Eskom’s technology efficiency has been frequently deteriorating for the final a number of years, which impacts income and cashflow, whereas a decision of its debt burden has nonetheless not been concluded.
Until Eskom is on a sound monetary footing, it lacks the funds to take a position in upkeep and the growth of technology and transmission capability, at a time when the financial system is being crippled by each day load shedding.
The utility is at present surviving on common authorities bailouts, which diverts public cash wanted for different pressing socioeconomic interventions. But with rising prices and inadequate funds at its disposal, Eskom will proceed to use for above-inflation tariff hikes, which have turn out to be an annual incidence.
Read: Energy regulator withdraws Eskom tariff resolution from agenda
When will the outcomes see mild?
Eskom ought to have submitted its FY 2021/22 outcomes to Parliament by 30 September 2022. However, at this date, Eskom stated its outcomes would solely be finalised by the top of November, with a variety of causes given.
These included the delayed appointment of exterior auditors and the necessity to restate its financials for the earlier (2020/21) monetary yr, because of reclassification of stock, revaluation of property and tools, and to make sure compliance with procurement rules.
Then in November 2022, Bloomberg reported that Eskom promised to launch its year-end figures earlier than the top of December 2022. This is the time when Eskom would usually be reporting its interim outcomes for the present monetary yr.
This week, Eskom spokesman Sikonathi Mantshantsha stated preparations for releasing the 2021/22 monetary outcomes have been below method, however a selected date couldn’t but be confirmed. He additional indicated that Eskom’s 2022/23 interim outcomes could be launched through the first quarter of subsequent yr.
How 2022 might look vs 2021 …
While Eskom’s gross sales volumes have decreased in current years, the utility’s gross sales income continues to extend (2019/20: R199.5 billion; 2020/21: R204.3 billion), because of continued, above-inflation electrical energy tariff will increase.
Revenue in 2021/22 is expected to be larger nonetheless, as Eskom elevated its common tariffs by 15.6% on 1 April 2021, whereas the financial system continued to get well from Covid-19. Selected commodity costs additionally remained sturdy, benefiting Eskom’s mining prospects.
However, in the long term, Eskom’s gross sales volumes and revenues are below risk, as extra prospects, together with a few of its largest vitality intensive customers, are supplementing their vitality wants with renewables and different self-generation choices, to make sure safety of provide, include prices and decarbonise their operations.
One of the legacies of a few years of mismanagement of Eskom’s new-build programme is the utility’s R400 billion long-term debt.
Read: These charts present the Eskom disaster has been 20 years in the making
For 2020/21, Eskom reported that its web working earnings (Ebitda) of R32.8 billion may meet solely 30% of its debt service commitments, and solely 85% of the curiosity on its debt. Eskom’s liquidity is more likely to be worse in the 2021/22 and 2022/23 monetary years, due in half to quickly rising diesel prices.
Read: Eskom R19.5bn diesel ask more likely to be denied: Godongwana
In 2020/21, Eskom reported a web loss after tax of R18.9 billion, which was barely higher than the lack of R20.8 billion loss for 2019/20. However, based on Bloomberg, that R18.9 billion loss in 2020/21 has now been restated as R25.3 billion, and it’s expected that the loss for 2021/22 may very well be related.
The Minister of Finance Enoch Godongwana indicated in his Medium-Term Budget Policy Statement in October 2022 that authorities would take one- to two-thirds of Eskom’s debt onto its personal steadiness sheet. This would strengthen Eskom’s steadiness sheet and credit standing. However, extra exact particulars and dates are nonetheless to be clarified in the minister’s Budget Speech in February 2023.
Strengthening of Eskom’s steadiness sheet would allow the utility to take a position in long-overdue upgrades to the transmission grid, and bettering distribution and transmission grid entry for brand new technology capability from impartial energy producers (IPPs).
The value of diesel
In 2020/21, Eskom spent R4.12 billion on diesel for it its open-cycle gasoline generators (OCGTs) to offset its deteriorating technology efficiency, as plant availability fell to from 66.64% in 2019/20 to 64.19% in 2020/21. But this value is more likely to have escalated in 2021/22, as plant availability fell additional to 61.86%, with considerably larger ranges of load shedding.
At the final state-of-the-system briefing on 15 November 2022, Eskom COO Jan Oberholzer stated Eskom had spent R11.2 billion on diesel in the 2022/23 monetary yr from 1 April 2022 to 31 October 2022 – about double the finances for the total monetary yr.
As a consequence, Eskom stated it had run out of funds to obtain extra diesel till the subsequent monetary yr.
Read: Eskom needs to burn R17bn in diesel subsequent yr …
The Ministers of Public Enterprises and Mineral Resources & Energy have since organized for an emergency provide of fifty million litres of diesel from PetroSA, for which a funding answer has nonetheless not been introduced.
This most likely signifies that extra dangerous information awaits in Eskom’s 2022/23 monetary outcomes.
Charlotte Mathews and Chris Yelland are from EE Business Intelligence.
© Copyright 2022 – EE Business Intelligence (Pty) Ltd. All rights reserved. Published with permission.
