South Africa’s Beleaguered Power Utility Set to Post Record Loss
(Bloomberg) -- Eskom Holdings SOC Ltd., which supplies about 95% of South Africa’s power and is reliant on government bailouts to remain solvent, is set to announce its second consecutive multi-billion rand annual loss on Tuesday. The big question is: How many billions?
The state-owned utility forecast in January that its loss would widen to about 20 billion rand ($1.4 billion) in the year through March, from 2.3 billion rand the year before. But Anton Eberhard, who sits on a government team that’s advising on a rescue plan for Eskom, told a conference in Lisbon last month the shortfall would be at least 25 billion rand.
Either way, the loss would be a record for a state company, eclipsing the 14.6 billion rand state oil and gas company PetroSA Ltd. burnt through in the year through March 2015 after a massive asset writedown. The utility’s precarious financial state has now become a national problem, with the government giving it a 128-billion-rand bailout over the next three fiscal years to keep operating.
Eskom has been struggling to produce enough power to meet demand from its aging coal-fired plants, and two new ones currently under construction are running years behind schedule and way over budget. The utility isn’t generating enough cash to service both its interest and debt repayments, despite having secured tariff increases of more than 500% since 2007, according to Eberhard, a professor at the University of Cape Town.
The release of the results may coincide with the announcement of a temporary replacement for outgoing Chief Executive Officer Phakamani Hadebe, who leaves at the end of the month. The utility may also get a new chief restructuring officer, who will help reorganize its debt and oversee the process of splitting it into generation, transmission and distribution units.
Eskom revealed in May that it owed 440 billion-rand at the end of March, 273 billion rand of which was government-guaranteed.
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