{"id":186399,"date":"2017-07-19T12:59:40","date_gmt":"2017-07-19T10:59:40","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=186399"},"modified":"2017-07-19T13:05:01","modified_gmt":"2017-07-19T11:05:01","slug":"eskoms-profit-plummet","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/186399\/eskoms-profit-plummet\/","title":{"rendered":"Eskom’s profit plummets"},"content":{"rendered":"

South African power utility Eskom has reported a group profit of R888 million for the 2016\/17 financial year, down from a R5.1 billion profit in the previous year.<\/p>\n

However, the power utility’s generational unit (known as the Eskom Company) made a loss of R870 million.<\/p>\n

Group revenue increased by 7.9% to R177 billion, while group ebitda increased 14.4% to R37.5 billion.<\/p>\n

Also positive however, was generation costs decreasing by 8.5% to R60 billion, while cash generated from operations increased by 23.1% to R46 billion, the group reported.<\/p>\n

The group’s results were dragged into the black primarily through its subsidiaries – specifically, a R2.14 billion profit posted by the group’s short-term insurer, Escap.<\/p>\n

Escap is a captive short-term insurance company – meaning it can only insure risks of its parent company Eskom and its subsidiaries.<\/p>\n

Escap provides cost-effective, customised short-term insurance products to the Eskom group (other than nuclear and aviation liabilities) through a combination of self-insurance and reinsurance with external insurance markets.<\/p>\n

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This is revealing, as it points to Eskom’s generating operations running at a loss. Another key figure to be tracked, is Eskom’s rising debt.<\/p>\n

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.<\/p>\n

Since 2006 – when this figure started appearing with prominence in Eskom’s reports – Eskom’s debt has rocketed from around R30.2 billion, to R320 billion in 2016.<\/p>\n

In its latest report, this figure has jumped again, climbing to R355.3 billion – R18.5 billion of which was covered as a current liability paid in the past financial year.<\/p>\n

Eskom’s rising debt has been the key concern among stakeholders, with government guarantees extending to ‘only’ R350 billion.<\/p>\n

As with our previous coverage<\/a><\/strong>, the graph below (updated with 2017 data) highlights the growing concern with Eskom’s financial state. It shows growing revenue, declining profits, and mounting debt – while other liabilities like municipal arrears also getting higher each year.<\/p>\n

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To combat these concerns, Eskom said it will focus on five key areas going forward:<\/p>\n