Eskom wage bill shock

Energy expert Chris Yelland has warned that Eskom’s “notably high” annual wage bill is a major reason for its “very serious” cash flow issues.

Speaking on Talk Radio 702, Yelland pointed out that the energy regulator’s 40,000 plus employees earned an average in excess of R600,000 per annum.

He was alluding to an article published by Beeld in 2013, whereby Eskom stated that its average salary per worker was as much as R633,000.

According to documents handed to the National Energy Regulator of South Africa, the reason for the high wage bill was due to new power stations needing more employees, along with a need to get more skilled workers and to retain them.

In its most recent results announced in December, Eskom reported a profit of R12.2 billion
for the six months that ended September 2013.

Revenue in the first half of the 2013/14 financial year increased 6.1% to R77.8 billion as
electricity tariffs rose.

The group said its employees increased to 46,624, from 44,913 in 2012.

BusinessDay reported that Eskom has asked government for an “equity injection of at least R50 billion” in order to bail the company out of an “acute” cash-flow spiral.

“We have approached the government, through the Public Enterprises Department, to see if there’s a possibility of getting an equity injection,” Eskom finance director Tsholofelo Molefe said in an interview.

“As a minimum we may require R50 billion, but that must come in addition to a tariff review.”

Commenting on the report, Yelland said: “The point is that they are paying a lot more for coal these days. They are also having to run their open cycle gas turbines which consumes vast amounts of diesel at prices many times higher than coal and they are exceeding their budgets for fuel, and their operational costs are therefore sky high.”

Yelland told the radio station that Eskom’s staffing costs were also notably high in the industry.

“The last figures I saw were that the average remuneration per employee across the whole of Eskom’s 40,000 employees is about R600,000 per annum.”

On Eskom’s request for a R50 billion bailout, Yelland said that there were three sources for funding, including rising tariffs.

BusinessDay reported that Eskom may ask Nersa to review an earlier decision to raise electricity prices 8% over the current five-year period, instead of the 16% it asked for.

Public Enterprises Department spokesman Mayihlome Tshwete told BusinessDay that government was ‘considering’ ways to help the energy supplier. “No figures are being discussed yet, neither is any financial assistance.”

Yelland, however, warned that there were limits to how much the state energy provider could raise the price of electricity, before the demand for it begins to drop, which would then lead to having to raise the prices further.

He said that the company could also raise debt, but again cautioned that there were limits to that as it depended on the strength of the company’s balance sheet.

The third source would be equity, namely a cash injection from shareholders.

“It seems like the government don’t want to come to the table with equity, but are acting like a dog in the manger, and not allowing outside shareholders to come up with the necessary equity either.”

Eskom did not respond to questions posed by BusinessTech by the time of publication.

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Eskom wage bill shock