Eskom has said that it expected to record an after-tax loss of R22 billion by the end of the 2021 financial year on lower tariff increases.
ESKOM has said that it expected to record an after-tax loss of R22 billion by the end of the 2021 financial year on lower tariff increases, declining sales volumes and escalating municipal arrears debt.
The struggling power utility said yesterday that its financial performance was expected to deteriorate in the second half of the financial year due to seasonality factors.
Eskom said significant financial challenges remained, predominantly related to tariffs not being cost-reflective, coupled with an unsustainably high debt burden of R463bn.
Eskom chief financial officer Calib Cassim said the recession and continued uncertainty around Covid-19 threated future sales volumes, the cost of production and customers’ ability to pay.
“By the end of the 2021 financial year, we expect to record an after-tax loss of approximately R22bn, due to the continued negative impact of the lower than adequate tariff increase, together with the impact of lower sales volumes due to Covid-19,” Cassim said.
“Cost savings alone will not solve Eskom’s financial position, the price of electricity must migrate to prudent and efficient cost reflectivity while embedding the user pay principle.”
This would be Eskom’s fourth consecutive year of recording annual losses.
Cassim said Eskom required a considerable reduction in the debt profile or a sizable increase in cash flows through cost-reflective tariffs in order to improve its financial position in the longer term.
Eskom recorded a net profit, after tax, of R83 million for the six months ended September as net finance cost of R15.3bn due to the unsustainable debt burden of R463.7bn eroded operating profit.
Revenue grew a marginal 1.1 percent to R108.7bn, compared to R107.5bn during the comparable period last year, with earnings before interest, taxation, depreciation and amortisation rising to R28.1bn from R26.4bn a year before.
But sales volumes for the period fell 10.3 percent as a result of the Covid-19 national lockdown that took effect in March.
Municipal arrears debt grew to R32.9bn from R25.1bn, with the top 20 defaulters constituting 80 percent of the total invoiced municipal arrears debt and 48 municipalities carrying arrears debt of more than R100m each.
The government has injected R6bn into Eskom in the year-to-date to cover debt servicing and thereby support liquidity, with R56bn committed for the 2021 financial year.
The power utility said that a reliability maintenance programme was in full swing, with more than 15 percent of capacity under planned maintenance, an equivalent to more than two large power stations
Eskom implemented load shedding for 19 days from July to September due to high levels of breakdowns, mainly during periods of particularly cold weather.
Eskom group chief executive André de Ruyter said the utility’s top priority was focused on addressing operational and financial challenges.
De Ruyter said the utility aimed to return to financial sustainability.
“Given the challenging environment in which we operate, this will require extraordinary efforts from every Eskom employee, and continued support from the government and all South Africans,” De Ruyter said.