Eskom’s revenue to take a R3bn hit
• CFO cites lower demand for power and reduced payment by consumers who are under financial pressure
Eskom expects to take a more than R3bn hit to its revenue over the 21-day lockdown due to low demand for electricity and an anticipated lower collection rate as customers come under financial pressure, CFO Calib Cassim said on Friday.
Eskom expects to take a more than R3bn hit to its revenue over the 21-day lockdown due to low demand for electricity and an anticipated lower collection rate as customers come under financial pressure, CFO Calib Cassim said on Friday.
Lower revenue will to some extent be offset by lower costs as Eskom will not use its dieselfired, open-cycle gas turbines and has taken several units offline over the lockdown. The extent to which the power utility is able to weather the storm will depend on how long the lockdown lasts, said Cassim.
A six-week or three-month shutdown would be catastrophic for Eskom’s cash flow.
Demand for electricity has plummeted over the past week. At its lowest point, demand for electricity sunk to 12,000MW. Normal peak is between 26,000MW and 30,000MW.
Even when the economy runs at normal levels, Eskom is unable to raise sufficient revenue from sales to pay for both operational and debt servicing costs and is dependent on cash transfers from the Treasury to make ends meet. Eskom’s average monthly revenue is R15bn.
Cassim said Eskom anticipated lower sales of R500m for March and R2bn for April, assuming a 21-day lockdown. It also assumed R700m less in collections from customers over the period, adding significantly to the non-payment levels by municipalities.
“The main point is whether the lockdown is extended or not. We have not looked at the numbers of the impact that would have yet,” said Cassim.
Eskom CEO André Ruyter said in interview at the end of last week that the power utility would take the opportunity to do short-term maintenance during the period of low demand.
Several units have been taken offline due to low demand.
However, the company would not begin the promised “philosophy maintenance ”— maintenance strictly according to the specs of original equipment manufacturers — as Eskom wanted to limit the number of employees on site during the lockdown. Philosophy maintenance is a cornerstone of De Ruyter’s plans to fix Eskom, where maintenance has been neglected for 10 years in a struggle to keep the lights on and keep maintenance costs low.
Work on Kusile, Eskom’s second mega power station under construction, has been stopped over the lockdown period.
Eskom has also, since the lockdown, told wind farms that it might curtail their production as the excess energy in the grid was making it unstable. This would be done under force majeure, said Eskom, a legal clause which can be invoked when a party to an agreement is unable to meet its obligations through no fault of its own.
It undertook to extend their 20-year contracts by the equivalent number of days or hours of the curtailment.
But power purchase agreements between Eskom and independent power producers (IPPs) require that the utility pay them for the energy they have available to deliver, regardless of whether Eskom needs it. The IPPs have said they will contest the force majeure notice.
A SIX-WEEK OR THREE-MONTH SHUTDOWN WOULD BE CATASTROPHIC FOR ESKOM’S CASH FLOW
CASSIM SAID THAT ESKOM ANTICIPATED LOWER SALES OF R500M FOR MARCH AND R2BN FOR APRIL, ASSUMING A 21-DAY LOCKDOWN
THE POWER UTILITY WOULD TAKE THE OPPORTUNITY TO DO SHORT-TERM MAINTENANCE DURING THE PERIOD OF LOW DEMAND