Eskom H1 results with CEO Andre de Ruyte
Eskom made a profit of R83 million, in the six months ended September. This is compared to a R1.9 billion loss in the previous comparable period. However, Eskom expects its performance to deteriorate in the second half of the financial year, due to lower demand in the summer season. Eskom CEO, Andre de Ruyte joins CNBC Africa for more.
Mon, 14 Dec 2020 17:24:30 GMT
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AI Generated Summary
- Eskom reports a profit of 83 million rand in the first half of the financial year, marking a significant improvement from previous losses.
- CEO Andre de Ruyter emphasizes the need for cost-reflective tariffs and outlines plans to address regulatory challenges to achieve financial sustainability.
- Eskom focuses on cost-cutting measures, debt repayment commitments, contractor disputes, and maintenance backlog to enhance operational efficiency and reduce the risk of load shedding.
Eskom, South Africa's struggling state-owned power utility, has reported a profit of 83 million rand in the six months leading up to September. This marks a significant turnaround from the 1.9 billion rand loss incurred in the previous comparable period. Despite this positive development, Eskom's CEO, Andre de Ruyter, anticipates challenges in the second half of the financial year. The decreased demand during the summer season is expected to impact the company's performance adversely. In a recent interview with CNBC Africa, de Ruyter outlined the strategies and plans that Eskom is implementing to address the current challenges and work towards a sustainable future.
According to de Ruyter, Eskom's future prospects are closely tied to external factors such as government lockdown measures and demand for electricity. The severity of restrictions imposed by authorities, particularly in response to the COVID-19 pandemic, can significantly impact Eskom's sales volumes. During the initial Stage 5 lockdown, Eskom witnessed a substantial decrease in average demand by nearly 6,000 megawatts. While the current demand is only down by about 1,000 megawatts compared to the regular profile, de Ruyter acknowledges that the company's performance hinges on external factors.
One of the key challenges highlighted by de Ruyter is Eskom's pursuit of cost-reflective tariffs. The CEO emphasized that Eskom cannot continue selling electricity below the cost of production. Despite efforts to reduce internal inefficiencies and costs, Eskom struggles to recover its costs based on global benchmarks under the current tariff structure regulated by the government. To address this issue, Eskom has taken legal action against the regulator and aims to implement a more gradual increase in tariffs to achieve cost-reflectivity without causing undue economic shocks.
In addition to tariff adjustments, Eskom is focusing on cost-cutting measures to improve its financial outlook. The company has already reduced its workforce by 2,000 employees and introduced voluntary severance packages to further streamline operations. By curbing cost increases in primary energy and diesel consumption, Eskom aims to enhance its efficiency and financial sustainability. However, the CEO acknowledges that challenges persist, particularly with net debt service costs exceeding 30 billion rand annually, posing a significant hurdle to achieving sustainable profitability.
De Ruyter also addressed concerns regarding Eskom's debt repayment obligations to bondholders. While the company is committed to honoring its commitments and avoiding defaults, it relies on liquidity support from the national treasury to meet its financial obligations. Acknowledging the strain on government resources, de Ruyter highlighted the need for a sustainable solution to alleviate the burden on taxpayers and ensure Eskom's financial stability.
Furthermore, Eskom is actively pursuing claims against contractors, including disputes with companies like Stefanutti Stocks, to recover irregular payments and address issues that have adversely impacted the company. Through collaboration with the Special Investigating Unit (SIU), Eskom aims to resolve these matters and protect the interests of electricity consumers in South Africa.
Looking ahead, de Ruyter outlined Eskom's plans to address its maintenance backlog, a critical factor contributing to load shedding and operational challenges. While the company faces seasonal variations in demand, particularly during winter and summer, Eskom is prioritizing reliability maintenance to improve plant efficiency and reduce the risk of load shedding. By focusing on long-term outage management and unit repairs, Eskom aims to enhance its generation capacity and mitigate the impact of maintenance delays.
In conclusion, Eskom's CEO, Andre de Ruyter, remains focused on implementing strategic initiatives to steer the company towards sustainable profitability and operational efficiency. Despite facing challenges in the energy market and regulatory environment, Eskom is committed to addressing its financial constraints, improving cost structures, and enhancing its service delivery to meet the electricity needs of South Africa.