Eskom’s gaping black hole – sees loss ballooning over expected R15bn

By Paul Burkhardt

(Bloomberg) – South Africa’s state-owned power utility Eskom Holdings SOC Ltd. expects a loss of around R20bn ($1.49bn) for the financial year through March.

The estimated loss “is our view based on December 2018 forecasts to year end,” Eskom said in an emailed reply to questions, and due to higher costs to meet demand and to address generation performance.

Eskom has said its situation is unsustainable and the government is reviewing steps the utility can take to start emerging from R419bn of debt and contend with waning demand. Costs have increased for coal, which most of its fleet uses to generate power, and for additional repairs to new plants that are years behind schedule and over budget.

Read also: Eskom’s death spiral: Unions stand in way of any revival

Chief Financial Officer Calib Cassim on Jan. 15 revealed that Eskom’s loss would be bigger than the R15bn the utility initially anticipated.

Eskom needs to fix its cost structure and requires above-inflation tariff increases, or the government should be prepared to increase the level of recapitalisation, Chief Executive Officer Phakamani Hadebe said Monday at a mining conference, in Cape Town. The company is too big and ultimately it will need to be unbundled, he said.

“Once we have a solution; the next challenge is the execution,” Hadebe said.