Eskom’s biggest loss yet – Moneyweb

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RYK VAN NIEKERK: Eskom reported financial results today, and it suffered a net loss after tax of R24 billion, which was double the loss of R12 billion it suffered in the 2022 financial year. The loss mostly flows from 280 days of load shedding, and the group also spent nearly R30 billion on diesel to run its open-cycle gas turbines. The group’s total debt also rose from R396 billion to R424 billion.

On the line is Calib Cassim, Eskom’s acting CEO. Calib, thank you so much for your time today. The financial performance is not pretty. How do you think South Africans should view it?

CALIB CASSIM: Yes, the results – we are not proud of them in terms of our performance on the back of the poor generation performance, culminating in 280 weekdays of load shedding. The pressure on cost resulted in a bottom line loss deterioration from just under R12 billion to R24 billion. But the real focus is that we’ve seen in recent weeks a better performance from generation, and that remains a key priority – for not only Eskom but for the country.

RYK VAN NIEKERK: The financial position is concerning since Eskom has received several double-digit tariff increases, or approval from Nersa to hike rates by more than 10% – I think the most recent one is close to 20%. When will it start to make a difference to Eskom’s financial performance?

CALIB CASSIM: We know it’s difficult. The tariff does contribute positively.

I think firstly let’s get the generation performance and reduce the expense of diesel usage.

Secondly, we also need the municipalities [to settle their debt]. We’ve seen that has grown to R58 billion off the R45 billion of 2022; it meant R8 billion of revenue not recognised in our performance. We need to address that.

But to answer your question directly, FY24, as we said, Ryk, in the outlook, will be similar – around a R23.2 billion loss.

We see this then [with] the tariffs and the other initiatives, improving in FY25 significantly.

RYK VAN NIEKERK: You’ve referred to diesel. Eskom spent nearly R30 billion on the open-cycle gas turbines in the financial year. Can you not procure diesel at a cheaper rate? Do you need to buy diesel at the commercial rates in South Africa?

CALIB CASSIM: Effectively how the price works, it is the commercial rate, and we do get a discount. Most of our diesel is bought through PetroSA, a similar state-owned entity. We are working in conjunction with them. Obviously market dynamics also impact on the price of diesel. But I think most importantly we need to get generation to perform better and then the reliance on diesel needs to reduce from a load factor perspective going forward to see the benefit financially.

RYK VAN NIEKERK: Koeberg is supposed to come online in November – well, one of the units at least. I would imagine that would make a big difference. Is the connecting of that unit to the network still on track?

CALIB CASSIM: I think first and foremost Koeberg is the cheapest cost of generation we have in the fleet, and it’s the most reliable. However, once it comes back from Unit 1 – we didn’t take off Unit 2 – for each steam generator from a fleet and a country perspective we will still be operating with one unit right into next year.

So we are not going to see any significant benefit with Koeberg coming back. Importantly, we need to go through the process of that licence extension for Koeberg for another 20 years.

RYK VAN NIEKERK: I want to return to your diesel expense of nearly R30 billion. How does that compare with the money Eskom spends on the repairs and the maintenance of power stations – reactive and proactive maintenance?

CALIB CASSIM: Overall our total spend on repairs and maintenance is close to that diesel number; and yes, we are seeing benefits coming through in terms of certain power stations being more reliable, and we’ve seen this with bringing back those Kusile units.

So yes, in terms of repairs as a percentage, we want to ensure that we keep our planned maintenance up at about a 10% factor. We need to really reduce the breakdowns. That’s over 30% that has to come down, Ryk.

RYK VAN NIEKERK: Of course there are also a lot of concerns regarding corruption and theft at Eskom, and it is an ongoing fight. But can you calculate the impact of corruption and theft on the financial performance of the utility?

CALIB CASSIM: Yes, it’s a very difficult calculation but as and when we conclude investigations we definitely record it through the financials in terms of any overpayments.

And in terms of recoveries, as and when we do conclude that through the legal process to the regulatory mechanism, we then give that in terms of future tariff reduction.

But it is a difficult process. We are dependent on a number of investigations, our own ones but also in conjunction with law enforcement agencies like the Hawks and the SIU [Special Investigation Unit].

RYK VAN NIEKERK: But are you winning the fight? Are you making positive progress?

CALIB CASSIM: On the positive we’ve seen some arrests recently, working with the priority committee, but it’s an ongoing battle.

We have a number of engagements. I think on the positive, the amount of interaction that we have with the law enforcement agencies – not only at management level but also at the higher level through the Necom [National Energy Crisis Committee] process – is promising.

It is not only Eskom, it is also dealing with the logistics environment in terms of Transnet now and Prasa.

RYK VAN NIEKERK: I want to just go back to the period when André de Ruyter left Eskom, because there were many revelations and allegations made. He also wrote a book. I don’t want to discuss the allegations, but rather how that did affect Eskom, and especially Eskom employees. How would you regard the mindset of Eskom’s employees, because I’m sure they would also have been negatively affected by those allegations.

CALIB CASSIM: I think firstly, Ryk, a number of the allegations and what was recorded we were aware of, but there were a few new ones. Yes, the morale and the manner in which it was done did impact on staff, including the executive committee.

Obviously we had to focus on the important job at hand, dust ourselves off, and then just remain focused on our mandate to deliver and to reduce the load shedding as quickly as possible.

But it did have a dent. We are rebuilding on them, and we are going to move on from that now going forward.

RYK VAN NIEKERK: And then there’s also a [National] Electricity Crisis Committee [Necom]. It is an initiative launched by the president, and many private sector individuals and companies are involved, and they are tasked with helping Eskom to improve the electricity supply. Has that committee made a difference?

CALIB CASSIM: Definitely. We believe it has made a difference. We could see, for example through that committee, we’ve got the support to get that reprieve on the Kusile temporary stacks through the Department of Environmental Affairs and the benefit we’ve seen from those two units being now connected to the grid.

I think there are still some areas where the turnaround and decisions that are required are still not as fast as we would like, but the fact that we are getting airtime with a number of ministers on a regular basis for 10 works – we see that as positive.

RYK VAN NIEKERK: But is that a good or a bad thing, because there seem to be many cooks in that kitchen?

CALIB CASSIM: Yes, I think from our perspective as Eskom we must just keep driving what is required, where we need things unlocked, and obviously deal with the things that are in management’s control. So I think we need to also be clear on what we need on an urgent basis.

RYK VAN NIEKERK: Thank you, Calib. That was Calib Cassim, the acting CEO of Eskom.