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Eskom sees R20bn FY loss, seeks higher tariff hikes

Eskom CFO Calib Cassim says the larger forecast loss would come as a result of higher-than-anticipated power plant maintenance costs.
Eskom CFO, Calib Cassim predicts the utility will make a loss of R20bn in the 2018/19 financial year. Picture:

South Africa‘s struggling power firm Eskom expects to make a wider R20 billion ($1.5 billion) loss in the current financial year and wants steeper tariff hikes than it previously sought, its chief financial officer said on Monday.

The chief executive also said the government should consider injecting extra capital into state-owned Eskom to help it cope with what he said were low electricity tariffs.

Eskom, which previously forecast a R15 billion loss in the financial year ending in March, is vital to South Africa‘s economy because it supplies more than 90% of its power but is drowning in around R420 billion of debt.

Read: SA should consider capitalising Eskom again – CEO

South African President Cyril Ramaphosa is trying to turn around the ailing company and has said he will announce a plan to shore up its finances in the coming weeks.

Chief Executive Officer Phakamani Hadebe told a mining conference in Cape Town the government should consider splitting up the utility, using the term “functionally unbundling”. He also said the government should recapitalise the company.

Read: Cost to fix Medupi, Kusile balloons to R8bn

Chief Financial Officer Calib Cassim said in Johannesburg the larger forecast loss would be due to higher-than-anticipated power plant maintenance costs and increased use of diesel and gas, which is typically more costly than coal for generation.

Cassim said Eskom was now requesting electricity tariff hikes of 17.1% in 2019/20, 15.4% in 2020/21 and 15.5 percent in 2021/22, steeper than a previous application for increases of 15.0% in each of those three years.

Eskom said the new request was based on changes to its sales forecasts and production plans, arguing that a significant amount of time had elapsed since it made its initial request.

Read: Mines will bleed jobs if Eskom gets its 15% increase

South Africa‘s energy regulator is expected to make a decision on Eskom’s tariff request in March this year.

“We need Eskom to be sustainable to supply electricity,” Cassim told a public hearing on the tariff increases.

“We are using one credit card to pay for another,” he said, saying Eskom was funding debt servicing with further borrowing.

If granted the revised tariff hikes, Eskom would still only turn a profit in 2022, Cassim said, showing the challenge facing the firm. 

Also read: Corruption Watch files Eskom board delinquency papers

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…the higher future tariffs, the quicker my installed Heat-Pump (for the geyser) pays itself off!

Why don’t the people in suburbs equalise the situation by creating their own illegal connections? Surely their votes are just as important as those in the townships for Eskom to not bother about them as well. A bit like roads, as more and more drivers realise that if the rules of the roads don’t apply to taxis why should they apply to me.

Sir, please show me the tree where money grows. You people live in the clouds and have no clue.

Yes…”these people” live in a world all of their own….where money grows on trees, wealth can be distributed , infrastructure looks after it self,corruption/state capture is not wrong but a privilege ….pipe dreams of the ruling elite

Financing incompetence and corruption throughout the ANC led goverment.
Why is a tax revolt then so outrageous?

Surely as the CFO, he would / should have studied basic economics and understand the concept of Price Elasticity. The fact that this basic economic reality has not registered, simply confirms many of the expert commentators that this Board is woefully unqualified for the job of turning Escom around.

I’m with EsKam on this one. I fully support a 15% per annum tariff increase for the next three years, and indeed for the ten years thereafter. How else can EsKam continue to pay their staff well above inflation increases, tax free bonuses,and performance and Xmas bonuses? How else can E-sKam retain the status of being 66% overstaffed? They also need lots of cash to throw at their friends’ companies who supply EsKam with all manner of goods, many of which are overpriced.

End of comments.

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