South Africa’s state owned electricity utility, Eskom Holdings SOC Ltd, has this week reported a surprise 4 000% improvement in net profit for the six months ended in September 2021. The utility made a R9.2 billion ($569.4 million) profit, the first such profit since 2017, suggesting that its turnaround efforts are starting to bear fruit.
Eskom still expects to incur a R9.1 billion loss when its financial year ends in March, however the loss will be way much less than the R18.9 billion reported in the 2020 financial year.
The utility’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) was R44.8 billion, up 58% due to higher revenue which was R135 billion in September 2021, compared to the same period in September 2020 at R108.7 billion. Eskom says the increase in revenue by 24.2% is due to recovery in demand and sales volumes.
The state power utility says the easing of lockdown restrictions and the return to operations of many sectors of the economy were instrumental in increasing power demand.
Commenting on the results, Eskom CEO André de Ruyter said; “I’m very pleased to say our financial results show improvements across all key profitability metrics.”
Eskom’s Chief financial officer, Calib Cassim, attributed the results to several factors including the 15.06% tariff increase. “Obviously the 15% tariff increase, plus the 8% in volume growth has come through in the numbers, together with Eskom’s cost control focus of extracting R20 billion target out of our cost base,” Cassim said.
The utility’s gross debt fell to 392 billion rand as of September 2021, down 15% from a year earlier. Eskom’s debt is expected to rise to 416 billion by March 2022 because of funding postponed from the previous year.
The utility recorded a 13.7% increase in primary energy costs at R61.8 billion by September 2021 compared to R54.3 billion in September 2020. Eskom says these costs emanate from, “volume of electricity generated from Eskom’s power stations as well as purchases from independent power producers (IPPs) and international imports required to meet electricity demand.”
Eskom’s plant availability declined to 65% by September 2021, down from 67.8% in the comparative period last year. Load shedding was severe with some 427 GWh in energy shed, slightly better than the 443 GWh recorded for the six months to September last year.
Andre de Ruyter, Eskom CEO plans to gradually pivot away from coal towards cleaner energy sources, supported by financing from wealthy nations in a deal announced at the COP26 climate summit last month.