Massive loss for Eskom

Power utility Eskom has reported a R12.3 billion loss for full year 2022.

The multi-billion-rand loss follows an even bigger loss in FY2021 of R25 billion, though it represents a reduction of 51%.

According to the group, the reduction in the loss can be attributed to higher sales revenue driven by a 15% tariff increase. However, Eskom’s massive debt burden remains the key drain on the business.

To illustrate this, earnings before interest, taxation, depreciation and amortisation (Ebitda) was up 61% to R52.4 billion, while operating profit – earnings before servicing debt – was up 238% to R20.4 billion, said Eskom chief executive officer, Andre de Ruyter.

According to de Ruyter, this shows that Eskom could be profitable if it wasn’t for its significant debt burden.

While the national government is expected to be taking over one to two-thirds of Eskom’s debt in the new year, the actual quantum is not yet known. Even with the debt takeover, though, de Ruyter warned that municipal debt will continue to mount.

Eskom’s current debt and borrowings are at R396.3 billion, of which municipal debt made up R45 billion at the end of the financial year. This has since grown to R56 billion, de Ruyter said.

This problem will continue to mount, especially following the Constitutional Court on Friday dismissing an appeal by Eskom.

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

In effect, following the dismissal, Eskom cannot cut power to municipalities that refuse to pay for services. De Ruyter said that Eskom will abide by the court’s decision – but said the municipal debt needs to be addressed.

If a resolution to this problem is not found, Eskom will need ever-increasing government bailouts, he warned.

Looking at the current financial year (FY2023), Eskom said that it anticipates losses to continue, with the current forecast at a R20.1 billion loss for the year.

The forecasts do not take into account any price increases, as the group is still waiting for energy regulator Nersa to announce its decision on the group’s application to hike prices by 32%.

Nersa was initially supposed to make its decision known at the end of November, but this was delayed to 12 January 2023.

The group more than doubled its spending on diesel in the financial year, blowing R14.7 billion on fuel, up from R7 billion the year before.

Read: Load shedding pushed to stage 6 once again – here’s the new schedule