Power utility Eskom this week recorded a net loss after tax of R20.7 billion in the year ended March, up from a previous loss of R2.3 billion.\n\n\n\nMeanwhile Eskom\u2019s top executives still walked away with multi-million rand salaries and several golden handshakes. Exiting chief executive Phakamani Hadebe, who will step down from the company at the end of July 2019, will receive a final paycheque of R8.6 million for one meagre year on the job. Chief financial officer Calib Cassim gets R3.24 million for trying to understand wha the hell is going on with the books. The other 13 clowns making up Eskom\u2019s group executive received a payout of R44 million.\n\n\n\nAll of these shenanigans were revealed at the release of the utility\u2019s 2018\/2019 integrated annual results at its Megawatt Park offices in Johannesburg. The board of the utility led by Jabu Mabuza said while the results were expected, they are \u201cunfavourable\u201d (no shit Sherlock - Ed.).\n\n\n\nThe board chair said the results come at a tumultuous time for the country and at a time the utility faces a R440 billion debt.\n\n\n\nOutgoing Group Chief Executive Officer (GCEO) Phakamani Hadebe said the last 18 months as head of the utility have been challenging.\n\n\n\nRemarking on the results, he said: \u201cWe were unfortunately oblivious to underlying factors including declining maintenance spend over years that was faced by power stations.\u201d\n\n\n\nHadebe said the rate of increasing cost has always been ahead of revenue. For example, between 2010 and 2018 there have only been four instances where Eskom has been able to generate enough income or earnings to service its debt.\n\n\n\n\u201cThat happened due to high tariff increases. It also happened when government recapitalised [the utility],\u201d said Hadebe.\n\n\n\nEskom, he said, is working on cost containment measures, with employee benefit costs being contained and head count reduced.\n\n\n\nPrimary energy costs (including coal, liquid fuels and Independent Power Producers) increased to R99.5 billion (March 2018: R85.2 billion). The usage of open-cycle gas turbines (OCGTs), Eskom and independent power producers (IPPs), increased substantially driven by poor plant performance and supply constraints at a cost of R6.5 billion.\n\n\n\nExpenditure on renewable IPPs increased to R22.2 billion for the year from a previous R19 billion primarily due to the commissioning of new renewable IPPs during the year.\n\n\n\nRevenue challenges\n\n\n\nEskom\u2019s revenue was negatively impacted by non-payment by municipalities as well as tariffs that are not cost reflective. \n\n\n\n\u201cWith declining revenue Eskom should receive cost reflective tariffs in order for it to service debt. The appropriate price should be 120 cents per kilowatt hour but what we\u2019re being paid now is 90 cents per kilowatt hour,\u201d he said, adding that other challenges are of the utility\u2019s own making.\n\n\n\n\u201cIn the past five years, the sales volumes annually have decreased by about 1% equating to about R2 billion cut in revenue. During the year under review the sales volume dropped by 1.8%. Costs of Eskom has been rising, revenue decreasing and the bottom line has been decreasing. \n\n\n\n\u201cWe are now facing a death spiral,\u201d said Hadebe.\n\n\n\nNon-payment by municipalities and Soweto\n\n\n\nAlso compounding the challenges at the utility was the non-payment of services by Eskom to municipalities, which Hadebe said is of concern.\n\n\n\n\u201cNon-payment by municipalities has been a cause for concern, this has increased from R13.5 billion and by the end of the year it was R19 billion. Now it\u2019s at R22 billion. The speed with which its moving is of concern,\u201d said the outgoing GCEO who will be leaving the utility at the end of July 2019.\n\n\n\nEskom is in talks with Ministers to find a solution to the matter.\n\n\n\nThe power utility also expressed concern at residential arrear debt. In comparison to municipal arrear debt, which covers only a few hundred municipal customers, defaulting small power user (SPU) customers, particularly in Soweto, comprise tens of thousands of residential customers, making them much more difficult to manage and to collect arrear debt.\n\n\n\nTotal invoiced Soweto SPU debt has increased to R13.6 billion (including interest) at year end from R12.4 billion in March 2018 of which only R795 million is deemed collectable.\n\n\n\nMeanwhile, lifestyle audits at the utility are almost complete and the utility has held over 1000 disciplinary hearings of which 20% of these have resulted in employee exits.\n\n\n\nDebt position and cost containment\n\n\n\nHadebe also spoke of the improved financial oversight at the utility.\n\n\n\n\u201cThe debt position of Eskom is such that there is a need to optimise the whole balance sheet to deal with the debt issues, if you\u2019re looking at the numbers, our earnings or EBDITA are sitting at R32 billion and debt servicing costs amounts to R70 billion. The amount we are generating is not sufficient to even pay the interest, so we are like an individual who borrows money to pay interest in the credit card, that has to change.\u201d\n\n\n\nThe utility\u2019s turnaround strategy also speaks to cost containment with Eskom having committed itself to duct costs by R33 billion in 2023\/24. In 2019\/2020 set itself a target of R6 billion and by the end of the first quarter of this financial year, it has saved R 3.4 billion.\n\n\n\nCommenting on government appropriations, Hadebe said government through a special appropriation will provide Eskom with R26 billion this year and a further R33 billion.\n\n\n\n\u201cThere are still other discussions that are ongoing, this ensures that Eskom maintains the status as a going concern and that we are not trading recklessly.\u201d\n\n\n\nOn this issue, the utility\u2019s Chief Financial Officer Calib Cassim said the utility has a going concern status given the support obtained from government.\n\n\n\n\u201cWe have a going concern with the support of government of the next 12 to 18 months, it\u2019s not the end solution, it\u2019s the journey we\u2019ve just begun, it allows us to keep operating over the next 12 months to keep the lights on and to ensure we have time to engage with government on the sustainable solution from a financial perspective,\u201d said Cassim.