South Africa’s embattled power utility, announced that its operational and financial woes are expected to worsen in the current financial year, which extends until March 2024. Despite managing a modest profit of R1.6 billion for the six months ending September 2023, down from R3.8 billion during the same period in 2022, Eskom anticipates recording a substantial loss of R23.2 billion for the entire fiscal year.

The primary cause of this financial downturn is the persistent underperformance of Eskom’s power stations, resulting in unprecedented electricity outages across South Africa. The utility’s historical trend of improved financial performance during the winter months failed to offset its deep-seated problems, including high debt repayments and unpaid bills from municipalities.

Eskom’s reliance on diesel to maintain electricity supply during breakdowns further exacerbates its financial challenges. The utility earmarked R27.9 billion for diesel expenses in the year ending March 2024, but financial reports released on Wednesday suggest an overspend of R4.3 billion, bringing the projected total to R32.2 billion. This looming budget overrun is expected to prompt Eskom to seek additional financial support from the government.

The extensive use of open-cycle gas turbines (OCGTs) highlights the severity of Eskom’s struggles in 2023, marked by a staggering 280 days of blackouts, a stark contrast to the 65 days recorded in 2022. These disruptions, coupled with breakdowns at power stations, hinder Eskom’s ability to increase revenue through electricity sales. Sales volumes during the six months ending September 2023 dropped by 6% to R91.87 billion, despite a 9.5% overall revenue increase to R158.6 billion, driven by an 18.65% tariff hike from April 1.

Eskom’s financial predicament is further complicated by the escalating municipal electricity debt, reaching a staggering R70 billion by September 2023, up from R58.5 billion in March. The majority of delinquent municipalities are located in Mpumalanga and the Free State. To address this issue, the National Treasury and Eskom have initiated a debt relief scheme, with 52 municipalities receiving approval for relief by September, contingent on meeting specific conditions, including current account payments to Eskom.

The burden of debt and interest costs remains a significant obstacle for Eskom, with its debt soaring to R442.7 billion in September from R423.9 billion, largely due to currency fluctuations. In February, the government provided some relief by taking over R254 billion of Eskom’s debt, injecting R41 billion between August and December 2023.

On the leadership front, Eskom sees a semblance of stability with the appointment of a new CEO, Dan Marokane. However, the future remains uncertain as Eskom grapples with financial challenges, a reliance on emergency measures, and ongoing efforts to recover debts from municipalities. The impending departure of group chief financial officer Calib Cassim, whose contract concludes in December 2023, adds an additional layer of uncertainty to Eskom’s leadership landscape.