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Eskom sees 6.7% slide in electricity sales in Covid-hit financial year

Operating profit plunges R3.4bn due to lower demand and an increase in operating costs.
Eskom CEO André de Ruyter. The group’s workforce was reduced by more than 2 000 during the reporting period through natural attrition. Image: Moneyweb

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.

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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.”

Read: Eskom reports fourth straight loss as debt eases

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.

Read:

Load shedding on track for worst year ever

46 days of load shedding hits Eskom’s financials

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): 

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Complaining about a 6.7% less sales while you continously tell us to use less electricity because supply is at risk?

Jip — The only company I know of in the world that begs it customers to use less of its only product !!
Proudly moronic in SA.

It is the only business I know that asks you to buy less of there product.

On a previous article I commented that Eskom is in a death spiral, similar to what Cape Town water was facing during the drought. You ask people to use less, but because your model is consumption based the the revenue drops. This eventually led to a surcharge before services were provided. This is the future for Eskom as well. However if municipalities collect the money it will be applied to salary increases at municipal level instead of going to Eskom.

Easy to solve; put the price up, again! Sell the whole crooked enterprise.

An incomplete article MW.

What you fail to cover is the vast amounts of write offs that were made due to unpaid electricity bills in selected areas.

Also, what is clear is that ESKOM fails to manage the rapidly rising dept from municipalities.

This amounts to geographical apartheid. In other words, you live in one area and you pay. You live in another area and your electricity dept simply gets written off.

ESKOM is not facing the reality of the situation: We, the consumer, cannot afford the electricity bill and barely surviving every month. ESKOM had destroyed the S.A. economy as they’ve ‘rated’ their ‘service’ for 1st world.

does not matter how one look at the eskom, the answer is the same – they are farming backwards at a high speed
for how long will covid19 be the excuse for their financial dire straits situation???
with 4000 employees less, they are still heavily overstaffed with incompetent cadre employees that is currently just an eskom milking machine. would like to see what the latest voluntary separation agreement stipulate to prevent resigned / paid off people appearing on the eskom horizon in any near future.
every night on tv ” please switch off – we are under pressure”, whilst eskom is suppose to be the core of a growing economy – ample electricity at the lowest cost per Kw possible to the public and industry. I have no hope for this entity anymore + same dim view of saa’s future

“A total of 2 023 employees left the service of Eskom through natural attrition and voluntary separation during the year.”
Probably find that a high percentage of those who “separated” were highly skilled /professional qualified employees who could find employment easily elsewhere, leaving most of the deadwood holding onto their (highly paid) jobs. So Eskam’s productivity continues to decline!!

You are correct. I personally know two experienced turbine engineers who left and they told me that two others also left. They left because it was expected of them to do three other people’s work. They tried to lodge complaints before they left, but it was ignored. The only department that is fully staffed, the personnel department, told them that they are not allowed to take on new people. Apparently they can not distinguish between a tea girl and key personnel.

If the 2000+ who left the eskom staff composition were the more professional / competent employees, then bragging about it is the last thing eskom can afford – getting rid of these people is like saa without qualified pilots

While the economic downturn obviously affected electricity usage, it is disappointing that the other two factors, load-shedding and conversions to solar are hidden.

For residential usage one would expect that lockdown and work-from-home would *increase* usage. This is apparently lost in “sales to distributors”.

These factors do not only cut into the revenue of Eskom but of the municipalities too.

End of comments.

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