A record year of load-shedding saw Eskom’s energy sales decline by 5%, while spending on diesel to run open-cycle gas turbines (OCGT) increased 50% for the year to March 31.
These were some of the main factors driving Eskom’s net loss after tax to R24bn, up from R12bn in the previous year.
Eskom presented its annual results for the year ended March 31 on Tuesday. Acting CEO Calib Cassim said the utility had to implement load-shedding on 280 days during the year, compared with 65 days in the previous year.
Despite some of the R254bn in debt relief announced by the Treasury in February starting to flow to the utility, its total debt burden increased from R396bn in the 2022 financial year to R423bn in 2023.
“We are now sitting at 202 load-shedding days in 2024. If Eskom is to not exceed 280 days this year, we will have to not have load-shedding for at least half [the] days during each of the next five months. This will be tough, but it is what we are trying to achieve,” Cassim said.
Load-shedding placed pressure on the cost of production, he said, especially in running the OCGTs, “which come at an enormous extra cost” of almost R30bn and which “filtered through the financial performance”.
The cost of energy produced by the turbines also increased by about 50% in terms of unit costs due to an almost 30% increase in the cost of diesel over the period.
Cassim said they expected to start seeing a turnaround in Eskom’s financials by 2025.
“It is critical that Eskom’s performance does change. We are confident that we will turn around the operational performance, and we believe financials will then improve by end-March 2025.”
Despite recent improvements in generation performance, financial performance in the current (2024) year will continue to be negatively affected by load-shedding, which would again result in a decrease in energy sales and increase in costs as Eskom continues to rely heavily on OCGTs to keep load-shedding at lower stages.
Eskom has implemented an 18.6% tariff increase for the current year, but it expects sales volumes for 2024 to decline by a further 2%, Cassim said.
“Our biggest financial challenges remain the lack of cost-reflective tariffs, excessive use of OCGTs due to capacity shortages, inflationary cost increases, nonpayment from customers and Eskom’s debt burden.”
Eskom acting CFO Martin Buys said with the inflow of debt relief payment from the Treasury over the next three years the utility’s gross debt was expected to reduce by about 40% over the next five years to R270bn. “The trick will then be to make sure we maintain it at that level,” he said.
An important advantage of the debt relief was that Eskom’s improved liquidity position made it possible to plan for maintenance and outages on plants in advance.
“For big stations we have to place orders for parts a couple of years in advance. Because we can now support our debt-servicing cost we can start placing lead orders long in advance,” he said.
Spending on maintenance and repairs increased by R3bn in the year to end-March 31.
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