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Eskom heads for another full year a loss as fundamental problems persist even after making a profit of R83 million in the first half of its fiscal year.
The improvement in net income during the six months to September follows a loss of R1.9 billion from the previous year, the company said Monday in a statement on its website. The utility is forecasting an annual loss of R22 billion, marking the fourth consecutive year without profitability.
“Significant financial challenges remain, primarily related to fees that do not reflect costs, along with an unsustainably high debt burden,” he said.
Electricity sales fell by an unprecedented 10.3% as lockdown measures designed to control the spread of the coronavirus pandemic affected demand.
Losing sales exacerbates an existing downtrend for the monopoly that provides nearly all of South Africa’s power and adds another hurdle to its already struggling finances. The terms have been extended for a restructuring plan that will divide the business into transmission, generation and distribution businesses.
Debt securities and loans fell by rand 20 billion to rand 464 billion, partly due to the strengthening of the rand since March. As about 66% of that is guaranteed by the South African government, “Eskom’s debt level is a systemic risk for the fiscus and the country as a whole,” the company said. It expects to raise funds of around 40.7 billion rand by the end of March.
Financial situation
“To improve our long-term financial position, we need a significant reduction in the debt profile or a significant increase in cash flows through fees that reflect costs,” Eskom said.
The government, unions and business groups last week approved a pact to find ways to reduce debt.
Operating performance is slowly improving, Eskom said. Even so, it was unable to meet demand due to poor maintenance of the generation units that forced the company to implement power cuts for 19 days from July to September. The company this weekend had rolling blackouts for the first time since September. – Reported by Paul Burkhardt, (c) 2020 Bloomberg LP
