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Eskom has been unable to control its debt load of R463.7 billion (up from R454.2 billion in September 2019), despite the rate hike and continued support from the government.
On Monday, Eskom CFO Calib Cassim told reporters during his tentative results presentation that the energy company spends R2 billion each week on debt service commitments.
Eskom has blamed a host of problems for its mounting debt, including funds owed by municipalities and customers now amounting to R32.9 billion, up from R25.1 billion in September 2019. municipalities in the country represented more than R100 million. owes, each, as of September 30, 2020.
It adds that the minimum rate increases granted by the National Energy Regulator are insufficient to cover its costs.
Eskom Chief Executive André de Ruyter said Monday that the utility requires a gradual 25% rate increase to adequately cover its costs.
During the six months to September 2020, Eskom’s sales volumes fell 10.3% to R108.7 billion, as a result of the national Covid-19 lockdown that took effect in March. This is despite a tariff increase of 8.76% granted by Nersa during the period.
Demand is unlikely to recover to pre-Covid-19 levels due to the economic recession. Sales are expected to be 15.7 TWh lower than the previous year and are likely to stagnate at 190 TWh over the next few years, Eskom says.
De Ruyter said that implementing the required “profitable” rates would not result in exorbitantly high electricity prices because compared to other developing and developed markets, South Africa’s electricity prices would remain competitive. South Africa would still be in the lowest third of average global tariffs, he said.
“If you convert South African electricity rates to US dollars … the real cost of electricity in South Africa measured in US dollars since 2011 has not kept up with US inflation …
“In terms of US dollars, the cost of electricity has decreased over the last decade.”
He added that this conversion is important because South Africa is a net exporter of commodities to markets dominated by the US dollar.
As of September 30, Eskom had secured funding of R19.6 billion, or 48% of the funding requirements of R40.7 billion, for fiscal year 2021.
The government has provided additional support of R6 billion, with the remainder of the R56 billion pledged by the government is expected by the end of the year. However, in the absence of rate increases, Eskom says that government support will help pay off debt and improve liquidity, but is inadequate in reducing “principal debt and therefore will not guarantee long-term financial viability. of Eskom “.
Eskom posted a net profit, after tax, of R83 million, while navigating a “very challenging” operating environment.
“Despite having reached 48% of our financing requirements during the period under review, our access to financing in domestic and foreign markets remains limited due to low investor confidence as a result of poor financial performance, capacity of saturated debt and the recent downgrades, ”Cassim says.
“These factors have a direct effect on market appetite and the future cost of Eskom’s loans and can hamper the execution of our loan program. However, Eskom will continue to explore all avenues. ”
Cassim concluded: “Cost savings alone will not solve Eskom’s financial situation. The price of electricity must migrate towards a prudent and efficient cost reflectivity, while incorporating the principle of user payment ”
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