Eskom expects to make a R20 billion loss – so it wants to hike fees even more
Eskom’s CFO Calib Cassim says that Eskom’s financial loss for the 2018/19 year will be even larger than initially expected – hitting R20 billion.
This is up significantly from earlier projections which put the loss at R15 billion.
According to Reuters, Eskom is also expected to ask for an even larger tariff hike to salvage revenue.
The power utility has been begging energy regulator Nersa to grant it a 15% tariff hike every year for the next three years – however, Cassim said the group will request an even bigger hike.
Eskom will request a 17.1% tariff hike for 2019/20, 15.4% for 2020/21 and 15.5% for 2021/22, Reuters reported.
This will result in a 56% hike over the whole period, compared to the 52% hike before.
The new data comes just days after Eskom announced that it concluded a R15 billion loan facility with a consortium of local and international banks.
The company is currently sitting with R420 billion of debt, which it is struggling to service through declining revenue.
Eskom said in a statement on Friday (2 February) that the facility will partly fund its capital expenditure programme, while adding that it has secured approximately 95% of the R72 billion funding requirement for the financial year.
The remaining 5% will be raised through domestic debt capital markets and other sources, it said.
A significant contributor to Eskom’s debt problems comes from municipalities which are in arrears. By last reporting, Eskom said that municipal debt came to R17 billion, with Soweto owing another R17 billion in unpaid electricity.
In KwaZulu-Natal, the power utility is offering a 50% discount on electricity abusers and those connected illegally, in a bid to lessen the blow of R5 billion that it loses each year to these crimes.
Push back against hikes
There has been significant pushback against Eskom’s proposed tariff hikes, with watchdogs, NGOs and industries saying that it should not fall on the end-user to pay for Eskom’s debt problems which are largely its own doing.
Eskom has suffered a decade of corruption and abuse, through which billions of rands were funnelled out of the company via dodgy contracts and improper business.
The mining industry has hit back the hardest, saying that were Eskom successful in its bid for higher tariffs, 150,000 mining jobs could be at risk.
According to the South African Minerals Council, electricity prices have increased by 523% for mining companies, while 18,300 jobs have been lost as a direct result of the growing costs of powering operations.
The council predicted that if the tariffs are put in place, the percentage of South African gold operations considered to be making a “marginal” profit – of 6% or less – or making a loss would increase from 71% in 2018 to 96% in 2021.
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