Eskom results indicate some positive financial performance for the first half of the year, although financial and operational challenges remain
Net profit after tax of R1.3 billion compared to R0.6 billion in the same period last year
EBITDA increased to R30.6 billion in comparison to R28.3 billion for the same period last year
No loadshedding during winter 2019
Increased international sales volumes
New build projects continue to deliver with Medupi Units 2 and 3 (each 794 MW) achieving commercial operation
45 km of high-voltage transmission lines commissioned
Improvement in availability of new build units as a result of fixing defects
Generation plant and environmental performance remain a challenge with availability declining to 70% compared to 75% for the same period last year Municipal arrear debt (including interest) has increased by R5.2 billion since March 2019 to R25.1 billion
Thursday, 28 November 2019: Eskom is encouraged by the achievement of an improved net profit and increased EBIDTA in this period. However, despite delivering some positive financial performance for the six months ending on 30 September, financial and operational performance remains a challenge. In addition, some financial ratios are expected to deteriorate further before improving.
The group has achieved an EBITDA of R30.6 billion compared to R28.3 billion over the same period last year and a net profit of R1.3 billion compared to R0.6 billion in the same period last year. Debt has increased to R454 billion. A total of 61% of funding for the 2020 financial year has been secured by September 2019. Savings of R5.6 billion achieved could be negatively impacted to year end by spend on diesel to stabilise the grid.
The group’s total revenue has increased by 10%, primarily as a result of NERSA’s overall tariff determination of 13.87% for the year. Local sales volumes declined by 1.29% compared to September 2018, mainly in industrial and distributor categories. International sales have shown an increase in the past six months. The municipal arrear debt continued to increase to R25.1 billion, an average growth of over R850 million per month.
Eskom’s Interim Executive Chairman and Acting Group Chief Executive, Jabu Mabuza during his address today said that Eskom’s turnaround journey to achieve financial and operational sustainability is aligned to the Department of Public Enterprises’ special paper (Roadmap for Eskom in a Reformed Electricity Supply Industry). “Eskom’s turnaround journey that seeks to stabilise, separate and grow the company in order to achieve long-term sustainability will take some time to achieve its objectives.
“We are encouraged by positive steps taken in stabilising governance and rooting out financial mismanagement, malfeasance and maladministration. This includes recovery of monies lost during the period of state capture. Lifestyle audits of executive senior managers have been completed. Eskom is working with all law enforcement agencies conducting major investigations into matters of fraud and corruption that affect the organisation”, added Mabuza.
Group Chief Financial Officer, Calib Cassim gave a full report on the financials highlighting that Eskom’s financial performance remains under pressure. Cassim indicated that cost savings alone cannot resolve the current financial challenges. Migration towards a cost-reflective tariff remains imperative. “We have lodged applications with the High Court to review the National Energy Regulator of South Africa (NERSA’s) recent revenue determinations.
In terms of municipal debt, arrear balances including interest have increased by R5.2 billion since March 2019 to a total of R25.1 billion with a payment level of 44% for the top 20 defaulting municipalities. Payment levels at Soweto remain low at 16%.
Cassim indicated that although positive progress has been made with the implementation of the Generation nine-point recovery programme, plant availability together with environmental performance remain key challenges. “The recovery programme helped us to improve operational performance and ensured no loadshedding during winter. Unfortunately, we had to implement loadshedding for five days in October and November to stabilise the system. In addition, we have seen some improvement in the availability of new build units as defects were fixed. Medupi Power Station’s Unit 3 achieved commercial operation on 5 July 2019 adding 794 MW to the national grid, and 45 km of high-voltage transmission lines were commissioned.”
“The average partial load losses continue to exceed the target of 3 500 MW, with unplanned maintenance increasing to 19.58%. This affects the reliability of our system and requires usage of diesel (OCGTs). Environmental performance and boiler tube leaks remain a challenge in some of our power stations, necessitating the shutting down of these units. In the last six months, both generation and transmission network performance has deteriorated, with generation plant availability declining to 69.92% from 75.01% for the same period last year. Generation continues to focus on operational and environmental recovery. Of concern is the high utilisation of the coal fleet”, says Cassim.
“In order to reduce irregular expenditure, a dedicated function to focus on addressing PFMA violations has been established. Reporting procedures have been amended to comply with recent National Treasury instructions, and it is encouraging to see that the amount of new incidents of irregular expenses has reduced to below R1 billion for the period” says Cassim.
Mabuza elaborated on the projections for year-end:
“As we know that financial performance is seasonal, projections are that we will declare a loss for the full year’s results, similar to that of last year. Contributing factors include revenue variance between the winter and summer periods with higher demand in the winter and higher winter prices, higher primary energy costs in summer due to higher production from renewable IPPs in summer, and increased price of coal, employee benefits from salary settlements and escalating municipal arrear debt. Our debt servicing obligations largely fall within the second half of the year thus putting more pressure on liquidity. We continue to work with our shareholder to stabilise Eskom’s finances. Projections indicate that we are unable to service debt and fund a portion of capex through cash from operations. We remain reliant on Government support of R49 billion for the 2020 financial year and R56 billion for 2021 to ensure Eskom’s status as a going concern.”
Welcoming the appointment of Mr André de Ruyter as the Group Chief Executive of Eskom, Mabuza said, “On behalf of the Eskom Board, I wish to convey our congratulations to Mr André de Ruyter on his appointment as the Group Chief Executive. I wish him well in his new role as I pass the baton on to him. We are fortunate to have the expertise of an experienced leader such as André to steer Eskom towards achieving our vision for the future. Leadership stability remains a critical factor in Eskom’s turnaround.”
Statement issued by Eskom Media Desk, 28 November 2019
