Busisiwe Mavuso, Chief Executive Officer (CEO) of Business Leadership South Africa (BLSA), says this year’s results demonstrate that operational excellence and financial discipline are achievable at Eskom when there is sustained focus and partnership among the utility, government, and the private sector.
The state-owned power utility reported a profit of R23.9 billion before tax – its first in eight years – signalling a significant financial turnaround.
Mavuso said Eskom’s return to profitability after eight years offers some welcome positive news for the power utility and the broader economy, as this was achieved not just from higher tariffs, but from a fundamental and significant improvement in the operations of the state-owned entity.
“Load shedding was damaging to Eskom for many reasons, but one obvious consequence was that it had less electricity to sell and therefore less revenue it could earn. It also meant that Eskom ran its diesel-based open-cycle gas turbines much more, which cost considerably more than its other electricity production. The significant improvement in performance of its main fleet has enabled it to not only be a more reliable supplier of electricity, but also to use the OCGTs much less.
“The reduction in load shedding, while hugely beneficial to the whole economy, has also been good for Eskom’s revenue. Profits were also substantially helped by a favourable settlement with Sars over fuel levy rebates, which accounted for half the total. Overall, Eskom managed to grow revenue by 15% while reducing the cost of primary energy by 14%. That is a significant achievement and CEO Dan Marokane and the board deserve congratulations,” Mavuso said.
Additionally, Mavuso said on the whole, this year’s results show that Eskom is getting a grip on its many performance challenges, with significant improvements in many areas of how the utility is run.
In turn, that can start to rebuild confidence from the public and other stakeholders that the SOE has a clear future as an efficient and competitive electricity producer.
“The improved financial performance also gives it a path toward being able to raise debt in the markets to support investment in capacity. Thanks to this year’s performance, that is now looking feasible, provided the municipal debt issues can be dealt with.”
