South Africa\u2019s Eskom Holdings SOC Ltd. is headed for another full-year a loss as fundamental problems remain even after making a profit of R83 million ($5.5 million) in the first half of its fiscal year.<\/p>\n
The improvement in net income for the six months through September follows a loss of R1.9 billion a year earlier, the company said Monday in a statement on its website.<\/p>\n
The utility forecast an annual loss of R22 billion that will mark the fourth straight year of being unprofitable.<\/p>\n
\u201cSignificant financial challenges remain, predominantly related to tariffs not being cost-reflective, coupled with an unsustainably high debt burden,\u201d it said.<\/p>\n
Electricity sales declined by an unprecedented 10.3% as lockdown measures designed to control the spread of the coronavirus pandemic dented demand.<\/p>\n
The loss of sales exacerbates an existing downward trend for the monopoly that provides almost all of South Africa\u2019s power and adds another obstacle to its already troubled finances.<\/p>\n
Timelines for a turnaround plan that will split the business into a transmission, generation and distribution businesses have been extended.<\/p>\n
Systemic risk<\/strong><\/p>\n Debt securities and borrowings were reduced by R20 billion to R464 billion, in part due to the strengthening of the rand since March.<\/p>\n As about 66% of that is guaranteed by the South African government, \u201cEskom\u2019s level of debt is a systemic risk to the fiscus and the country as a whole,\u201d the company said. It expects to raise funding of about 40.7 billion rand by the end of March.<\/p>\n \u201cIn order to improve our financial position in the longer term, we require a considerable reduction in the debt profile or a sizable increase in cash flows through cost-reflective tariffs,\u201d Eskom said.<\/p>\n The government, labour unions and business groups last week endorsed a pact to find ways of reducing the debt.<\/p>\n Operational performance is slowly improving, Eskom said. Still, it was unable to meet demand due to ill-maintained generation units that forced the utility to implement power cuts for 19 days from July through September.<\/p>\n The company this weekend had rotational blackouts, known locally as load-shedding, for the first time since September.<\/p>\n
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