Eskom heads deeper into financial crisis with record loss

Bradley Prior

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Eskom heads deeper into financial crisis with record loss

Eskom Holdings SOC Ltd., South Africa’s struggling power utility, expects to report a loss of more than 15 billion rand ($1.1 billion) in the year to March 31, a record for any state company.

The anticipated loss, revealed by Chief Financial Officer Calib Cassim at a tariff application hearing in Cape Town on Monday, will exacerbate Eskom’s already dire financial position -- it is saddled with 419 billion rand of debt -- and increase pressure on the government to help bail it out. [Bloomberg]
 

SilverCode

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Eskom has proposed that it be allowed to raise tariffs by 15 percent annually for three years to help it bring its debt under control, but Attard Montalto sees it as unlikely that South Africa’s power regulator will grant its request because it abides by a strict formula when determining how costs should be allowed to feed into prices.
Let them have their 15% increase, but then also open up the field for independant power producers. Eskom is a lost cause for power production and no amount of bailouts or increases is going to fix them.

Allowing IPP's into the market ensures that when Eskom goes belly up, we still have *someone* producing power. Eskom can then sell off its power stations to repay some of the debt, and just be a power transmission company.

Having a single bungling entity have so much control over a country that if it fails the country fails, boggles my mind. The sooner municipalities are able to buy electricity from where ever they choose the better.

Heck, it paves the way for JZ to get in touch with his Russian friends and try build that nuclear power station he so badly wanted ... using his private funding from the Guptas of course.
 

LazyLion

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Never gonna happen with this communist leaning government.
 
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Fuzzbox

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Cut your wage bill in half and get rid of about 20000 employees will solve the problem.
 

ArtyLoop

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Inb4... loadshedding will be back next week, or even as early as Thursday, to "punish" us for the bad news
 

Swa

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Personally I have no problem with Eskom being subsidised by government. But get prices back to where they were before this crisis.
 

HowTo

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They new what they were doing. 2008 Bail out?
Even the 15% price increase will not help. They were selling them self out.
Are we blind?

They cant even complete the two outstanding power generating plants. (Witbank and Northern province.)
 

The Trutherizer

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Eskom already has more debt than some countries. It's really getting ridiculous. They need to face reality and change with the times. By them being so inflexible it is not they that will break. It'll break the whole country.
 

Zoomzoom

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Let them have their 15% increase, but then also open up the field for independant power producers. Eskom is a lost cause for power production and no amount of bailouts or increases is going to fix them.

Allowing IPP's into the market ensures that when Eskom goes belly up, we still have *someone* producing power. Eskom can then sell off its power stations to repay some of the debt, and just be a power transmission company.

Having a single bungling entity have so much control over a country that if it fails the country fails, boggles my mind. The sooner municipalities are able to buy electricity from where ever they choose the better.

Heck, it paves the way for JZ to get in touch with his Russian friends and try build that nuclear power station he so badly wanted ... using his private funding from the Guptas of course.
They tried this, and this is why we are in the situation we are in. Post 94 in all the heady days of freedom, there was great expectations of raking in the cash privatising state entities. No-one wanted to touch any of it. Aging systems, vast distances, too few paying consumers and a state demand to supply low cost / free electricity to indigent homes meant that no-one wanted in. However they had placed a moratorium on Eskom developing new assets which they failed to lift for nearly 10 years which is why when there was that drama with the bolt being dropped into Koeberg and putting that off-line for a while, they suddenly woke up and said 'oops'. That was when the deep deep doodoo they were in hit home. And it hasn't improved since then because they have running around like headless chickens trying to demothball retired coal stations and make up the shortfall in generation capacity by any means possible, but this has cost more than it is worth to achieve and there has been no consensus on what or where to develop the very essential new power generating plants.

Add to this that no foreign entity wants to invest money into Eskom which has left them unable to borrow the money they need to carry out essential programs.

