9 power takeaways about utility

Eskom’s 2017-18 interim financial results follow its recent liquidity crisis, Moody’s downgrading its credit rating and concerns by banks, financial institutions and lenders around its “going concern” status.

Nine key points:

1. While there’s room for improvement, it is generating, transmitting and distributing electricity, maintenance is being done, and key operating performance metrics are positive.

2. Eskom isn’t financially sustainable, with net cash generated unable to service repayments.

3. Sales revenue is declining, with price increases offset by declining sales volumes. Operating costs are stable, while net finance costs increased 53%, resulting in net profit after tax dropping 34%.

4. Delayed revenue clawbacks via the regulatory clearing account mechanism – with Nersa allowing significantly lower-than-expected price increases – has resulted in the liquidity crisis.

5. With the appointment of a credible chair, board and acting CEO; R20 billion of bridging finance is expected to be available to meet its February debt-servicing needs.

6. Its financials for the second half of the financial year traditionally worsens significantly, with lower sales revenue and higher maintenance costs. Thus a net loss is expected 2017-18.

7. Eskom is not in an environmentally sustainable position, with a few of its coal-fired power stations operating outside SA’s environmental compliance limits.

8. There’s no apparent progress in concluding power purchase agreements with independent power producers.

9. Its ambitions to build a new nuclear fleet appear to be over. The CFO contradicted ex-CEO Brian Molefe’s position that the nuclear build could be funded on Eskom’s balance sheet.

Yelland is investigative editor at EE Publishers