Eskom suffers $1.2 Billion loss, and more to come

Amidst South Africa’s enduring power crisis, Eskom Holdings SOC Ltd. grapples with an astronomical R23.9 billion net loss after tax, with another 23.2 billion loss projected for the coming year. With grid constraints and operational setbacks, the utility foresees limited respite until 2025. Hindered by high costs and plummeting sales, Eskom’s challenges are compounded by leadership turmoil and delayed restructuring plans. As the nation reels, Eskom confronts a critical juncture in its struggle for stability.

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South Africa’s Eskom Posts $1.2 Billion Loss With More to Come

By Paul Burkhardt

South Africa’s struggling state power utility reported a 23.9 billion-rand ($1.2 billion) net loss after tax for the past financial year after subjecting the country to record electricity outages and warned that no immediate turnaround is in sight. 

Eskom Holdings SOC Ltd. expects to post another 23.2 billion loss in the 12 months through March 2024 due to the poor performance of its plants and delays in securing generation capacity from private producers, interim Chief Executive Officer Calib Cassim told reporters at a briefing in Johannesburg on Tuesday. 

Power cuts intensified in the fourth quarter of 2022, with Africa’s most industrialized economy subjected to outages of up to 12 hours a day. Eskom only expects its operational performance to improve in the 2025 fiscal year, according to Cassim. 

“The time for excuses for Eskom and its staff is over, we now need to deliver,” he said.

Eskom’s performance has steadily worsened in recent years, leading President Cyril Ramaphosa to declare an energy crisis, step up the purchase of power from private producers and appoint an electricity minister for the first time. The success of those interventions has been limited, with auctions delayed and limited because of grid constraints, and rolling outages ongoing.

 The utility’s loss was largely attributed to its high primary energy costs, while sales volumes dropped 5% amid the blackouts, Cassim said. The company spent 84 billion rand mostly on coal and almost 30 billion rand on diesel-fired open-cycle gas turbines. 

The government has struggled to appoint someone to lead the utility.

Andre de Ruyter announced in December that he would step down as CEO because a lack of support made his job untenable. He planned to stay on until March, but left early after the airing of a television interview in which he linked ruling African National Congress officials to widespread corruption at the company. The position has been temporarily filled by Cassim, who moved over from his role as chief financial officer. 

Public Enterprises Minister Pravin Gordhan, who oversees the state-owned company for the government, has said a new CEO will be named by the end of the year.

Plans to split Eskom into generation, transmission and distribution businesses have also been delayed as the utility seeks approvals to complete the process. Consent from lenders to break out the transmission unit is expected in November, as is the appointment of the unit’s board by the Department of Public Enterprises, Cassim said. 

“We’re looking to operationalize by March 2024, though not all elements are under our control,” he said. 

One positive development for Eskom has been the disbursement of the first tranche of a 254 billion rand debt-relief package from the government. 

“Debt relief will go a long way towards improving financial sustainability and liquidity,” the utility said in its results presentation. 

A clamp-down on fraud and corruption that’s rife throughout the company is under way, while steps are being taken to recoup billions of rand of debt owed by municipal customers, it said.  

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