Another Eskom bailout is inevitable

Truth and Energy civil nuclear engineer Hugo Kruger said he is sceptical about Eskom’s claims that it does not need another bailout from the National Treasury as the utility’s performance continues to decline.

Kruger’s remarks come in light of Eskom’s release of its financial results for the year through March 2023.

In its presentation, the power utility acknowledged a noteworthy escalation in its net loss after tax, soaring to R23.9 billion from the R11.9 billion loss reported in 2022.

Eskom’s interim CEO, Calib Cassim, noted a rise in municipal debt to Eskom from R44.8 billion to R58.5 billion over the past year.

Furthermore, he revealed a deterioration in the utility’s energy availability factor, dropping from 62.02% to 56.03% in 2023.

It was primarily due to generation supply constraints and shortfalls from the Independent Power Producer (IPP) programs.

However, Kruger told Newzroom Afrika that the number many people are overlooking is that Eskom’s unplanned maintenance was at 30% in 2023, up from 25% last year. 

“So basically, Eskom is like a Soviet vacuum factory at this stage – it is just chowing money,” he said. “They say they don’t want to have a bailout again, but I’m very sceptical of that.”

Eskom has had to spend increasingly more on diesel over the past few years as the utility’s coal power plants cannot keep up with demand, and it has to use its diesel-powered open-cycle gas turbines to subsidise supply.

In addition, one of Eskom’s biggest challenges is that it loses sales, and therefore revenue, as load-shedding intensifies and people increasingly turn to alternative energy sources.

To make up for these lost sales, the utility implements above-inflation tariff hikes.

This can be seen in Eskom’s 2023 results – despite making a loss and declining sales, the utility’s revenue rose by 5%.

Eskom said the 9.61% tariff increase in its financial year was behind this revenue growth.

Kruger said the problem Eskom is now facing is that, as the tariff keeps increasing to make up for the utility’s revenue shortfall, more people will go off the grid and stop using Eskom.

“The Eskom tariff cannot recover the cost. It is running at a loss, and it’s going to run at a loss – Treasury will have to bail it out,” he said.

He said one of the only options left if Eskom wants to survive and potentially compete with the private sector is to fix the entire utility and run it properly and operationally.

However, this will cost money, which Eskom does not have and cannot make enough of.

“Who’s going to pay for that? The politicians are not going to answer this because it’s an election year. They’ll say no more bailouts. But after the election, they’re going to realize we have this big debt in the utility, and the economy depends on it,” he said. 

“That’s the unfortunate thing because there is no alternative to the monopoly. This is not South African Airways that we can throw away tomorrow. We need Eskom to work.” 

“If you’re going to maintain it, it will cost money. So I don’t believe a word that they say that they’re not going to get another bailout.”