By Mike Cohen and Loni Prinsloo
(Bloomberg) – The financial woes dogging South Africa’s behemoth state power utility show little sign of letting up even as the government grants it massive bailouts.
Eskom, which supplies 95% of the nation’s electricity, posted a R1.3bn ($88m) profit in the six months through September, about double a year earlier. However, it still anticipates a R20bn loss for the full year due to lower demand and prices in the summer months. Eskom’s debt burden rose to R454bn, from R440bn at the end of March.
“The Eskom turnaround remains a long and difficult journey,” Jabu Mabuza, Eskom’s chairman and acting chief executive officer, said at the results presentation in Johannesburg on Thursday. “The ultimate goal is to make Eskom profitable.”
Eskom’s precarious state stems from years of mismanagement, a bloated wage bill, massive cost overruns at two new coal-fired power stations and maintenance backlogs at other plants that left it struggling to meet demand. The government has said the utility is too big to fail and allocated it 138 billion rand over the next three years to enable it to keep operating. Yet that isn’t likely to be enough to ensure its viability.
Freeman Nomvalo, who was named Eskom’s chief restructuring officer on July 30, is considering options to reorganize its debt.
The government plans to split the utility into generation, distribution and transmission units under a state holding company — a reorganization it says will make it easier to raise financing and improve efficiency. This month it announced that Andre de Ruyter, currently the CEO of packaging company Nampak Ltd., will take the helm at Eskom on Jan. 15.
|More highlights from the first-half results presentation: