Eskom expects first profit since 2017 next year

South African power utility Eskom forecast a return to profit for the first time since 2017 even as its loss for the most recent financial year more than doubled.

The company projected an after-tax profit of more than R10 billion for the 12 months through March 31, 2025, after posting a R55 billion loss in the previous fiscal year.

The steep loss was anticipated after the utility implemented record power outages caused by failures at poorly maintained generating facilities. But more recently it has delivered a much-improved electricity performance, with no scheduled power outages — known locally as loadshedding — since March.

“It’s looking positive,” CFO Calib Cassim said in an interview. “But our biggest worry at this point is this ever-growing rate of municipal debt and nonpayment.”

South Africa’s municipalities — marred by years of mismanagement — owed Eskom R95.4 billion by November, 28% more than what was outstanding at the end of March.

The utility has made significant repairs to its largely coal-fired fleet of plants that generate almost all of South Africa’s electricity, preventing outages for almost nine straight months. 

The power cuts still took a significant toll on the economy — as much as R899 million per day, according to central bank estimates — and were a big reason why the ruling African National Congress lost its majority in this year’s elections.

A large chunk of the increase in bottom line losses for 2024 was due to a R36.6 billion hit caused by the unbundling of Eskom’s transmission business, which forced the company to “derecognize” a previously reported deferred-tax asset.

The loss before tax shrank to 25.5 billion for fiscal 2024 while earnings before interest, tax, depreciation and amortization rose 26% to 43.4 billion rand.

Investors responded positively to the improved cash flow and outlook, with yields on the company’s 2028 eurobonds declining by 2 basis points to 6.78% by 12:43 p.m. in Johannesburg.

CEO Dan Marokane, who took over the role in March, has said the utility has the opportunity to reinvent itself, signaling that the century-old, state-owned monopoly can still thrive despite growing private-sector participation in power supply.

The company forecasts it needs an R834 billion over the next decade for capital spending. That includes an average of R45 billion annually to expand its generation and another R31 billion a year to sustain its operations. 

The figures exclude R449 billion of capex that National Transmission Company South Africa needs over the same period, as well as R162 billion for distribution, it said.