Despite Eskom managing to slash its debt by almost R82 billion for the financial year ended March 2021, its operations took a massive Covid-19 hit according to the group’s latest results published on Monday.
The debt-laden state power utility saw a 6.7% decline in electricity sales overall for the year, which contributed to operating profit plunging from R9.2 billion in its financial year ending March 2020, to R5.8 billion in its latest financial results.
Besides the drop in electricity demand, due to the pandemic and lockdowns largely in the first half of its financial year (April to September 2020), an increase in operating costs also played a part in the poorer operating profit performance.
Had it not been for an 8.76% tariff increase, which saw revenue growth improve to R204.3 billion for the year, Eskom would have reported a wider after tax loss.
“Just like the overwhelming majority of South African businesses, Eskom was not spared the worst effects of the Covid-19 pandemic,” said Eskom CEO André de Ruyter. “The slowdown of economic activity due to the pandemic led to an unprecedented decline in sales, which fell 6.7% from the previous year.”
Eskom reported “making headway” in reducing its debt burden by 16.9% for the year or by R81.9 billion – bringing its outstanding debt to R401.8 billion.
However, De Ruyter and group CFO Calib Cassim both still concede that Eskom’s debt remains unsustainably high.
This has seen its net finance cost coming to R31.5 billion, turning Eskom’s operating profit of R5.8 billion into a loss of R18.9 billion after tax for its latest financial year.
Eskom’s after-tax loss has however narrowed – it came in at R20.5 billion for its prior (2020) financial year.
The group benefitted from a relatively stronger rand last year and lower interest rates, which played a role in the reduction in its debt burden.
Cassim said the group had paid around R65 billion in debt, with the balance in the debt reduction related to the stronger currency and lower interest rates.
On the overall 6.7% slide in electricity sales, Cassim noted that electricity sales to industrial customers was down by double digits or 10.4%, while sales to distributors was down 4.1% and sales to the mining sector down 6%.
He said Eskom’s increase in operating costs during the financial year was largely related the group doing much more maintenance and repair work on its fleet of power stations and the power grid.
“This affected the group’s operating profits over and above the impact of lower electricity sales,” he added.
Despite this and the lower demand for electricity, Eskom had an even worse bout of load shedding during the year, reporting an extra day of power cuts. During the financial year, it had a total of 47 days of load shedding, versus 46 days in the prior financial year.
Meanwhile, the group has cut its workforce by another more than 2 000 staff during the reporting period.
It noted that the effective 4.5% headcount reduction came about through natural attrition and there were no forced retrenchments.
Eskom also did not implement an annual increase or offer any bonuses for management during the year.
“This is consistent with Eskom’s endeavour to contain costs and further helps improve Eskom’s operational efficiency,” said De Ruyter.
“A total of 2 023 employees left the service of Eskom through natural attrition and voluntary separation during the year. This had the effect of reducing the headcount to 42 749 during the year, from 44 772,” he added.
“This means that over the past two years Eskom has reduced its workforce by just under 4 000 employees. It must again be stated that not a single one of these was a forced retrenchment,” he reiterated.
Listen to Fifi Peters’s interview with Cassim on Eskom’s latest financial results (or read here):