Major loss on the cards again for Eskom

A major loss is again on the cards for Eskom according to its interim results published on Friday for the six months ending on 30 September 2022 that shows its losses for the financial year ending yesterday would probably amount to an unbelievable R32,4 billion.

This will be the sixth consecutive loss for the power utility.

Eskom’s interim results

Until 30 September 2022, Eskom made a profit of just R3,8 billion but even this profit was significantly lower (63.8%) than the year before when it was R10.6 billion, due to higher depreciation and amortisation expenses, as well as greater finance costs.

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Eskom always makes a pre-tax profit during winter when the demand for power increases and it sells more electricity and this time its revenue increased by 7% to R144,8 billion from R135.4 billion the previous year.

During the financial year ending in March 2022, Eskom had a loss of R11,9 billion. The expected loss for the past financial year will be about three times bigger. Eskom’s generation business seems to be the biggest problem with a massive loss of R5.2 billion compared to R2.2 billion in 2021.

The transmission and distribution businesses continued to perform well, with profits of R7 billion each, while the group’s debt liabilities are R423.64 billion.

Board assessment

According to the Eskom board, it assessed the ability of the group to continue as a going concern in the near future and reviewed the group’s performance, as well as noting the deterioration in some of its financial indicators compared to 31 March 2022.

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In addition, the board also:

• Noted the improvement in the cash and cash equivalents balance of R16.7 billion from R15.9 billion on 31 March 2022 applied to settle Eskom’s debt obligations.
• Considered the impact of the cash flow forecast for the 18 months ending 31 March 2024 and the projected net loss before tax for 2023, estimated at R32 431 million.
• 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.
• Noted the continued equity support from government, with R21.9 billion committed and received by January 2023. This support assisted Eskom in maintaining a positive liquidity position during the period.
• Noted the debt relief announced by the Minister of Finance in February 2023 which will provide total debt relief of R254 billion to Eskom over the next three years.
• Noted that no new borrowings will be allowed from 1 April 2023 until the end of the debt relief period, unless approved by the minister of finance.
• Considered the positive outlook by a rating agency on Eskom after the announcement in February 2023 of the Eskom debt relief measures.
• Considered the impact of the continuously deteriorating generation plant performance and increased reliance on more expensive sources, IPPs and open-cycle gas turbines, to manage supply and demand.
• Acknowledged that an acceptable price increase and improved plant performance are critical factors in the going-concern assessment.
• Recognised that Eskom continues to face various challenges that resulted from mismanagement and corruption that could influence stakeholder sentiment. Progress has been made in cleaning-up irregularities, improving processes and strengthening controls, but it is taking time to identify all issues, take appropriate corrective action, and implement consequence management.
• 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.

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