Eskom suffers R5 billion loss – in just three months

Power utility Eskom suffered a R5 billion loss before tax in the first quarter of the 2023/24 financial year ending June 2023.

The group’s unaudited quarterly results were presented to the Standing Committee on Appropriations on Tuesday (29 August) by the National Treasury, alongside the financial updates for other state-owned companies.

The group’s net revenue grew to R70.9 billion (versus R66.3 billion over the same quarter in 2022), which was largely driven by the significant 18.65% increase to tariffs for direct customers from 1 April 2023.

Sales volumes were 6.2% lower than budgeted and declined by 7% compared to the previous comparable period.

Sales volumes were impacted by generation supply constraints, it said, which lead to the load curtailment and load shedding that have been a daily feature in the lives of South Africans for almost a full year.

More positively, however, the group said that its primary energy costs were R3.5 billion lower than budgeted at R43.4 billion. This was mainly due to expenditure on Open Cycle Gas Turbines (OCGTs) being 19.3% lower than budgeted.

The lower spend was mainly driven by a favourable decline in diesel prices during the quarter, it said.

The group’s other finances reflect the strained position the group has been in for over a decade.

Gross debt securities and borrowings increased to a massive R454.5 billion as at 30 June (up from R439 billion in March). The group raised R16 billion in funding through private placements with the related disbursements only taking place in early April.

While profitability ratios performed better than expected, the group said it is still experiencing several challenges that are preventing it from achieving long-term financial sustainability.

“Eskom’s profitability remains hampered by poor long-term financial sustainability arising from an inadequate tariff path, poor generating plant performance and escalating arrear municipal debt,” the committee heard.

Eskom’s municipal debt has skyrocketed to R63.7 billion as at 30 June 2023.

Operational performance

On the technical side, Eskom’s Energy Availability Factor in the first quarter of the year was at 54.49% at the end of June. This is lower than the EAF of 56% at the end of March and far lower than the “proposed target of 65%”.

The decrease in EAF was driven by unplanned losses (breakdowns), which were up to 35% in the quarter.

Unplanned outages averaged 16,718MW, which was higher than the assumption of 15,000MW heading into the winter months, which resulted in load shedding ranging between stage 2 and stage 6 on 91 days in the quarter (ie, every day).

The utility also experienced and increase in partial or full load losses, reported at 6,927MW over the period.

While Eskom’s spending on OCGTs was lower than budgeted, the turbines were used frequently over the quarter. Both Eskom and independent OCGTs contributed 1,583MW to the grid, at load factors of 24.2% and 22.3%, respectively.

Outside the quarterly results, on 7 July, the Eskom Debt Relief Act came into effect, which will see National Treasury deliver R254 billion over the next three years to help Eskom alleviate its debt.

The first tranche will be R184 billion to address Eskom’s debt and interest payments as they fall due. This will follow with R78 billion in 2024, R66 billion in 2025 and R40 billion in 2026.

The second component of the debt relief will see the Government take over R70 billion in Eskom debt commitments in 2026.