Eskom and its 2018 woes: Five major problems the power utility is facing

Eskom wants government to take on R100bn of its more than R400bn debt.
Eskom wants government to take on R100bn of its more than R400bn debt.
Image: Business Times

From debt, mismanagement and failing plants, the troubled power utility has seen its fair share of blows this year, leading to questions about the sustainability of the state-owned entity.

Here are the five biggest problems facing Eskom.

R419bn debt

The total debt for Eskom climbed by 14% to R419bn in the past six months (until the end of September). According to Business Day, the power utility’s service-cost debt doubled to R45bn in a year.

Despite only generating R26bn from operations, Eskom’s profit also dropped from R6.3bn to R671m in 2017. The power utility’s primary energy costs increased by 12% to R46bn and employee-benefit expense grew by 12% to R16.9bn.

According to its CFO, Calib Cassim, Eskom is likely to surpass the R11.2bn loss that was projected for 2018. This was all reflected in the utility’s performance results in late November.

Government bail-out

Eskom wants the state to take on R100bn of its debt.

According to Business Day, the overall debt is expected to rise to R600bn in the next three years if not attended to. Eskom can’t afford to pay interest costs from revenue earned. These costs are projected to rise to R250bn in three years.

Load-shedding

South Africans have found themselves in the dark in the past few weeks due to Eskom’s decision to bring back scheduled power cuts to ease generating capacity.

In a press briefing last week, Minister of Public Enterprises Pravin Gordhan said the age of the power stations and maintenance of the plants were the main reasons for load-shedding.

“Eskom has 47,000 megawatts of installed capacity. Its plans to cut down operations, whether as a power station or units within power stations, was supposed to be 7,500 megawatts. Instead, what we’ve had is, in addition to the 7,500, somewhere between 9,000 and 11,000 megawatts of breakdowns. We have potential for 47,000, but can only supply about 26,000.”

Gordhan said several units at the Medupi and Khusile power stations had failed to generate the expected 7,000 megawatts into the system.

The minister said he expectes no load-shedding between December 15 and January 15 as many businesses would be closed for the holidays.

The maintenance issue at plants is attributed to technical staff and contractors producing “sub-standard” repair work, according to Gordhan.

Workers

Earlier this year, Eskom workers took to the streets demanding an increase, despite the power utility initially standing firm on 0%.

The strikes disrupted the flow of power as many plants were left unattended, causing power cuts. After a stand-off with trade unions, Eskom eventually offered a three-year wage agreement – 7,5% in 2018 and 7% for 2019 and 2020.

Workers also caused damage to certain Eskom facilities, which affected supply in many areas. In August, Eskom lodged a dispute with the CCMA following vandalism that occurred during the strike.

Coal shortage

In September, Reuters reported that Eskom had less than 20 days of coal at 10 of its 15 plants. However, the power utility dismissed that coal shortage was the reason for the current load-shedding.

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