- State-owned power utility, Eskom says the mounting debt by the City of Tshwane (CoT) and the City of Ekurhuleni (CoE) for bulk electricity supply is posing a “significant challenge”.
According to Eskom, the City of Tshwane owes it some R4.2 billion while Ekurhuleni is currently in arrears of some R146 million.
“The accumulating debt not only strains Eskom’s financial stability but also threatens the reliability of electricity supply across the province. The impact on Eskom’s financial stability is exacerbated by the City of Tshwane’s accumulation of unpaid bills and Ekurhuleni Municipality’s late payments, and it affects the residents and businesses that rely on a stable power supply.
“If left unaddressed, the situation could lead to service interruptions, hindering economic activities. Despite continuous efforts to address the inconsistent and late payments, the debt, specifically that of the CoT, continues to grow and hinders Eskom’s ability to invest in essential infrastructure, maintenance, and the development of sustainable energy solutions,” the power utility said.
The electricity supplier urged municipalities to “prioritise settling current accounts and outstanding electricity payments”.
“Eskom remains committed to working with municipalities to find viable solutions and mitigate the potential repercussions of the mounting debt,” the power utility said.
Eskom is pursuing a multipronged strategy aimed at recovering municipal arrear debt owed, however, the problem continues to escalate. At 30 September 2023, total municipal arrear debt was R70 billion, a sharp increase from R58.5 billion in March 2023. The top 20 defaulting municipalities constituted 76.7% of total invoiced municipal arrear debt. The municipal debt relief programme is expected to improve payment levels and the settlement of current accounts by municipalities, which will lead to an improvement in Eskom’s operational cash flows over time.
To date, a total of 52 municipalities have received approval or conditional approval from National Treasury to participate in the programme, accounting for 86% of the total municipal arrear debt balance at 31 March 2023. Another 20 defaulting municipalities, accounting for a further 11%, have applied for municipal debt relief and are awaiting approval from National Treasury. No write-offs have been processed to date as the municipalities must comply with the conditions for 12 months for Eskom to process the first third of the debt write-off.
Eskom cautions that despite achieving a profit in the first six months, an after-tax loss of R23.2 billion is expected by the end of the financial year due to the continued poor generating plant performance, lack of cost-reflective tariffs, high debt service costs and non-payment by some customers, which continue to contribute to the loss-making position in the short term. However, the organisation does foresee the financial situation improving significantly in FY2025 due to a combination of Generation operational improvements, the benefits of the debt relief package and municipal debt relief programme, together with continued focus on efficiencies and addressing shortcomings in the internal control environment.
Eskom announced their interim results for 6 months ending September 2023 yesterday. The main highlights include:
- Net profit of R1.6 billion after tax.
- Favourable tariff increase of 18.65% resulted in an increase in revenue from R144.8 billion in September 2022 to R158.6 billion in September 2023 despite a 5.9% decline in sales volumes.
- Received R41 billion to date of the R78 billion Government debt relief committed for FY2024.
- Arrear municipal debt remains an area of concern and has escalated to R70 billion.
- Gross debt securities and borrowings remained high at R442.7 billion, including the subordinated Government loan of R16 billion at 30 September 2023.
- Energy availability factor (EAF) deteriorated to 55.30% resulting in frequent implementation of loadshedding.
- Renewable and short-term independent power producer (IPP) programmes produced 8.9TWh. Overall, these programmes delivered about 2.7TWh less than target, contributing to the generation capacity shortfall.
- Eskom and IPP-owned open-cycle gas turbines (OCGTs) produced 2.9TWh at a cost of R18 billion, against R15.8 billion spent in producing 2.1TWh up to September 2022.
- Distribution network performance remained stable while Transmission performance experienced a decline.
The interim financial statements and accompanying performance commentary can be accessed at https://www.eskom.co.za/investors/integrated-results/.
Author: Bryan Groenendaal
