/ 30 May 2023

Treasury: Eskom continues to make a loss despite bailout

Eskom Gettyimages 1158766660
Eskom has announced a staggering loss of R23.9 billion for the financial year ended March 2023. (Waldo Swiegers/Getty Images)

Despite a 9.61% tariff increase approved by the National Energy Regulator of South Africa (Nersa) and a R21.9 billion bailout from the treasury, Eskom is set to post a R21.2 billion loss.

This is according to Finance Minister Enoch Godongwana, who was presenting the preliminary outcomes for state-owned enterprises and government departments for the fourth quarter of 2022-23 to parliament’s standing committee on appropriations. 

Eskom’s financial woes increased because the utility spent more than it was supposed to, the treasury said. The chief expense was diesel, which was used to limit load-shedding stages.

“Eskom’s debt stock swelled to R439 billion — about a 10% increase over the year — due to the weakening rand and borrowing activities. It earned less revenue than anticipated and spent more, especially on diesel [R21.36 billion], which was more than double the previous financial year,” Godongwana said.

Eskom has been trying to recoup its money owed to it from municipalities and through the help of Nersa’s tariff increases, which would help it reduce its debt.

The embattled utility is looking to get back more than R350 billion with the tariff hike. This comes at a time when Eskom has plunged the country into stage six rolling power cuts caused in part by continued breakdowns at its stations.

In March, Eskom said only a few municipalities had entered into active agreements with it, despite developing a debt management strategy.  

At the same time, Deputy President Paul Mashatile described municipal debt as a crisis that was worsening the power utility’s financial state.  

“As of the end of December 2022, municipalities owe Eskom R56.3 billion, and the debt is rising. It is clear that we need a debt-relief strategy that will acknowledge the inherent risk of unviable municipalities,” Mashatile said in parliament.

Bail out?

In his February budget speech, Godongwana gave the utility a R254 billion debt bailout for the next three years. One of the conditions is that Eskom will not be allowed to incur further debt for new electricity generation in this period. 

The utility plans to have its first gas to power project up by 2028 following consultation with both Nersa and Minister of Mineral Resources and Energy Gwede Mantashe to build a new combined-cycle gas power station in Richards Bay.

Nersa said in a statement last week that it had agreed to Mantashe’s draft section 34 determination that the power utility procure 344.5 megawatts of new generation capacity and battery storage.

Speaking to the Mail & Guardian, the utility said it is in discussions with the treasury to renegotiate the bailout terms to enable it to fund its projects.

“Once Eskom gets the go-ahead in terms of the Nersa process for the gas plant, as well as the treasury’s support, an appropriate funding model will be developed as well as a detailed business case and an “appropriate” procurement process will be launched,” the utility said.

Mandisa Nyathi is a climate reporting fellow, funded by the Open Society Foundation for South Africa.