By Shaun Jacobs.
Eskom has reported a R55 billion after-tax loss for the 2023/24 financial year, as the company continues to face declining sales and increased input costs.
However, the utility’s strong revenue growth managed to reduce its loss before tax by 26% to R25.47 billion.
This was revealed in the utility’s annual financial statements for the past financial year, which were published on 19 December after months of delays.
Eskom’s results were so delayed that the JSE felt it necessary to issue a statement to warn holders of the utility’s debt that the utility has failed to submit its financial information on time.
The exchange also said that the listing of Eskom’s debt securities and the registration of their programme memorandums is under threat of suspension and possible removal.
Eskom’s latest set of financial statements reveals the monetary impact on the utility from severe load-shedding throughout 2023 and the subsequent shift from households and businesses to alternative sources of electricity.
It must be noted that these results cover the financial year to the end of March 2024 and so do not include the impact of Eskom’s greatly improved operational performance since then.
Eskom’s results show strong revenue growth of 14% to R295.81 billion for the financial year, largely due to tariff increases. However, its primary energy costs also grew strongly, by 11% R173.73 billion.
Employee costs rose by 9% to R35.1 billion.
On a positive note, the utility’s operating profit skyrocketed by 288% to R10.2 billion. It must be noted that this excludes Eskom’s debt-servicing costs of R38.4 billion for the year among other costs.
This translated into a reduction in Eskom’s pre-tax loss by 26% to R25.47 billion from R34.6 billion in the previous financial year.
After-tax, Eskom’s loss for the year more than doubled to R55 billion from R26 billion. This resulted primarily from a once-off adjustment to derecognise a deferred tax asset of R36.6 billion in terms of IFRS Accounting Standards, the utility said.
This was prompted by the transfer of the Transmission Division to the National Transmission Company South Africa (NTCSA) on 31 March 2024 as part of a common control transaction within the group.
Despite the Eskom holding company expecting to return to a tax-paying position within the next five years, it was concluded that it is unlikely that the remaining business will generate sufficient taxable income within the next five years to fully utilise the unused assessed tax losses.
However, the derecognition has no impact on Eskom’s right to utilise assessed tax losses against future taxable income.
In March 2023, Eskom launched a comprehensive maintenance plan that targets its worst-performing power stations.
The management team devised a plan to maintain this good performance while rapidly improving the six plants whose performance was below par.
This resulted in the utility conducting intensive maintenance at the six poorly performing plants to improve the reliability of their units.
During this period, Eskom extensively used OCGTs to limit the intensity and frequency of load-shedding. However, it came at a cost.
Eskom’s diesel costs reached R34 billion, which was the main reason for its extensive financial loss in the 2024 financial year. The utility expenditure on maintenance also grew strongly by 30% to R28.7 billion to address performance shortfalls.
This marks the seventh consecutive financial year in which Eskom has posted a loss, with the utility last posting a profit in 2016v when the utility had a brief spell of improved performance.
In 2017, the utility posted a loss. However, its financial problems date back well before then. Since 2006, it has had to deal with a growing revenue shortfall, which has ballooned from R1 billion to a cumulative R535 billion.
To compensate for this shortfall, Eskom issued a significant amount of debt. Despite repeated government bailouts, the company has a total debt burden of R412 billion.
Its debt-servicing costs on that burden now exceed R38 billion a year, significantly limiting the utility’s ability to invest in new capacity and maintain its infrastructure.
However, the utility’s improved performance so far in 2024 has given Eskom’s management hope that it can also turn around its dire financial situation.
Eskom said it is saving billions by using less diesel on the back of improved performance from its coal-fired power stations. It has also seemingly brought load-shedding to an end, with South Africans not experiencing any power cuts since the end of March 2024.
From 1 April to 22 August 2024, Eskom’s diesel expenditure was R3.59 billion, 75% less than the same period last year. This translates into R10.6 billion in savings for the utility.
Eskom’s board has set a target of R16.2 billion in cost-saving measures for the 2025 financial year.