Eskom could make a R16bn loss in 2020, MPs hear

Power utility Eskom could record a loss of R16 billion for the 2020 financial year, Acting Director General of the Department of Public Enterprises Kgathatso Tlhakudi has said.

Last year the entity recorded a net loss of R20.7 billion, Fin24 previously reported.

On Wednesday evening, officials from the department of public enterprises and Treasury briefed Parliament’s Standing Committee on Appropriations on the financial challenges facing state-owned enterprises Eskom, SAA and SA Express. The management of these public entities also participated in the meeting.

Last week, at a briefing on the state of the system, Eskom CEO André de Ruyter said that the financial performance for the year was yet to be finalised, but the Eskom expected a net loss, given its debt servicing costs.

Eskom has a debt burden of R450 billion. It aims to reduce this to R200 billion through a range of measures such as cost cutting, raising tariffs and stabilising its balance sheet.

Deputy Finance Minister David Masondo stressed that it is important to address Eskom’s debt. He added that an equity injection from government would not be sustainable. Responding to a question on a proposal by Cosatu that a special purpose financing vehicle be used to address Eskom debt, Masondo said it was a positive step in finding a solution, but the ministry had not yet received a detailed proposal and it would be “premature” to comment in detail on the matter. “We are open to ideas and suggestions to deal with Eskom debt,” Masondo said.

Commenting on Eskom, Tlhakudi said that the cash generated from operations have been insufficient to meet Eskom’s debt obligations. But Eskom’s cash position had been bolstered by government’s R49 billion support package and has since improved to R23 billion. The power utility has also managed to achieve R9 billion in savings.

But municipal debt is still a headache, having increased from R19.9 billion, as at March 2019, to R28.04 billion as at 31 March 2020.

De Ruyter expressed concern over municipal debt. “The top 20 municipalities constitute about 81.25{e93887a69cdd95d753f466db084bbc3aa0067124675315461d28d68a72842cc2} of the total invoiced municipal arrear debt. We have in place 48 active payment agreements with defaulting municipalities, [and] 19 of those agreements are being fully honoured,” he said. Only one municipality out of the top 20 is honouring its agreement. “The remainder are still defaulting.”

De Ruyter said that while Eskom can disconnect defaulting private customers to incentivise quick electricity payments, the power utility is interdicted from cutting supply to 16 out of the top 20 municipalities.

Load shedding

The CEO said that the power utility still only anticipates three days of stage one load shedding over winter. However, cold weather has seen demand for electricity increasing, after a pronounced drop during the initial phase of the lockdown.

“During tonight’s peak, we had a significant demand for electricity, owing to the cold weather.

“Demand exceeded 31 000 MW, significantly higher than normal. Eskom had available some 34 000 MW it could use to serve demand,” said De Ruyter.

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