R12.3 billion loss: ‘Eskom could be profitable if not for debt burden’ – De Ruyter

Eskom has incurred a net loss of R12.3 billion after tax despite the power utility’s operating profit improving by 238% to R20.4 billion.

The state-owned enterprise (SOE) presented its annual results for the 2021/2022 financial year, which ended in March, on Friday.

Revenue increases

Briefing the media, Eskom CEO André de Ruyter said that despite this year’s loss, it has been reduced by 51% from the previous financial year, in which the power utility recorded a net loss of R25 billion after tax.

The reduction in the loss was due to higher sales revenue driven by a 15% tariff increase and as a result, Eskom’s revenue has gone up to R246.5 billion.

“At the operating level, Eskom increased profit more than three times to R20.4 billion, from R6 billion in March 2021,” the Eskom boss, who has since resigned, said.

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De Ruyter, however, pointed out that Eskom’s debt continues to plague the SOE, saying this hinders the power utility’s profitability.

“Before we take into account the cost of servicing our debt, operating profit was up a very healthy 238%.

“If we had a more normalised debt burden, Eskom could have been profitable if we did not have to pay out these extraordinary amounts on capital as well as interest to service our debt burden,” he said.

Eskom’s debt currently stands at R396.3 billion, of which municipal debt made up R45 billion at the end of the financial year.

Municipal debt

According to De Ruyter, the power utility’s municipal debt arrears has since grown to R56 billion.

This could prove to be a massive challenge to Eskom after the Constitutional Court (ConCourt) on Friday ruled against the SOE.

The ConCourt dismissed Eskom’s appeal against an interdict barring the power utility from reducing electricity supplies to two municipalities in the Free State and Mpumalanga.

The judgment means Eskom cannot cut power to municipalities that refuse to pay for services.

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During Friday’s briefing, De Ruyter said that Eskom respects the court’s ruling, but reiterated that the municipal debt needed to be addressed because this may lead to the power utility asking government for more bailout money.

In October, Finance Minister Enoch Godongwana announced during his mini-budget that government would take over as much as R266 billion of Eskom’s debt.

Watch the briefing below:

Improvements

Meanwhile, De Ruyter warned that Eskom needed deal with challenges such as fraud to improve governance.

“Governance remains a huge focus area for us and we really have to as a nation confront this scourge that is going to result in our country, in my respectful opinion, if we do not tackle fraud, corruption, sabotage and other criminal conduct. A number of our power stations are at the grip of criminal syndicates,” he said.

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He acknowledged the deployment of the South African National Defence Force (SANDF) to several Eskom power stations in response to the growing threats of theft and vandalism.

“We [also] welcome the recent steps by the Hawks. My only regret is that it has taken so long for our security forces and agencies to start engaging with a matter of national security.

“It’s a grave pity that we had to get to a position where Eskom itself, with privately funded intelligence gathering, had to assist our law enforcement agencies to investigate with a view to bring some of these perpetrators to book,” he said.