Eskom forecasts another multibillion-rand annual loss, expects to blow its diesel budget

Eskom’s operational and financial performance are set to worsen further during its latest financial year, which runs until March 2024, with the power utility still being in a lossmaking position while overspending on its diesel budget to momentarily keep the lights on. 

Eskom expects to record another financial loss, of R23.2-billion, during the 12 months ending March 2024 mainly due to the poor performance of its power stations, which have subjected South Africa to record electricity outages.

On Wednesday, Eskom unveiled its financial results for the six months ending September 2023, a period in which the power utility managed to eke out a profit of R1.6-billion (though down from a profit of R3.8-billion around the same time in 2022).

Historically, Eskom’s financial performance is much better during the six months ending September, which fall in the winter months, as it sees an increase in electricity demand, translating into higher revenue from electricity sales. 

However, Eskom’s entrenched problems such as high debt repayments and municipalities not paying their electricity bills always push the power utility to record a loss by the end of its financial year. Eskom will extend its money-losing streak in 2024 as during its 2023 financial year, it posted a financial loss of R23.9-billion, which was the largest in its 100-year operational history. 

Read more in Daily Maverick: Eskom posts record R23.9bn financial loss 

Another factor that inhibits Eskom from being profitable is the money it spends on diesel to stave off higher stages of blackouts when its coal-fired power plants break down. Eskom burns diesel to run its open-cycle gas turbines (OCGTs), an emergency generation fleet that is intended only for dire emergencies or use during peak demand periods.

Eskom had set aside a budget of about R27.9-billion to spend on diesel during the year ending March 2024. In its financial result documents released on Wednesday, Eskom forecast it would spend R32.2-billion on diesel — implying that it will spend R4.3-billion more than it initially budgeted. This would create a situation in which Eskom puts pressure on the government for financial support to help the power utility secure more money to fund the diesel budget overrun.

Eskom said its reliance on OCGTs and budget overruns on diesel were expected to continue until the performance of its power plants and SA’s electricity generation capacity improved. 

Eskom had to rely on OCGTs because 2023 is shaping up to be the worst year for power disruptions. There have been more than 280 days of blackouts in 2023, which is substantially worse than the 65 days recorded in 2022.

Breakdowns at Eskom power stations and not generating more electricity inhibit the power utility from making more money from electricity sales. Underscoring this is that during the six months ending September 2023, Eskom saw its sales volumes drop by 6% to R91.87-billion. However, Eskom’s overall revenue grew by 9.5% to reach R158.6-billion due to the electricity tariff increasing by 18.65% from 1 April for consumers who are directly supplied with electricity by the utility. 

Municipal electricity debt and Eskom’s debt