Eskom is talking to government to get more money

Eskom CEO Phakamani Hadebe says the power utility is in talks with the government, trying to find a way to get more money to fight the current power crisis, as both its expected tariff hike and government bailout numbers fell short.

Speaking to the SABC, Hadebe laid out Eskom’s financial woes in simple terms.

He said that Eskom generates about R180 billion in revenue in a year, while operation costs amount to R140 billion – leaving R40 billion in net revenue.

However, this is before debt and tax demands, which cost “R50 billion or so,” putting the group at a deficit. “We are borrowing money to service the debt,” Hadebe said.

“That’s why we are in discussions with government – because as long as we do not have the room to service the debt from our own operations, that debt will continue to be an issue.”

Splitting Eskom is also not a quick fix, he said.

Structurally, Hadebe said that Eskom has to reduce its costs, and is doing so through a reduction in both capex and opex, while targeting other reductions of R20 billion over the next three years.

But the group’s problems have been exacerbated by the shortfall from the Nersa grant – which amounts to R150 billion over the next three years – as well as lower than expected government financing.

According to the CEO, Eskom wanted approximately R100 billion from government, but was granted only R69 billion.

“That’s why we are in talks with government – because we aren’t just dealing with income statements and operations, there are real balance sheet issues that need to be addressed,” he said.

Hadebe said that, financially, Eskom could be self-sufficient within three to four years – if Eskom and the government can reach consensus on how to deal with these issues.

Operationally, to resolve the issues with various power stations to bring all operations into a “better position”, the CEO said it would take 12 to 24 months.