JOHANNESBURG – South Africa’s struggling power firm Eskom expects to make a wider 20 billion rand ($1.5 billion) loss in the current financial year and wants steeper tariff hikes than it previously sought, its chief financial officer said on Monday
Eskom is vital to the health of Africa’s most industrialised economy as it supplies more than 90 percent of its power, but it is drowning in around 420 billion rand of debt after a decade of steep decline.
South African President Cyril Ramaphosa is trying to turn around the ailing company and has pledged to announce a plan to shore up its finances in the coming weeks.
Eskom had earlier forecast a loss of 15 billion rand in the 2018/19 financial year which ends in March.
Eskom CFO Calib Cassim said the larger forecast loss would come as a result of higher-than-anticipated power plant maintenance costs and increased use of diesel and gas generation, which is typically more costly than coal generation.
Cassim said Eskom was now requesting steeper electricity tariff hikes of 17.1 percent in 2019/20, 15.4 percent in 2020/21 and 15.5 percent in 2021/22.
The new request compares with an earlier application for increases of 15.0 percent in each of those three years.
Eskom said the new request was based on changes to its sales forecasts and production plans, arguing that a significant amount of time had elapsed since it made its initial request.
South Africa’s energy regulator is expected to make a decision on Eskom’s tariff request in March this year.
“We need Eskom to be sustainable to supply electricity,” Cassim told a public hearing on the tariff increases.
“We are using one credit card to pay for another,” he added, referring to the fact that Eskom currently funds its debt-service costs by further borrowing.
If granted the tariff hikes, Eskom would only turn a profit in 2022, Cassim said, reflecting the gravity of the company’s financial position.
($1 = 13.3404 rand) (Reuters)