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Surprise: Eskom makes a first-half profit

However, the power utility still anticipates annual losses. ‘The Eskom turnaround remains a long and difficult journey’ – chairman.
Image: Waldo Swiegers, Bloomberg

The financial woes dogging South Africa’s behemoth state power utility show little sign of letting up even as the government grants it massive bailouts.

Eskom, which supplies 95% of the nation’s electricity, posted a R1.3 billion profit in the six months through September, about double a year earlier. However, it still anticipates a R20 billion loss for the full year due to lower demand and prices in the summer months. Eskom’s debt burden rose to R454 billion, from R440 billion at the end of March.

“The Eskom turnaround remains a long and difficult journey,” Jabu Mabuza, Eskom’s chairman and acting chief executive officer, said at the results presentation in Johannesburg on Thursday. “The ultimate goal is to make Eskom profitable.”

Eskom’s precarious state stems from years of mismanagement, a bloated wage bill, massive cost overruns at two new coal-fired power stations and maintenance backlogs at other plants that left it struggling to meet demand. The government has said the utility is too big to fail and allocated it R138 billion over the next three years to enable it to keep operating. Yet that isn’t likely to be enough to ensure its viability.

The current financial year will probably represent a high-water mark for annual losses, with smaller deficits seen in 2021 and 2022, said Chief Financial Officer Calib Cassim.

“We will then move from the red zone to the yellow zone,” he said.

Cash flows remain “severely constrained” and Eskom remains reliant on government support to remain a going concern, the company said. Freeman Nomvalo, who was named Eskom’s chief restructuring officer on July 30, is considering options to reorganise its debt.

The government plans to split the utility into generation, distribution and transmission units under a state holding company – a reorganisation it says will make it easier to raise financing and improve efficiency. This month it announced that Andre de Ruyter, currently the CEO of packaging company Nampak, will take the helm at Eskom on January 15 – an appointment labor unions said was a setback to racial transformation.

Read: Unions lukewarm on Eskom’s new CEO

“Andre de Ruyter is the most suitable, willing and able South African to do the job,” said Mabuza, who revealed that four of the six people shortlisted for the job were white. “There are not many people that would be so selfless to take a less-paying job to fix the problem.”

Highlights from the results:

  • Net profit after tax of R1.3 billion (2018: R0.6 billion)
  •  EBITDA increased to R30.6 billion (2018: R28.3 billion)
  • Increased international sales volumes
  • New build projects continue to deliver with Medupi Units 2 and 3 (each 794 MW) achieving commercial operation
  • 45 km of high-voltage transmission lines commissioned
  • Improvement in availability of new build units as a result of fixing defects
  • Generation plant and environmental performance remain a challenge with availability declining to 70% (2018: 75%)
  • Municipal arrear debt (including interest) has increased by R5.2 billion since March 2019 to R25.1 billion

Mabuza reflected on developments and milestones in Eskom’s turnaround plan since July:

 

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Hmmm…1.3 billion rands ‘profit’, then 20 billion rands loss. Great success story.

Most and above anything else we must get this clueless interventionist Gov out of the energy sector completely.

We truly need in SA a TET, a Total Energy Transition.
Eskom is a Disastrous Dying Dinosaur, that has to be taken out of its misery ASAP.

It has a debt close to R 500 Billion, as mentioned in a Bloomberg article in April. This article keeps it on R 454 B. On top of that it received a bail out of something like R 20 or R 30 Billion this year, and another R 200 B of tax payers money is planned to be thrown at this hopeless entity in the next few years.
Eskom must be closed or liquidated ASAP, the power stations have to be sold at ANY cost to 3 or 4 private energy companies that will run them until they without doubt have brought new generation capacity online, as many of the existing fleet of power stations are old and poorly maintained. Average is 36 years.

Transmission has to be run by a separate company in which Gov can still have a max 45% share. Distribution and sales can be done by the 4 energy companies and separate smaller resellers of electricity.

The whole energy sector has to be deregulated, liberalised,
privatised and greened up. We should be able to get our power from our own roof top solar and be able to sell, feedback surplus to the grid, get it from a local mini grid, so called SSEG, or buy electricity from one of the 3 or 4 big energy companies that run the large power plants and supply the national system.

In such a scenario sector regulator NERSA should become a truly independent watchdog, to guard us from collusion and price fixing together with competition authorities, and together with environmental agencies prevent environmental disasters.
Feel free to also read my comments on prices of several sources of electricity production below the article
http://www.moneyweb.co.za/news/africa/the-transition-from-fossils-to-renewables-and-its-impact-on-consumer-prices/#

The government must be closed or liquidated ASAP,

Ummm Dr, who in their right minds would ever buy our govt? Or even get it for free with the trillions of debt hanging over its head that only about 4.5 million South Africans will have to pay off??

@ Oh Yeah, Hillly My Boy, what a great opportunity we missed in May this year to get a new Gov. Only with a new, more open minded, liberal and realistic Gov, a total overhaul of the energy sector can be achieved, I am afraid so.
So my Grand Plan, at this stage might just be pie-in-the-sky daydreaming.
Just last Monday, 4 days ago, our clueless, spineless and gutless leader, addressing the workers at Medupi on the official opening of the 5th unit out of the 6 at that power station, said that Eskom was ours and would never be privatised, and that Eskom would not retrench.

Tweaked to show a profit, just for the ratings agencies. They were not born yesterday.

Totally agree. I’m suprised this wasn’t done sooner.

This is something I would have kept as quite as possible.

Now that the unions are aware of if, can you imagine which way the wage negotiations will go…

True! This ‘info’ is a double-edged sword.

Eskom enjoys a monopoly on the right to rip us off, and they disguise it as electricity generation. Then they use their government-created powers to extort the government for bailouts, and they disguise this as a profit. Eskom is in the misrepresentation, smoke-and-mirrors and false pretences business. A government-driven Ponzi-scheme in other words.

Surely if you are struggling to make debt obligations and need bailouts its because you are not profitable?

Now if some one with a set, could have used a big knife, halved the overpaid workforce, stopped the stealing and waste on the construction sites and collected the outstanding debt, they would have proudly been able to post a 20 billion profit now and a projected 40 billion with a repayment on debt.
oh …. where is that joint I was sucking on………………

Profit is what is left after all the costs are subtracted from the income – including interest paid and bond costs etc.
Positive cash flow is not profit – there seems to be some confusion, or is it more funny sums?

More funny sums . . .

1st half ‘profit’ full year R20bn loss.

Eskom had a very good chairman in Bobby Godsell but the politicians overode him in favour of the insubordination CEO at the time.

South Africa trying to fix too many things that were working fine in 1994. It can only get worse as skills and capital flee. The ultimate tragedy is that today’s elite are following the same racist policies that got the country into strife in the first.

Aaah I know why!

Eskom is offering a BLACK FRIDAY SPECIAL:

“Get TWO load-sheddings for the price of ONE! *lol*

Will it lose all that ‘profit’ on tax? If it doesn’t pay tax, will SARS sue it? SA parastatals – the joke of the SA economy.

How do they think anybody takes them seriously with the bloated, overpaid labourforce they are doing nothing about.

Cant believe a word they are saying. It is like saying socialism is going to be successful. Hahaaaa.

End of comments.

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