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Eskom struggling to supply electricity after disappointing tariff hikes

Eskom struggling to remain sustainable.
Eskom struggling to remain sustainable.

Eskom is still struggling with liquidity and to remain sustainable‚ and will have to demonstrate to the auditors that examine its 2017-18 financial statements that it is a going concern‚ MPs were told on Tuesday.

Executives of the utility briefed Parliament’s energy portfolio committee on the implications of the decision of the National Energy Regulator of SA (Nersa) to approve only a 5.23% tariff increase for the 2018-19 year.

"The 5.23% tariff increase will negatively impact Eskom’s operational and financial sustainability‚ going-concern status and ability to meet its debt service commitments‚" the executives said in a presentation to the committee.

In the six months to end-September Eskom made a net profit after tax of R6-billion‚ compared with R10-billion in the previous period.

Higher depreciation and net finance costs were incurred due to new build units coming online. Revenue was 2% lower at R96-billion. Earnings before interest‚ depreciation‚ tax and amortisation amounted to R30-billion‚ down from R32-billion.

Net cash from operations of R22-billion was generated‚ compared with R32-billion in the previous period‚ and liquid assets at the end of September stood at R9-billion‚ down from R30-billion.

MPs were told that 54% of Eskom’s funding requirements for the 2018 financial year had been secured. Eskom has to repay a R20bn bridging loan by August.

Regarding Nersa’s tariff decision‚ Eskom executives said the 2.3% increase in 2017-18 and the 5.23% in 2018-19 translated into an average nominal increase over two years of 3.75%. This has had adverse effects on liquidity and Eskom’s going-concern status‚ as well as its ability to continue providing electricity.

"The financial ratios by Nersa require cost reductions of almost the entire employee costs‚" they said.

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