1/ Some take-aways from the 6 monthly financials reported this afternoon by South Africa’s national power utility Eskom
2/ Eskom’s net profit for the 6 months is R1.3 billion. But that doesn’t mean the utility is profitable. Higher winter tariffs skew the results and Eskom predicts another record loss of >R20 billion at year end. Dwarfs losses in all other SOEs
3/ Eskom’s revenue is up 10% despite electricity sale volumes declining 1.3%. Tariffs have increased double the rate of inflation. Eskom sells less electricity than 12 years ago. Classic utility death spiral. Can’t sell more so it hikes tariifs and consumers use even less
4/ Eskom costs are not yet under control. Coal costs (its largest opex by far) have increased 18%. Diesel costs up 16%. Interestingly, employee costs are down 3% (but there were some exceptional expenditure items in previous year)
5/ Municipal arrear payments are still out of control. Payment levels were 93% four years ago. Now down to 78% & accumulated arrears are R25bn. Soweto owes another R16bn. Payment levels there improved from 12 to 16%! Yes only 16%. Apartheid inherited payment boycotts persist 😳
6/ Eskom’s EBITDA margin is down. Cash interest cover ratio is down. Eskom is not generating enough cash to service principal and interest payments on its debt, amounting to R86bn this year. Massively dependent still on government support
7/ Government has provided two bailouts for Eskom this year: R23bn + R26bn. Shades the few billions required to keep SAA afloat. But government now making a point: bailouts unsustainable. SAA can fail because there is competition. Now need competition reforms in power sector
8/ Operational performance of Eskom’s power plants now down to 69%. Used to be above 90%. System is extremely tight. Further breakdown of plant will lead to more load-shedding unless new private investment in power generation is accelerated.
9/ Based on international developments and auction prices, new independent power projects could now be procurred for less than 40c/kWh in South Afrixa - a fraction of Eskom’s average electricity selling price of R1.10/kWh reported today in Eskom interim 6 month financials
