Eskom kisses R24 billion goodbye
Eskom has reported a net loss after tax of R23.9 billion for the year ended 31 March 2023, effectively doubling the loss it reported for the year prior.
The state-owned power utility presented its annual results for the 2022/23 financial year on Tuesday, 31 October 2023, and it also revealed that municipal debt had increased to R58.5 billion.
“[We had a] net loss after tax being increased almost two-fold … despite a 9.61% increase in tariffs,” said Calib Cassim, acting CEO at Eskom.
The power utility reported a net loss after tax of R11.9 billion for the year ended 31 March 2022. This increased by R12 billion to R23.9 billion for the 2022/23 financial year.
Martin Buys, acting chief financial officer at Eskom, said generation supply constraints resulting from poor plant performance and delays in commissioning new independent power producer capacity had the most significant impact on financial performance.
He said the impact was two-fold, with Eskom forced to increase its reliance on open-cycle gas turbines to supplement supply and load-shedding negatively affecting sales volumes.
For reference, load-shedding days increased from 65 in the 2021/22 financial year to 280 in the 2022/23 financial year.
Municipal debt likely also contributed to Eskom’s losses, with arrears increasing by R13.7 billion year-on-year to R58.5 billion.
Losses from criminal conduct also contributed to Eskom’s overall net loss.
Buys specified that criminal conduct includes theft, illegal connections, corruption, and vandalism. This figure reached R6 billion during the 2022/23 financial year.
He also noted that the power utility’s profitability had declined sharply, with its margins dropping from 21.4% to 14.7% as of 31 March 2023.
Eskom has been allowing its workforce to decline, which could help to cut costs. However, the rate is slowing, with its headcount reducing by 820 employees in the 2022/23 financial year, compared to 2,328 the year prior.
The power utility’s net debt also increased during the year ended 31 March 2023.
Buys provided a breakdown of Eskom’s net debt during the 2022/23 financial year. The highlights can be summarised as follows:
- Debt securities and borrowings increased by 7% from R396 billion to R424 billion
- Lease liabilities reduced by 6% from R8.6 billion to R8.1 billion
- Cash and cash equivalents decreased by 53%, and payments made in advance by 11%
Overall, this resulted in Eskom’s net debt increasing by 2% from R389 billion to R399 billion.
However, the power utility will receive R254 billion in debt relief from government over three years, starting during the 2023/24 financial year.
Finance minister Enoch Godongwana announced a debt relief programme for Eskom during his 2023 Budget Speech in February.
“We are proposing a total debt-relief arrangement for Eskom of R254 billion,” Godongwana said.
“This consists of two components. One is R184 billion. This represents Eskom’s full debt settlement requirement in three tranches over the medium term.”
“Second is a direct takeover of up to R70 billion of Eskom’s loan portfolio in 2025/26,” he added.
Eskom will receive advances of R78 billion during the 2023/24 financial year, R66 billion in 2024/25, and R40 billion in 2025/26 to help finance its debt.
However, the funding will be subject to the following conditions:
- Eskom must prioritise capital expenditure in transmission and distribution during the debt-relief period
- The power utility must focus on the maintenance of its existing generation fleet to improve electricity availability
- No new borrowing will be allowed from 1 April 2023 until the end of the debt-relief period, unless otherwise approved by Treasury
- Eskom may not implement remuneration adjustments that negatively affect its overall financial position and sustainability
- The debt relief must only be used to settle debt and interest payments
- Eskom must implement the recommendations outlined in an independent assessment of its operations, commissioned by the National Treasury
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