Eskom reports R5-billion loss in three months

Eskom has suffered a R5 billion loss before tax for the three months ending 30 June 2023, despite a significant increase in generated revenue.

Although its revenue grew by nearly R5 billion over the same period in the 2022/23 financial year, this was primarily driven by Eskom’s 18.65% electricity tariff hike, which took effect on 1 April 2023.

This is according to an unaudited first-quarter performance report presented by the National Treasury to the Standing Committee on Public Accounts (Scopa) on Tuesday, 29 August 2023.

A significant contributor to the power utility’s poor financial performance is outstanding amounts owed to Eskom by municipalities across South Africa.

“What is worrying is the increase in municipal debt, which continues to be a problem in terms of payment to Eskom, which also hinders Eskom’s financial sustainability going forward,” said National Treasury.

Total invoiced municipal debt increased from R58.5 billion on 31 March 2023 to R63.7 billion as of 30 June 2023.

The power utility also faces declining sales volumes, reporting sales volumes 3TWh less than budget and 3.4TWh lower than the same period in the 2022/23 financial year.

“Sales volumes were impacted by generation supply constraints, lending to load-curtailment and load-shedding,” said Treasury.

Primary energy costs were R3.5 billion lower than budgeted. This was primarily due to a 19.3% lower expenditure on Eskom’s Open-Cycle Gas Turbines (OCGTs).

Treasury said the decline in OCGT spending owes to a “favourable decline in diesel prices during the quarter”.

Eskom’s debt and borrowings had increased to R453.5 billion by end-June 2023. The figure sat at R439.1 billion as of 31 March 2023.

“Eskom raised R16 billion in funding through private placements on 31 March 2023, with the related disbursements only taking place in early April 2023,” said Treasury.

The government has implemented a plan to help Eskom deal with its debt obligations.

In the February 2023 budget speech, finance minister Enoch Godongwana announced a debt relief package of R254 billion over three years for the power utility.

The relief package will begin with government providing direct assistance of R184 billion to address Eskom’s debt and interest payments as they fall due.

This comprises R78 billion in 2024, R66 billion in 2025, and R40 billion in 2026.

Finance minister Enoch Godongwana delivering the 2023 Budget Speech

The second component will see government take over R70 billion of Eskom’s debt commitments in 2026.

However, the support offered to Eskom comes with strict conditions, including:

  • Eskom may only use the funding to settle debt and interest payments.
  • It may only incur capital expenditure for transmission and distribution, bar some exceptions.
  • Cash proceeds from selling Eskom’s non-core assets must be used to settle debt and interest.
  • Eskom requires Godongwana’s approval to borrow any more money.
  • Eskom may not use positive equity balances to structure new debt or loan agreements or use such balances as “margin financing”.
  • The power utility must prioritise the implementation of the unbundling process.
  • Eskom may not implement remuneration adjustments that negatively affect its financial position and sustainability.

“Failure by Eskom to demonstrate compliance will result in the delay in the conversion of the loan (or part thereof) until the next quarterly meeting, when compliance will be reassessed,” said Treasury.

“Thereafter, non-compliance with the conditions will result in Eskom having to repay the loan to the National Revenue Fund at market rates.”

Energy availability is still a challenge

In its Scopa presentation, the National Treasury also highlighted several operational challenges faced by Eskom.

This includes a declining Energy Availability Factor (EAF), which was reported at 54.59% on 30 June 2023, down from 56.03% at the end of March.

This is significantly worse than the proposed target EAF of 65%.

It added that the decline in EAF is mainly due to heightened “unplanned losses” (breakdowns), which increased to 34.97% in June 2023 from 31.92% in March and caused increased load-shedding.

“During Q1, average unplanned availability was 16,187MW, higher than the Winter Plan’s base-case assumption of 15,000MW, resulting in load-shedding ranging from Stage 2 to Stage 6 on 91 days during the quarter,” said Treasury.

The EAF does seem to have improved since the reporting period, with energy expert Chris Yelland posting data for the week ending 30 July 2023 at the beginning of August.

According to the data, the average EAF sat at just over 57.5% from 24 July to 30 July 2023.

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Eskom reports R5-billion loss in three months