Eskom plunges into a R2.3-billion loss

Eskom has reported a full-year loss as sales of power in South Africa fell and as the utility’s debt measures worsened.

The electricity producer that generates about 90% of South Africa’s power reported a loss after tax of R2.3-billion for the year ended 31 March from a profit of about R900-million 12 months earlier, the Johannesburg-based company said in a presentation on Monday.

Sales declined 0.9%, while its gearing ratio, which measures debt relative to equity, dropped to 72% from 68%, it said.

Eskom is under pressure to improve its financial situation as it faces declining demand for electricity amid tepid economic growth. The business has been at the centre of scandals involving the financing of transactions and awarding of contracts to firms linked to the Gupta family, who are alleged to have used their connections with former President Jacob Zuma to their benefit. Zuma and the Guptas deny any wrongdoing.

“Eskom continues to face significant financial and liquidity challenges,” the company said. This is due to the “high debt burden, low sales growth and increased finance costs. The auditors raised uncertainty that may cast significant doubt on the group’s ability to continue as a going concern.”

CEO Phakamani Hadebe, who started earlier this year, has pledged to improve governance as the first step in stabilising the business.

Pay negotiations with labour that started two months ago resulted in protests and power cuts after the utility said it couldn’t offer an increase to workers. Eskom backed down and has most recently tabled a three-year deal with raises of about 7% annually, compared to the current inflation rate of 4.6%.

Eskom depends on government support to service its R368-billion of debt. It has raised 22% of the funds it requires this year, the company said.  — Reported by Paul Burkhardt, (c) 2018 Bloomberg LP