Eskom has reiterated that it was expecting to record an after-tax loss of R23.2 billion by the end of the 2023/24 financial year due to the continued poor generating plant performance, in spite of achieving a profit in the first six months.
The struggling power utility yesterday reported a net profit after tax of R1.6bn for the six-month period ended 30 September despite continued financial and operational challenges.
The favourable tariff increase of 18.65% resulted in an increase in revenue from R144.8 billion in September 2022 to R158.6 billion in September 2023, despite a decline in sales volumes.
Sales volumes during the period experienced a decline, dropping by 5.9% from 97.6TWh in the same period last year to 91.9TWh, largely because of supply constraints, coupled with lower electricity demand from customers.
Eskom said this was due to difficult economic conditions and the impact of increased embedded self-generation such as solar photovoltaic (PV) technologies and wind.
Eskom’s acting group chief financial officer, Martin Buys, said non-technical losses, including the theft of electricity through illegal connections, meter tampering and ghost vending, also contributed to declining sales volumes.
Buys said Eskom’s financial performance in the first half of the year tended to be better than the second half, with the winter period typically characterised by higher tariffs and sales volumes than the summer period.
“The unsatisfactory operational performance and depressed economic conditions continue to have a direct impact on Eskom’s financial sustainability, requiring us to make difficult trade-offs between liquidity, the utilisation of open-cycle gas turbines (OCGTs) to minimise load shedding for the benefit of the economy, as well as accommodating spend on our operational recovery and capital expenditure programmes,” Buys said.
“Our financial performance also remains hampered by an inadequate tariff path, above-inflationary cost increases, non-payment by some customers as well as high debt servicing costs.”
The results showed that plant availability continued to deteriorate, with the energy availability factor (EAF) declining to 55.3% and resulting in more frequent load shedding at higher stages on average than in the previous year.
In total, load shedding was implemented on 183 days for 3 578 hours during the period, which equates to 149.1 days.
Renewable and short-term IPP programmes delivered about 2.7TWh less than target, contributing to the overall generation capacity shortfall.
The supply constraints continued to have an adverse effect on financial performance, with Eskom and IPP-owned OCGTs producing 2.9TWh at a cost of R18 billion.
Primary energy costs grew by 10.1%, increasing to R85.1bn from R77.3bn in September last year, placing a further strain on Eskom’s finances.
Non-payment of municipal debt remained a systemic challenge, with the total municipal arrears debt at R70bn by 30 September, a sharp increase from R58.5bn in March.
Eskom’s debt also remained unsustainably high, with the gross debt securities and borrowings standing at R442.7bn, including the R16bn subordinated government loan.
The government has committed a total of R78bn in debt relief for the 2024 financial year, of which R16bn was received in August, R20bn in October and R5bn in December, with the remainder to be received in the current financial year.
Eskom’s acting group CEO Calib Cassim said the government’s debt relief solution will go a long way towards improving Eskom’s financial sustainability and liquidity in the short to medium term, the impact of which we have already seen with the recent credit upgrades.
“We continue to execute our turnaround plan to improve financial and operational performance in the medium to long term,” Cassim said.
“Our overall focus remains on improving the performance of the generation fleet to reduce the level of load shedding being experienced by the country, and to limit the amount spent on supplementing capacity through the use of the expensive diesel plant.”
BUSINESS REPORT