Eskom on track for R20-billion loss

Eskom is on track to deliver another loss above R20 billion as the utility continues to struggle with declining sales due to elevated load-shedding and increased spending on diesel.

This was revealed by Eskom chairperson Mteto Nyati, who told CNBC Africa that it would take the utility more than two years until it became profitable again.

Nyati explained that the utility’s board has spent the past 18 months understanding the systemic issues facing Eskom.

One of these issues is the organisational culture, which Nyati described as a “culture that is unhelpful and dysfunctional”.

Other issues included the utility’s over R400 billion debt, criminality within Eskom, its unreliable operations and leadership instability.

These issues will take years to fix, so Eskom’s financial performance cannot be expected to improve significantly in the short term.

However, one boost to the ailing utility is that the government is expected to take over R254 billion of its debt by the end of the next financial year.

This will significantly reduce the company’s debt-servicing costs and bolster its profitability.

Coupled with this, Nyati said Eskom expects load-shedding to be reduced steadily over the next few years which will enhance the company’s revenue and reduce its spending on diesel.

Thus, the company will steadily move closer to profitability. However, Nyati said this will still take more than two years to reflect on the company’s bottom line.

“I think it will take more than two years to reach a point where we are profitable. But, when I leave at the end of my term, you will see us move closer to profitability,” he said.

“This financial year, for example, we will probably have the same losses we made last year. That, however, will be the end of losses of this size, and they will be steadily reduced over time.”

Eskom reported its net loss increased to R23.9 billion in the last financial year – a significant jump from the R11.9 billion loss reported in the previous period.

This was the company’s seventh consecutive loss as Eskom crumbled under the weight of its debt pile, high financing costs, poor plant performance, and a ballooning municipal debt.

Nyati’s expectation of another R20 billion loss is in line with guidance given by the company in October last year, where it said it expected a R23.2 billion loss for the financial year to the end of March 2024.

Historically, Eskom’s financial performance in its first half – which falls during the winter period when tariffs are higher and demand peaks – is better than the second, which is normally marked by higher maintenance and lower sales in summer.

This article was first published by Daily Investor and is reproduced with permission.