Eskom's massive profit drop

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Jamie McKane

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Eskom's massive profit drop

Eskom Holdings SOC Ltd.’s first-half profit plunged 89 percent and the situation at the South African state-owned power utility is likely to worsen in the next six months, Chairman Jabu Mabuza said.

Profit plunged to 671 million rand ($48 million) in the six months through September from 6.3 billion rand a year earlier, while finance costs rose to 15.2 billion rand from 11.9 billion rand, the company said in a presentation in Johannesburg on Wednesday.

[Bloomberg]
 
IMO, a more coherently written article: https://www.fin24.com/Economy/Eskom...-load-shedding-for-remainder-of-year-20181128

Weak financial ratios, reduced generation performance and low coal stock levels have again raised the spectre of load shedding for spower utility Eskom.

Announcing the interim financial results for the six months ended September 30, CEO Phakamani Hadebe warned that although liquidity had improved, the state-owned company remained a "debt-driven entity" with severe financial challenges.
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Spent extra R800m because they had to use diesel due to no coal.

When they going to convert ocgt to ccgt.
 
While petrol levies keep going up, Eskom hasn't even started paying a carbon tax yet, with all their coal-fired power stations: https://businesstech.co.za/news/ene...ax-will-affect-petrol-and-electricity-prices/

The revised bill introduces a number of key changes, including a proposed R120 per tonne of carbon dioxide equivalent emissions (CO2e) carbon tax rate, a new calculation methodology for the production of electricity from fossil fuels, and special allowances reducing the impact of the carbon tax on electricity producers – mainly Eskom.

Because of the way the current bill is structured, the earliest it could be implemented would be in January 2019.
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“We’re not selling enough electricity’’ in order recover costs, he said, saying sales volumes dropped 0.8 percent in the period.
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Wasn't it Eskom that told us that we need to use LESS electricity in order to prevent load shedding? Now they're complaining about not selling enough? Also, do you think people will use the same amounts of your product when you're inflating the prices at these ridiculous rates every year?

I do not understand. You can't have it both ways. I don't think these people understand how economics 101 works...

I'm certainly not gonna drink as much beer if I'm paying 4 times the price that I used to, why would I do it any different for electricity... It would be financially irresponsible, something that Eskom doesn't seem to grasp, especially with them buying coal and diesel at stupendous rates from comrades.

But ya know, lets just inflate those prices some more, we've done it before, people will still pay. It's not like we have a choice in an electricity provider.
 
NeoAcheron said:
Wasn't it Eskom that told us that we need to use LESS electricity in order to prevent load shedding? Now they're complaining about not selling enough? Also, do you think people will use the same amounts of your product when you're inflating the prices at these ridiculous rates every year?

I do not understand. You can't have it both ways. I don't think these people understand how economics 101 works...
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Yes, you are describing something called a: https://en.wiktionary.org/wiki/death_spiral
 
Jan Oberholzer, COO at Eskom, said "Eskom has used over R800m so far on diesel generators, and an estimated R800m-R1bn more could be spend if the performance of baseload coal power stations does not improve. He said diesel generators consume 14 litres per second, an expense that Eskom has to avoid"
 
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I seriously doubt they were in profit the last 10 years. They posted massive profits, then turn around and wants electricity prices to go up because of costs/difficulty maintaining the grid? Naw, this is more realistic, in fact, the SOE shouldn't be making a profit in the first place and that money should be going to maintaining and upgrading the network instead of paying fat salaries and bonusses
 
Eskom needs a bailout

Eskom is buckling under its debt burden of R419 billion and seems to be angling for another government bailout.


This became clear at the presentation of its interim results for the six months ended September 30 at its Megawatt Park headquarters in Sandton on Wednesday.


The debt could increase to R600 billion in the next three years. Eskom has already used R337 billion of its R350 billion government guarantee and might ask for further guarantees.


The utility reported an 89% drop in net profit – from R6.3 billion at the end of September 2017 to R671 million just one year later. Newly appointed Eskom CFO Calib Cassim told reporters that the full-year loss could be as much as R15 billion, up from the R11.2 billion budgeted for at the beginning of the financial year.


‘Expect load shedding’


These results come against the backdrop of deteriorating operational performance. Eskom COO Jan Oberholzer said at the event “load shedding is a reality going forward”.


In the reporting period, Eskom generated R26.6 billion from operating activities, which is R18.5 billion short of the R45.2 billion it needed to service its debt. This after its debt servicing costs almost doubled from R23.2 billion at end of September last year.


Staff costs and primary energy costs each rose by 12% while arrear debts from municipalities have increased by 25% to R17 billion.


Sales volumes dropped by 0.8% which caused revenue to increase by only 2.7% despite a 5% tariff increase.


Eskom chair Jabu Mabuza made it clear that “Eskom is not sustainable as conceived and seen today.”
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And this:

He emphasised that “someone” has to pay the debt: “Either the consumer or the taxpayer has to pay. And it might be the same person!”


Asked the minimum amount by which Eskom’s debt burden needs to be reduced, Eskom CEO Phakamani Hadebe said it will depend on the tariff determination currently before energy regulator Nersa. Eskom has asked for a 15% tariff increase every year for the next three years.
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envo said:
I seriously doubt they were in profit the last 10 years. They posted massive profits, then turn around and wants electricity prices to go up because of costs/difficulty maintaining the grid? Naw, this is more realistic, in fact, the SOE shouldn't be making a profit in the first place and that money should be going to maintaining and upgrading the network instead of paying fat salaries and bonusses
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Eskom never made a profit in real terms, Government has given them over R86 Billion in loan forgiveness and cash bailouts in the past 10 years.
 
"...saying sales volumes dropped 0.8 percent in the period..."
Are they surprised?
A few years ago, we used too much ....then we got load shedding
Now we use too little...then we get load shedding
 
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