FINANCIALLY, ESKOM IS IN A PROPER PICKLE.
In essence, Eskom will struggle to pay the interest on a R252bn debt pile partly relating to Medupi and Kusile whilst its falling credit status will make raising further funds increasingly expensive. On the basis of one financial ratio – return on assets – the company is woefully underperforming.
Return on assets is supposed to be on parity with the cost of money to Eskom. However, the utility’s CFO Tsholofelo Molefe said at Eskom’s year- end results that returns on assets was only 0.53% while the cost of raising capital was 7.65%, an outcome that was “inadequate” and would “result in a further erosion of Eskom’s financial position”.
“It is therefore imperative that the price of electricity migrates to cost- reflectivity,” said Molefe. “Eskom requires a rate of return on assets that will enable it to maintain and replace the current asset base,” she said.