Friday, January 21

Eskom cuts debt by R82bn, reduces net loss

FIFI PETERS: The state energy company Eskom has reported a slightly smaller loss this time of around R18.9 billion. The debt of his group was reduced and now hovers around 401,000 million rand; that has dropped by R81 billion over the period.


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We have Eskom CFO Calib Cassim joining us in clearing the numbers. Calib, thank you very much for your time. I know it has been very busy for you, so we will address it directly. Your balance sheet is improving, but are you improving fast enough by your own standards?

CALIB CASSIM: Thanks, Fifi. Good evening to you and your listeners. I think a tremendous improvement in the last 12 months, but from where we are, we would like to see the debt reduce even more and clearly to go from about 67% as we have it now. I think a more sustainable level will be 50%. So that’s the medium to long term strategy from a net perspective, Fifi.

FIFI PETERS: Remind us again how you get there.

CALIB CASSIM: First of all, from our perspective as Eskom, we need to help ourselves with cost efficiency, as we reported today, savings worth R14 billion in the last 12 months. Our goal is to increase that to R20 billion in the current year. And then that will be the basis in the future. So profitability should be reflected.

Second, as stated, we believe that the price of electricity should migrate to full cost recovery so that we can cover our cost of capital.

And finally, we would have to re-engage with the government and get their support to help slow down and reduce those R400 billion (debt). Those discussions are still ongoing.

FIFI PETERS: Does that mean you’re asking for another ransom, Calib?

CALIB CASSIM: No. Right now, the government has committed and supported with more government injections in the next financial year: in fiscal year 2022 R31.7 billion of support, and in the following two years, Fifi, another R20 billion per anus. . That is basically related to (the fact that) the amount of cash that we are generating from operations is simply not enough to meet those debt service commitments, understanding that with R320 billion of our debt already guaranteed by the government , we would not. we want to be in a situation where we default and then leave the government with a R320 billion problem to deal with.

FIFI PETERS: In terms of the amount of cash you are generating, it is showing a slight decrease over the period, as is income. But what do recent changes in our energy landscape mean for your business? I am referring specifically to the government’s announcement to allow private companies to generate their own electricity at a higher threshold than the industry initially expected.

CALIB CASSIM: From a positive perspective, we all know that more capacity is urgently needed. That is why we made sure that, from an economic perspective, we would reduce the deficit levels in terms of supply, which will obviously have a direct impact on Eskom’s sales volumes in the short and medium term. We believe that this is positive since it will allow us to operate more efficient plants, cheaper plants, and that gap is covered with these one hundred megawatts.

Fifi, it’s also to be appreciated that we don’t expect this to immediately fix the gap. Then we will implement it in the next few years, but we appreciate it from Eskom’s perspective.

FIFI PETERS: Meanwhile, most South Africans just want to know about load shedding and when they can leave that headache behind. What can you say?

CALIB CASSIM: From our perspective, the most painful exercise for Eskom is when we cannot meet the supply to the country, due to the demand for safety and security, as well as just the economy in general. It’s still a challenge with a tight system and usually what we find during the summer months, when we do even more maintenance, is that it’s quite a challenge. I assume, Fifi, that the recent explosion of Unit 4 in Medupi has put quite a bit of pressure on the system, but in the coming weeks we should present a summer outlook in terms of the system for the country, and we hope to mitigate that with other stations of better performance.

FIFI PETERS: It’s okay. Caleb, thank you very much for your time, sir. We leave it there. Calib Cassim is Eskom’s CFO.

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