Eskom lost R5 billion loss in space of 3 months
In the first quarter of the 2023/24 financial year that ended June 2023, Eskom reported a R5 billion loss before tax. The revelation came from Eskom’s unaudited quarterly results that were presented to the Standing Committee on Appropriations on Tuesday the 29th of August. The company’s net revenue went up to R70.9 billion for the
Eskom lost R5 billion loss in space of 3 months
In the first quarter of the 2023/24 financial year that ended June 2023, Eskom reported a R5 billion loss before tax.
The revelation came from Eskom’s unaudited quarterly results that were presented to the Standing Committee on Appropriations on Tuesday the 29th of August.
The company’s net revenue went up to R70.9 billion for the quarter, up from R66.3 billion for the same quarter in 2022. Primarily, the increase happened because of the 18.65% increase in electricity tariffs for direct customers from 1st of April 2023. Sales volumes were 3 TWh, 6.2% lower than budgeted and declined by 7% compared to the previous comparable period when sales were 3.4 TWh. The impact in volumes came from generation supply constraints, resulting in load curtailment and load-shedding.
In simple terms, the state-owned company was not able to generate enough electricity to meet demand. As such, electricity sales and revenue did not meet expectations. However, the consolation was that Eskom’s primary energy costs were R3.5 billion lower than budgeted at R43.4 billion. Mainly, this was due to expenditure on Open Cycle Gas Turbines (OCGTs) being 19.3% lower than budgeted, and the lower spending came from a favourable decline in diesel prices during the quarter. After that though, Eskom’s other finances painted a picture of a company in severe financial distress.
Eskom’s gross debt securities and borrowings increased to R454.5 billion as of 30 June, up from R439 billion in March. The company’s municipal debt shot all the way up to R63.7 billion without any concrete plan to ensure defaulting municipalities pay their bills. As much as profitability ratios were performing better than expected, Eskom mentioned that it is still experiencing challenges preventing it from achieving long-term financial sustainability.
The company said its profitability remains hampered by poor long-term financial sustainability arising from an inadequate tariff path, poor generating plant performance, and escalating arrear municipal debt.
On the technical side, Eskom’s energy availability factor (EAF) in the first quarter of the financial year was 54.49%, and it is continuing with its steady decline. It is lower than the 56% EAF at the end of March and far lower than Esklom’s target of 65%. The cause for the decline is unplanned losses, also known as breakdowns, which were up to 35% in the quarter.
Unplanned outages averaged 16,718 MW, higher than the assumption of 15,000 MW heading into the winter months. As a result, these outages caused load-shedding to range between stage 2 and stage 6 in the quarter.
Also experiencing an increase in partial or full load losses, the utility reported at 6,927 MW over the period. While Eskom’s spending on OCGTs was lower than budgeted, the turbines were used frequently over the quarter.
Eskom and independent OCGTs contributed 1,583 MW to the grid at load factors of 24.2% and 22.3%, respectively.
On the 7th of July the Eskom Debt Relief Act came into effect. The National Treasury will be delivering R254 billion over the next three years to help Eskom alleviate its debt. The first tranche will be R184 billion to address Eskom’s debt and interest payments as they fall due. This will follow with R78 billion in 2024, R66 billion in 2025, and R40 billion in 2026.
The second component of the debt relief will see the government take over R70 billion in Eskom debt commitments in 2026.