Add to this the problems with a top heavy management, incompetent political appointees and little to no actual leadership with any kind of knowledge or business sense being evident and we have the problem we have today. The corruption and draining of what little there was in assets was just the cherry on the top of a very large steaming pile of mess.
 

Swa

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They tried this, and this is why we are in the situation we are in. Post 94 in all the heady days of freedom, there was great expectations of raking in the cash privatising state entities. No-one wanted to touch any of it. Aging systems, vast distances, too few paying consumers and a state demand to supply low cost / free electricity to indigent homes meant that no-one wanted in. However they had placed a moratorium on Eskom developing new assets which they failed to lift for nearly 10 years which is why when there was that drama with the bolt being dropped into Koeberg and putting that off-line for a while, they suddenly woke up and said 'oops'. That was when the deep deep doodoo they were in hit home. And it hasn't improved since then because they have running around like headless chickens trying to demothball retired coal stations and make up the shortfall in generation capacity by any means possible, but this has cost more than it is worth to achieve and there has been no consensus on what or where to develop the very essential new power generating plants.

Add to this that no foreign entity wants to invest money into Eskom which has left them unable to borrow the money they need to carry out essential programs.

Add to this the problems with a top heavy management, incompetent political appointees and little to no actual leadership with any kind of knowledge or business sense being evident and we have the problem we have today. The corruption and draining of what little there was in assets was just the cherry on the top of a very large steaming pile of mess.
The irony is that we don't have a shortfall in generation capacity. We haven't had one in a while since our economy shrunk so much and power heavy industry closed shop. The issue now is one of management and incompetence causing maintenance to run behind and inferior coal or contracts with nothing being delivered then expensive diesel to avoid load shedding. This then leaves even less money for maintenance.
 

Zoomzoom

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The irony is that we don't have a shortfall in generation capacity. We haven't had one in a while since our economy shrunk so much and power heavy industry closed shop. The issue now is one of management and incompetence causing maintenance to run behind and inferior coal or contracts with nothing being delivered then expensive diesel to avoid load shedding. This then leaves even less money for maintenance.
The heavy industry closed up shop because of the issues with power generation capacity, and it has stopped new industry - Coega Aluminium Smelter as a case in point - "Although some progress was made in discussions regarding the supply of electricity to the Coega aluminium smelter project, it was insufficient . "

(Although I'm not sorry it didn't happen for environmental reasons, aluminium smelting is horrible for the environment).

That is to say, while we may not have an immediate problem, there was a problem, which lead to less consumption, which in itself is a problem because less consumption => less income => higher fees to make up the difference.

We need more capacity, we need heavy industry to have the capacity it needs to expand, we need to use more electricity to make it cheaper for everyone.
 

TelkomUseless

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Cut your wage bill in half and get rid of about 20000 employees will solve the problem.
Will not ever happen. ANC depends on Eskom to "create" jobs.. and keep people there. ANC government have no clue how to create jobs..
 

3WA

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They tried this, and this is why we are in the situation we are in. Post 94 in all the heady days of freedom, there was great expectations of raking in the cash privatising state entities. No-one wanted to touch any of it.
I can’t think of a technology that existed in the late 1990s that would be worth investing in for private energy generation, but those technologies certainly exist today. 1990s technology means big upfront costs and long waiting periods to realise profit. Not the case with the way IPPs are implementing renewable energy production.
 

Gaz{M}

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Listen to the Ted Blom interview on CliffCentral podcast. It explains the history of Eskom and how we got to this point.

http://cliffcentral.com/podcasts/gcs/

Eskom used to be a pure government department, non-profit and somewhat solvent. Then they turned it into a company and everything went to sh*t. Reason being, that it now needed to show return of assets etc.

Also, Coal was turned from a cost plus model into a major cash cow for corrupt suppliers.
 

ambroseg1

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If Eskom's total debt is R419 billion, how can R15 billion loss be a record? That would take in excess of 20+ years to achieve assuming they had near R15 billion losses every single year.
 
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