Eskom disaster

Eskom is in deep financial trouble. It reported a loss of R21.2 billion for the last financial year, and its debt increased from R396 billion to R439 billion.

The National Treasury revealed this in a Parliamentary presentation on state-owned enterprises and government departments.

Treasury said Eskom faces numerous financial challenges, including a loss before tax of R21.2 billion for the financial year ending March 2023.

It is much higher than the budgeted loss of R13.6 billion and nearly double the loss before tax of R11.9 billion for the previous year.

Another concern was Eskom’s gross debt securities and borrowings, which increased to R439.1 billion as of 31 March 2023. It was up from R396.3 billion in March 2022.

Eskom attributes the increased debt largely to the impact of the weakening of the rand on foreign-denominated borrowings and debt-raising activities.

Eskom increased its net revenue to R259.2 billion from R247.6 billion year-on-year, largely driven by a regulatory standard tariff increase of 9.61% for the 2023 financial year.

However, non-payment of municipal and residential revenue continues to negatively affect Eskom’s profitability.

Total invoiced municipal arrear debt increased to R58.5 billion at year-end, up from R44.8 billion a year before. 61 municipalities have arrear debt of more than R100 million each.

Eskom’s sales volumes were impacted by generation supply constraints associated with load curtailment and load-shedding and poor economic conditions.

The power utility continues relying on the government for financial support to stay afloat and keep the lights on, at least for part of the day.

Operational challenges

It is not only Eskom’s finances which are a mess. It has enormous operational challenges, which is clearly seen in the increased levels of load-shedding.

Eskom Generation continues to experience unreliable performance in its fleet of power-generating plants.

The poor performance is partly due to delayed and inadequate maintenance and delays in commissioning new plants.

There is also a delay in faults detected in the new units that have been commissioned, which is seen in the Medupi and Kusile power stations.

Eskom’s reported Energy Availability Factor (EAF) was 56.03% as of 31 March 2023, significantly lower than the 62.02% a year earlier.

What is particularly concerning is that it is well below the target of 65%, which was part of the plan to end load-shedding.

The decrease in EAF compared to the previous year is largely due to a significant increase in unplanned losses. These losses increased from 25.35% to 31.92% over the last year.

Additionally, average partial load losses of 6,057MW have increased substantially compared to the previous year’s 4,851MW.

Due to the poor performance of the generation fleet, Eskom has had to significantly increase the usage of its own and IPP OCGT’s to limit the stage of load-shedding.

OCGT production for the financial year was reported at an unprecedented high of 3,018GWh at a cost of R21.36 billion. In comparison, Eskom spent R10.03 billion in the 2022 financial year.