Eskom’s operational and financial performance continued to deteriorate in the six months to the end of September
2018, with the situation expected to worsen.
Releasing the company’s interim financial results for the period under review, Eskom’s Group Chief Executive, Phakamani Hadebe, said: ‘”There will be pressure in the short- to medium-term as we transition towards financial and operational sustainability.”
Eskom has defined an ambitious turnaround plan, largely within its own control, to improve financial performance by 2023.
Hadebe said the company is facing severe challenges both operationally and financially.
He said Eskom is currently in a debt reliant liquidity situation as a result of low tariffs, limited growth in sales, increased costs, and the rising capital investment programme.
In addition to this, the company is facing reduced generation performance, low coal stockpiles, and increases in municipal debt.
Revenue rose marginally to R98.1 billion from R95.5 billion previously, largely driven by a 5.2% tariff increase that was implemented in April this year. Net profit decreased 89% to R671 million from R6.3 billion last year.
Although coal costs were contained to 7%, independent power producer costs surged 29%, mainly due to volumes being 25% higher.
The recent wage increases for workers in the bargaining forum have also put pressure on costs. Employee costs rose 12% to R16.9 billion, up from R15.1 billion in the same period last year.
Historically, any profitability generated during the first half of the year is eroded during the second half, due to lower summer tariffs and higher planned maintenance.
The full impact of the wage settlement will also be experienced over the next six months, combined with higher diesel usage to avoid or minimise loadshedding.
Chief Operating Officer, Jan Oberholzer said the power system would remain constrained for the foreseeable future, until generation plant performance and coal stock levels improved.
This means that loadshedding in the coming months remains a very real risk.