Municipalities’ Eskom debt rises to R5.6 billion
Eskom says that it is owed R5.6 billion by municipalities at end of September 2015, which is up from a figure of R5 billion reported at the end of March.
Treasury has previously threatened to withdraw funding from 59 municipalities that owed Eskom R9 billion.
These municipalities entered into discussions with Eskom on a payment arrangement. However, as many as 27 municipalities reneged on their agreements.
Last week, Treasury said it will shortly decide on whether to cut funding.
According to Eskom, at 30 September 2015, the top 20 defaulting municipalities contributed R4.3 billion or 76% of the total arrear municipal debt.
Eskom said it has signed payment agreements with 50 defaulting municipalities, including 15 of the top 20 municipalities.
“The South African Local Government and the National Treasury have played a pivotal role in encouraging municipalities to settle their debts with Eskom,” it said.
On Tuesday, the power utility published its interim financial results for the six months ended 30 September 2015.
Group Chief Executive Brian Molefe said that the company has made significant strides in key areas of the business, a move that has placed the company on a path to operational and financial stability.
Last week Eskom trumpeted 100 days without load shedding, except for a 2-hour 20 minute outage recorded on 14 September.
“Eskom is making steady progress in reducing its maintenance backlog, a move that has resulted in improved plant availability and a drop in plant breakdowns over the past three months,” it said.
Molefe was appointed to the position of permanent CEO in September, having been seconded to Eskom in April 2015, following four years as group CEO of Transnet.
On Tuesday Eskom reported that net profit for the interim period grew 22% to R11.3 billion compared to R9.3 billion previously.
Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased 9% to R24.9 billion (2014: R22.8 billion) on the back of an 8% growth in the revenue of R87.9 billion.
Highlights:
- Cash flow from operations increased 13% to R23 billion;
- Funding of R46 billion secured, liquidity position improved;
- Gearing improved to 60% from 66%;
- Debt-to-equity ratio improved to 1.50 from 1.90;
- 41,778 additional households electrified.
Concerns:
- Total operating costs increased with 7% to R71.3 billion (September 2014: R66.6 billion);
- Primary energy costs rose by 7.7% to R41 billion;
- Repairs and maintenance grew by 11.2% to R3.7 billion, due to our strategy to perform more planned maintenance.
“We are progressing well in the maintenance of our power generating plant whilst keeping the electricity system stable. Our new build programme is progressing well, with the contribution of Medupi Unit 6 boosting our capacity and creating the necessary space for maintenance,” Molefe said.
He added that: “Our turnaround plan to stabilise and improve the availability of our generating plant includes moving to full philosophy maintenance as more space becomes available, and improving efficiencies by locking down outage schedules.”
Eskom said its liquidity continues to improve, enabling the company to successfully negotiate credit facilities that make it possible to fund itself.
At 30 September 2015, Eskom had secured funding of R46 billion against a year-end target of R55 billion; R19.8 billion has been drawn down to date. The Government loan of R60 billion was converted to equity.
The shareholder provided a further R10 billion in equity, with an additional R13 billion expected by March 2016.
“Going forward, our focus will remain on minimising load shedding, ensuring adequate liquidity, filling key vacancies and improving staff morale. We are also targeting operational efficiencies and an improvement in safety,” Molefe said.
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