Why Eskom is a Basket Case?

Imagine that one has a net income of R10,000 per month but owes the bank interest of R15,000  per month on loans of R.5m. Despite this disastrous financial position one nevertheless decides to increase the children’s pocket money by 20% whilst simultaneously taking unpaid leave amounting to 20 days. To prevent one’s family from starving, one then approaches one’s retired parents for a stipend of R5,000 per month. This will keep the wolf from the door but unless drastic cuts are made to the expenses, reductions made in the number of free-loading married children, and boosting one’s income, one will have to approach one’s aging parents on a biannual, if not annual, basis for increases in one’s allowance.

That is the quagmire in which Eskom is mired.

Main picture:  Eskom plant at full production

In point form, these of the salient financial factors which have coagulated to this insipid mess.

  • Loss for year ended March 2019 was R21b
  • Spent R6.5b on diesel for the open-cycle gas turbines (OCGT) to supplement the generating capacity of the coal-fired power stations
  • The diesel spent the previous year was R.5b
  • Energy availability factor (EAF – the amount of time stations are able to generate electricity) of 70%, down from 78% the previous year.
  • The performance of the coal-fired stations was hardest hit, declining to 67% EAF in the period, compared with 75% the previous year.
  • The utility ran out of coal at about 10 of its power stations, where stockpiles dropped below the operational requirement of 20 days’ worth.
  • The amount owed by non-paying electricity users increased to R20-billion in the period
  • The cash that Eskom generated from operations is insufficient to pay the interest on our debt
  • Eskom generated R33-billion cash from the sale of electricity in 2018, down from R38-billion the previous year.
  • Eskom’s outstanding debt rose to R441-billion in the year, up from R389-billion.
  • The utility paid R69-billion in debt servicing costs in the year, up from R44-billion.
  • The company trimmed 1,963 posts, mainly through attrition, leaving it with 46,665 workers
  • Despite this, the employee benefits bill still rose 12.9% after it agreed to increase salaries and pay bonuses.
  • The required staff complement is only 32,000 employees

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