Eskom’s loss balloons to R20.1 billion
JOHANNESBURG – Eskom is to post a R20.1 billion loss for the financial year to March from the R15bn the embattled power utility forecast at its mid-year results.
Eskom chief financial officer Calib Cassim said while the utility managed to curb operational costs, its overall expenses widened during the period.
He said this was why Eskom had escalated its application to the National Energy Regulator of South Africa from 45 to 48 percent over the next three years. Higher plant maintenance costs and the increased use of diesel had added to the expenses.
“We are projecting a net loss of close to R20bn at financial year end, and it is clear that while we have maintained operating cost escalations at around inflation levels, Eskom cannot solve financial and operational sustainability challenges that it faces alone. This loss situation will continue for the next few years, even with the applied-for increase,” Cassim said.
Eskom had initially applied for an increase of 15 percent a year for the next three years. However, its financial position has seen the power utility revise its tariffs application upwards with 17.1 percent for the 2019/20 financial year, 5.4 percent on top of 2019 for the 2020/21 and 15.5 percent increase for the 2021/22.
Business Unity SA (Busa) warned that Eskom would constrain investment in South Africa and contribute to stagnant economic growth, significant job losses and grid defection.
Busa vice-president Martin Kingston said Eskom’s average standard electricity prices had increased by 613 percent in nominal terms over the past 15 years.
“To strengthen Eskom’s balance sheet, the only viable solution appears to be a capitalisation/write-down of at least R200bn in debt. We are concerned that capital expenditure remains stubbornly high, notwithstanding Eskom’s financial constraints,” Kingston said.
Eskom’s financial woes are expected to deepen in the coming years, with many of its ageing coal plants expected to come to the end of their useful lives in the 2020s and early 2030s.
The power utility’s debt servicing costs gobbled up 28 percent of its expenditure in late 2018.
Capital Economics economist John Ashbourne said securing the power supply would require further investment, either via a new public subsidy or an inflation-spurring price hike.
“President Ramaphosa has opposed direct subsidies, and in December he refused an Eskom request to take a quarter of the firm’s debt on to the government’s books,” Ashbourne said.
“While the exact form of future government aid for Eskom is difficult to predict, the importance of the firm means that we expect the state will play a big role in resolving the crisis.”
Meanwhile, Corruption Watch yesterday said it had launched an application in the high court in Pretoria to have former Eskom board members declared unfit to serve on boards.
The anti-corruption organisation has set its sights on having Brian Molefe, Anoj Singh, Mark Vivian Pamensky, Venete Jarlene Klein, Zethembe Wilfred Khoza and former minister of public enterprises Lynne Brown declared delinquent.
David Lewis, the executive director of Corruption Watch said: “We are determined that there should be consequences for their conduct. This application is one way of exacting those consequences and in ensuring that they are not afforded another opportunity to conduct themselves in a similar fashion elsewhere.”