The under-fire state-owned electricity supply company said that it experienced significant operational and financial challenges.
ESKOM’s finances continued to deteriorate in the year to end March, with the utility reporting a R20.5 billion loss during the period and flagged that it continued to experience significant operational and financial challenges.
Eskom said sales were 1.3 percent lower than 2019 as revenue reached R200 billion, with growth hampered by capacity shortages and adverse economic conditions.
The under-fire state-owned electricity supply company said that it experienced significant operational and financial challenges, resulting in Stage 6 load shedding during December 2019 and a further R49bn government bailout. Chief executive Andre de Ruyter said despite these challenges, management had made significant changes to arrest the operational and financial decline.
He said Eskom had implemented assertive collection strategies against the largest municipal defaulters, which has resulted in a 17 percent increase in payment levels from these customers during the 2021 financial year.
“This is one of the key areas that require a concerted effort if Eskom is to embark on a sustainable course,” De Ruyter said.
“Every consumer of electricity needs to pay for what they consume.”
De Ruyter said the R49bn government bailout received in 2020 and R56bn for 2021 were reserved for debt servicing. It said at least 64 percent of the funding requirements for the 2021 financial year had already been secured. Eskom said the unsustainable debt burden led to net finance cost of R31.2bn.
The utility said municipal arrears debt increased to R28bn in March, from R19.9bn a year ago. Eskom’s liquidity situation, however, improved substantially R23bn cash and cash equivalents, compared to R2bn the previous year.
The utility saw a R37bn improvement in earnings before interest, taxes, depreciation, and amortisation (Ebitdta) arising from growth in revenue and contained operating costs.
Chief financial officer Calib Cassim said it had paid particular focus on Eskom’s capital and operating expenditure, coal inventory optimisation, revenue recovery initiatives and increased international revenues to improve its financial situation. Cassim said these savings were critical in light of the impact of Covid-19, which will have a negative impact on Eskom’s finance over the next few years.
“The reality is that our financial results for the 2021 financial year are expected to be similar to the 2020 financial year, before the fruits of long-term improvements materialise,” he said.
Cassim said that cash from operations was insufficient to service Eskom’s debt commitments, thus, the support from the government was necessary.
He said Eskom could not rely on the government support for survival.
De Ruyter reiterated this, saying that the National Energy Regulator of SA (Nersa’s) tariffs had to migrate towards cost reflectivity.
He said cost savings alone will not result in Eskom achieving long term financial sustainability.
“In order to address our unsustainable legacy debt, we either have to rely on bailouts funded by the taxpayer, or improve our financial situation by Nersa allowing Eskom to charge cost reflective tariffs,” De Ruyter said