Eskom posts R5 billion pre-tax loss in three months

Eskom, regardless of a formidable income surge attributed to a major electrical energy tariff hike, grapples with a staggering R5 billion pre-tax loss for Q1 2023. Municipal money owed and declining gross sales volumes have hindered monetary sustainability. The Nationwide Treasury’s unaudited report reveals the ability utility’s uphill battle, whilst an enormous debt reduction plan provides hope.

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Eskom reviews R5-billion loss in three months

By Myles Illidge

Eskom has suffered a R5 billion loss earlier than tax for the three months ending 30 June 2023, regardless of a major improve in generated income.

Though its income grew by practically R5 billion over the identical interval within the 2022/23 monetary 12 months, this was primarily pushed by Eskom’s 18.65% electrical energy tariff hike, which took impact on 1 April 2023.

That is in keeping with an unaudited first-quarter efficiency report introduced by the Nationwide Treasury to the Standing Committee on Public Accounts (Scopa) on Tuesday, 29 August 2023.

A big contributor to the ability utility’s poor monetary efficiency is excellent quantities owed to Eskom by municipalities throughout South Africa.

“What’s worrying is the rise in municipal debt, which continues to be an issue when it comes to fee to Eskom, which additionally hinders Eskom’s monetary sustainability going ahead,” stated Nationwide Treasury.

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

The facility utility additionally faces declining gross sales volumes, reporting gross sales volumes 3TWh lower than finances and three.4TWh decrease than the identical interval within the 2022/23 monetary 12 months.

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“Gross sales volumes had been impacted by era provide constraints, lending to load-curtailment and load-shedding,” stated Treasury.

Main power prices had been R3.5 billion decrease than budgeted. This was primarily as a consequence of a 19.3% decrease expenditure on Eskom’s Open-Cycle Gasoline Generators (OCGTs).

Treasury stated the decline in OCGT spending owes to a “beneficial decline in diesel costs throughout the quarter”.

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

“Eskom raised R16 billion in funding by means of non-public placements on 31 March 2023, with the associated disbursements solely going down in early April 2023,” stated Treasury.

The federal government has carried out a plan to assist Eskom take care of its debt obligations.

Within the February 2023 finances speech, finance minister Enoch Godongwana introduced a debt reduction bundle of R254 billion over three years for the ability utility.

The reduction bundle will start with authorities offering direct help of R184 billion to handle Eskom’s debt and curiosity funds as they fall due.

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

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

Nevertheless, the assist supplied to Eskom comes with strict circumstances, together with:

Eskom could solely use the funding to settle debt and curiosity funds.
It might solely incur capital expenditure for transmission and distribution, bar some exceptions.
Money proceeds from promoting Eskom’s non-core belongings have to be used to settle debt and curiosity.
Eskom requires Godongwana’s approval to borrow any extra money.
Eskom could not use constructive fairness balances to construction new debt or mortgage agreements or use such balances as “margin financing”.
The facility utility should prioritise the implementation of the unbundling course of.
Eskom could not implement remuneration changes that negatively have an effect on its monetary place and sustainability.

“Failure by Eskom to display compliance will outcome within the delay within the conversion of the mortgage (or half thereof) till the following quarterly assembly, when compliance will likely be reassessed,” stated Treasury.

“Thereafter, non-compliance with the circumstances will end in Eskom having to repay the mortgage to the Nationwide Income Fund at market charges.”

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Power availability remains to be a problem

In its Scopa presentation, the Nationwide Treasury additionally highlighted a number of operational challenges confronted by Eskom.

This features a declining Power Availability Issue (EAF), which was reported at 54.59% on 30 June 2023, down from 56.03% on the finish of March.

That is considerably worse than the proposed goal EAF of 65%.

It added that the decline in EAF is especially as a consequence of heightened “unplanned losses” (breakdowns), which elevated to 34.97% in June 2023 from 31.92% in March and induced elevated load-shedding.

“Throughout Q1, common unplanned availability was 16,187MW, greater than the Winter Plan’s base-case assumption of 15,000MW, leading to load-shedding starting from Stage 2 to Stage 6 on 91 days throughout the quarter,” stated Treasury.

The EAF does appear to have improved for the reason that reporting interval, with power knowledgeable Chris Yelland posting knowledge for the week ending 30 July 2023 firstly of August.

In response to the info, the common EAF sat at simply over 57.5% from 24 July to 30 July 2023.

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This text was first revealed by MyBroadBand and is republished with permission

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