The one graph that shows how big Eskom’s financial problems are

Ahead of Eskom’s financial statements for the 2017 financial year being released, we look back at the power utility’s financial performance over the past 15 years.

Eskom has come under fire in the past few years for mixed messages about its financial health.

The board and management team on several occasions have moved to assure investors and stakeholders that its

However, as soon as it comes time to hike prices, the same teams are quick to press how constrained its books are, and often throw in a few threats of a return to the dreaded load-shedding if it does not get its way.

This past weekend, the Sunday Times revealed that the financial situation at Eskom was far worse than it lets off, saying that the group was down to its last R20 billion, and only had enough money to keep running for the next three months.

Eskom has become heavily reliant on government funding, with government having extended its guarantees for the group in 2011 by R174 billion to a total of R350 billion – all in support of Eskom’s capital expansion programme.

This is the largest guarantee liability on Treasury’s books, and bigger than all other SOE guarantees combined.

The graphs below show how Eskom has performed over the past 15 years. All data has been sourced from Eskom’s annual report.

Revenue and Profit

Expenses include primary energy costs, employee benefits, depreciation and amortization, impairment losses and other operating expenses.

While Eskom has shown strong revenue growth over the past 15 years, a profit graph for the same period shows precisely how volatile things have been.

Notably, analysts and energy experts have pointed out that the power utility’s revenue growth is not as a result of increased sales (as users have been actively encouraged not to use too much power), but has been ‘artificially’ bolstered by fee hikes.

So on paper, a 10% growth in revenue looks quite optimistic – but when you consider that the average price per kilo-Watt hour increased by 12% over the same period, it speaks to some deeper issues.

Tariffs increased from around 15 cents per kWh in 2002, to about 76 cents per kWh in 2016.

So while Eskom needs to hike prices to make up revenue to cover operating costs, expansion and to pay off its loans – consumers and municipalities as a result, struggle to make payments.

This has been a prominent issue in the past few years in particular, as money owed to Eskom hit so high that the group had to start cutting areas off. One of the biggest liabilities is Soweto, where over 180,000 customers have amassed R4.7 billion in unpaid electricity bills.

The graph below outlines the rise in outstanding municipal debt (m debt) and debt from Soweto (S debt). Money owed to Eskom climbed from around R1.2 billion in 2012, to R11.3 billion in 2016.

Debt securities and borrowings

Every year Eskom reports its current (short term) and non-current (long term) debt liabilities, including debt securities and borrowings. This represents various debt instruments the group has taken on, which may mature in any given year.

The graph below shows how this value has changed between 2005 and 2016.

Alone, each of these graphs tells a separate story at Eskom – but put together, they give you the big picture:

Revenue increases, as a result of tariff hikes, do enough to cover operating costs and yield a small profit. But while these costs help the books balance on a continuing basis, each year the non-current (long-term) debt keeps accumulating.

Eskom is expected to release its 2016/17 results later on Wednesday morning.

Read: We’re not broke – Eskom

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The one graph that shows how big Eskom’s financial problems are