South Africa’s Eskom Has Fourth Straight Loss as Debt Eases
(Bloomberg) -- South Africa’s state-owned power utility posted a fourth consecutive annual loss as it continued to service a mountain of debt, repaired aging plants and lost electricity revenue because of a drop in demand caused by the coronavirus pandemic.
Eskom Holdings SOC Ltd.’s loss narrowed to 18.9 billion rand ($1.31 billion) in the year through March, from 20.8 billion rand a year earlier, Chief Executive Officer Andre De Ruyter said at a briefing on Tuesday. After growing unabated for about 15 years, the utility’s gross debt fell 17% to 401.8 billion rand, thanks to a cash injection from the government. But without government support it remains unsustainable to service.
Electricity sales dropped 6.7% from the previous year because of lockdown restrictions to curb the spread of Covid-19, the company said. The utility has made progress in reducing its headcount by about 10,000 workers by 2024 from peak levels.
Eskom’s inability to provide sufficient power to meet the nation’s needs and its reliance on state bailouts to stay afloat have been a major drain on the economy. Plans to build new capacity have been riven by corruption, cost overruns and government vacillation over what form of energy to use and the role private producers should play.
The utility is being split into transmission, generation and distribution units to make it easier to manage, while De Ruyter is taking steps to cut costs and stamp out the graft that’s plagued the company for years. He’s also trying to secure cheaper financing from development finance institutions in exchange for reducing the utility’s environmental footprint by increasing the use of renewable energy.
The company is scrutinizing its strategy for the generation business, which will carry about 80% of the overall debt, De Ruyter said. “The option that we have preferred is to make modest investments -- there’s no intention to crowd out the private sector,” he said. “On the contrary, we’re engaging on a major capital expenditure program in both transmission and distribution precisely to enable private investment in generation capacity.”
On plans to move away from fossil fuels, De Ruyter said Eskom has “an obligation” to provide alternatives to communities that rely on the coal value chain. That’s as the coal industry employs more than 90,000 people, according to the Minerals Council South Africa, in a nation that has the highest unemployment rate in the world among 82 countries monitored by Bloomberg.
De Ruyter also said that while the utility doesn’t have money to build a second nuclear plant, it would be interested in operating such a facility.
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