Business Maverick

Eskom 'on the right trajectory' but caution prevails for future stability

22 Dec 2024

An interview with Eskom’s chief financial officer, Calib Cassim.

The power utility has turned its fortunes around, as seen in the absence of load shedding for more than 250 days, and Eskom returning to profitability from 2025.

Question: There has been no load shedding for more than 250 days. Is Eskom ready to declare the permanent end of load shedding?

Answer: No. We want to go through an entire year of there being no load shedding. There are certain things to consider before saying that load shedding is behind us. We know that when the rainy season starts, especially in Mpumalanga, we have some issues with wet coal. So, we need to get through that cycle.  

There are two key stations that we expect to come back between now and March 2025. First is the second unit of Koeberg, which we expect will return online in early January 2025. Second, we want to get Kusile unit six back online by the end of March.

At that point, we would have added base-load capacity (of an additional 2,500MW). That will allow us to go into the winter season with more confidence. We have had challenges in the past, especially during the rainy season. We need to get through that season before we can say that load shedding is permanently over.

Q: So, is there a risk of load shedding coming back?

A: There might be exceptional weather conditions such as rain or snow — like we have had before. At that juncture, if we had to implement load shedding, it would be limited to stage one or two. This will happen for one or two days then we would suspend load shedding. However, there will no longer be incidents of having stage six load shedding that goes on for three weeks.

Q: At the media briefing this week (Thursday, 19 November 2024), we heard that by November 2024, municipalities owed Eskom R95-billion for electricity usage, up from R75-billion in March 2024. That’s a R20-billion increase in eight months. The the offending municipalities are mostly in Mpumalanga and the Free State.

Read more: Eskom’s recovery jeopardised by R92bn municipal debt, Parliament is told

Is Eskom losing the battle of getting municipalities to pay for electricity usage?

A: We are projecting that municipal debt will continue to rise and reach R110-billion by the end of March 2025. The debt is unsustainable. If municipal debt continues to rise, the benefit from the debt relief from the government will dissipate. (In 2023, the National Treasury pledged to bail out Eskom over three years by offering the power utility a R250-billion debt relief package).

In early January, the Minister of Electricity and Energy, Kgosientsho Ramokgopa, plans to meet with Eskom, the Treasury, and local government bodies to come up with solutions to the debt problem. The current mechanism from the Treasury for sorting out municipal debt is not working.

Q: The National Treasury and Eskom launched a scheme more than a year ago in which municipalities’ arrears electricity debt would be written off over the years, subject to certain conditions, including keeping up with current account payments to the power utility.

Read more: Municipalities hoping to access R56bn in Eskom-related debt relief must meet certain criteria

However, out of 71 municipalities that participated in the scheme, only 23 complied with current account payments. Is it safe to say that the scheme has bombed out?

A: The scheme is not working.

Q: So, from Eskom’s perspective, how can the municipal debt be remedied?

A: First, we have to look at the free basic electricity scheme and the 10 million customers who are meant to benefit from it. Only 2 million people are benefiting from the scheme. The scheme is not working. The Treasury allocates the funds to municipalities for the 50 kilowatt-hour of free basic electricity every month. Municipalities don’t pass down the benefit to consumers and keep the money. That is a big concern. We have to make sure that the utilisation of the free basic electricity relief benefits the necessary consumers.

Second, Eskom can partner with municipalities when it comes to billing systems, maintenance, and connections. There can be improvements in these areas. Similar to Eskom, we need to deal with corrupt officials (at municipality level) and root them out of the system.

Third, there has to be a rollout of smart prepaid meters. We are targeting seven million meters in the next three years. We need to do this at the municipal level as well to bring in technology that ensures that consumers pay. It can mitigate meters being tampered with.

Q: Eskom’s own debt that was more than R400-billion was seen as a big risk to the power utility’s financial sustainability. Is the municipal debt now the new risk for Eskom?

A: We are seeing more metros that are defaulting on electricity payments such as the City of Joburg and the City of Tshwane. Municipal defaults are a big concern for us and a major risk to Eskom’s recovery efforts.

Q: Eskom has discovered that some of its staff were colluding with illicit operators in fraudulent sales of prepaid electricity tokens through its online vending system. How entrenched is this problem?

A: I suspect that this is a problem that has been happening for a while. We’ve brought in forensic auditors to investigate this issue. The matter has been painstaking and it took a number of months to understand its extent and reveal it. The investigation is still ongoing.

Read more: Eskom wants an increase in electricity tariffs of up to 44% next year

Q: Eskom has asked energy regulator Nersa for standard electricity tariff increases of 36.15% next year, 11.81% in 2026/27 and 9.1% in 2027/28.When does Eskom expect Nersa’s final tariff decision?

A: I don’t think we should expect feedback from Nersa in December 2024. Nersa had its subcommittee meeting on Monday, 16 December, and the tariff issue was pulled out of the agenda. My understanding is that the subcommittee meeting will happen on Friday, 20 December. Then this subcommittee will have to recommend its decision to the Nersa board. The board might discuss the issue in January 2025 to make the decision. I don’t expect the energy regulator to make a difficult decision on tariffs during the Christmas period.

Q: Eskom is forecasting a R10-billion profit in 2025. Is Eskom out of the woods?

A: No. It is very positive that we are forecasting a profit. We need to understand why we are forecasting a profit. We are no longer spending a lot of money on diesel (to run open-cycle gas turbines that stave off higher load shedding stages). The diesel spend has been reduced by R20-billion. We are expecting to sell more electricity because we are generating more electricity. We are expecting electricity volume sales to increase by 4% during the financial year ending March 2025.

We had a difference of opinion with the SA Revenue Service (SARS) on rebates relating to diesel over a number of years. We finally reached a settlement with SARS in October 2024. SARS will end up paying us R9.2-billion by the end of March 2025. This is a once-off item that will help us to be profitable. Cassim concluded the interview with these decisive words: “Eskom is on the right trajectory. We no longer want to go back to the Treasury for bailouts. The government has put R500-billion worth of financial support into Eskom. There are many other programmes such as housing, education and health that the government needs to deal with. The government can’t keep giving money to Eskom.” DM

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