018 and a net profit of R1.3bn, which was twice what we achieved last year,” Mabuza said.
Eskom's net cash from operations of R19.7bn was lower than the R26.7bn achieved in the same period last year.
Mabuza said the municipal arrears debt continued to increase to R25.1bn, an average growth of more than R850m a month.
In terms of municipal debt, arrears balances including interest had increased by R5.2bn since March to R25.1bn.
Payment levels remained at 44percent for the top 20 defaulting municipalities, with Soweto remaining at a low 16percent.
Mabuza said defaulting municipalities, maintenance costs due to increasing unplanned breakdowns, increasing energy costs, employee benefits and debt servicing costs were becoming too much of a burden for Eskom to bear.
Calib Cassim, Eskom’s group chief financial officer, said cost savings alone could not resolve the current financial challenges.
Cassim said although positive progress had been made with the implementation of the generation nine-point recovery programme, plant availability together with environmental performance remained key challenges.
Eskom recently announced a plan to split the utility into three different entities for generation, distribution and transmission.
He said Eskom’s system remained constraint until mid-December since this is maintenance season, with no planned load-shedding at least until March 2020.
“In the last six months, both generation and transmission network performance has deteriorated, with generation plant availability declining to 69.92percent from 75.01percent for the same period last year,” Cassim said.
“Generation continues to focus on operational and environmental recovery. Of concern is the high utilisation of the coal fleet.”
Cassim also said that Eskom had reduced the amount of new incidents of irregular expenses to below R1bn for the period after amending reporting procedures to comply with recent National Treasury instructions.
Despite Fitch Ratings Agency having downgraded Eskom's stand-alone credit rating by one notch to junk, the power utility had managed to secure a total of 61percent of funding for 2020 financial year.