Eskom Sees Worse 2021 as Utility Reports Third Straight Loss

(Bloomberg) -- South Africa’s state-owned power utility Eskom Holdings SOC Ltd. forecast a worse 2021 after slumping to a 20.5 billion-rand ($1.3-billion) loss for the financial year through March, as the coronavirus pandemic weighs on demand.

It is the third annual loss for the indebted utility that provides most of the nation’s power and is simultaneously struggling to maintain adequate generation capacity and fix its finances. The results were “disappointing,” Chief Executive Officer Andre de Ruyter said Friday in an online presentation.

Financial results for 2021 are expected to be worse and long-term improvements will only begin to materialize after next year, according to Eskom. The utility expects to return to profitability in 2023.

Power demand was slashed during South Africa’s virus lockdown, which began on March 27. Eskom has made progress in some areas including bringing new generation online and keeping coal costs from sharply increasing during the current year, De Ruyter said.

While Eskom executives stressed the need for cost-reflective tariffs to help pay down some of the debt of 484 billion rand at the end of March, “something extraordinary” in addition to higher prices needs to be done for the company to become sustainable, Public Enterprises Minister Pravin Gordhan said in the presentation. The utility “should not be a burden on the fiscus” and the government’s initiatives are designed to curtail its support, he said.

Around 200 billion rand of green financing is potentially available, although the underlying conditions are “very complex” and depend on a number of factors including carbon credits, De Ruyter said. Eskom has sought low-carbon solutions to repurpose coal-fired stations scheduled for decommissioning and is exploring other measures in order to obtain better financing terms.

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