Eskom needs R1 billion a week from government to keep the lights on in 2021
- Eskom needs government support of R1 billion a week – or some R6 million an hour – to remain operationally stable in 2021.
- This was revealed during a presentation to Parliament, where the utility warned of a challenging year ahead due a drop in electricity sales because of Covid-19.
- In the 2019/2020 financial year, Eskom spent R7.5 billion on diesel-generated power to avoid load shedding, but still ended up rationing power for 46 days.
- Unless Eskom can successfully rollout its maintenance program and replace capacity generated by retiring power plants, load shedding is likely to persist.
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Eskom, will require government funding of approximately R1 billion per week – the equivalent of R6 million every hour of the day – to remain both financially and operationally stable in 2021. Without the cash, it will not be able to service its “unsustainable debt burden” of R480 billion.
That state of affairs was laid before Parliament’s Standing Committee on Public Accounts (SCOPA) on Wednesday morning. A presentation, recapping the utility’s dismal 2020 financial results and ambitious recovery plan, showed slight improvements during lockdown, but that results in 2021 are expected to be worse than the year before.
In 2020, Eskom managed to normalise its coal stock, bring the troubled Kusile Unit 2 online, and improved debt collection from defaulting municipalities. This was accomplished with government’s help – to the tune of R49 billion in bailouts.
But continued financial losses, delayed maintenance, and unplanned plant breakdowns led to 46 days of load shedding during the 2020 financial year. This, despite demand decreasing by between 1,360 MW and 5,680 MW – or roughly 10% of Eskom’s total generation capacity – during lockdown Alert Levels 3 to 5, respectively.
Eskom spent a further R7.5 billion on diesel-generated power to support the grid during times of immense strain. This is expected to be reduced by 30% in 2021, but only if the utility’s maintenance schedule is upheld and additional capacity is created to replace end-of-life power stations.
The utility predicts that its sales for the 2020/2021 financial year will drop even further, due to the Covid-19 pandemic. In 2019/2020, Eskom’s local sales dropped by 2.8%.
“Overall, sales volumes for 2021 are expected to be around 7% lower than 2020,” it told SCOPA.
While Eskom hopes to be profitable from 2023 onwards, cost savings of R62 billion and government equity support are not enough to get it there, it says. For this to happen, Eskom needs to slash its debt in half, create an operating cash balance of R30 billion, and almost double its ebitda (earnings before interest, taxes, depreciation, and amortisation) margin.
In the meantime, the utility will still need to rely on very, very large government bailouts to ensure that its remains operationally viable and staves off load shedding.
“On average, Eskom requires government support of about R1 billion per week in 2021,” Eskom told Parliament.
“We regret the burden that this places on the fiscus, particularly in the current economic climate.”
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