<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
JIMMY MOYAHA: Eskom Holdings Limited, the state-owned entity responsible for our electricity supply, reported its financial results for its financial year end. We\u2019re going to be looking at the performance of the state-owned entity. It saw a profit of R30.3\u00a0billion for this particular financial year.<\/p>\n
Read: Eskom doubles profit after ending load shedding<\/p>\n
I\u2019m joined on the line by the company\u2019s group chief executive officer, Dan Marokane, to look at the performance and see what we make of it.<\/p>\n
Ntate Marokane, lovely having you on the show. Thanks so much for taking the time. Your initial thoughts around the performance of the business from a financial perspective? A stronger financial year; the second strong financial year following the previous year.<\/p>\n
How have you and the management team reflected on the year that was?<\/p>\n
DAN MAROKANE: Jimmy, thank you very much. You\u2019ll be aware that this is the second consecutive profitable year for the group, really on the back of the disciplined execution of the generation recovery plan that began in 2023.<\/p>\n
We\u2019ve always said that when we have our fleet performing at the right level, we should be in a position to compress costs from a generation perspective.<\/p>\n
And with the additional effort placed on cost savings and revenue enhancement across the business, we are pleased that we\u2019re beginning to see these financial results \u2013 R30.3\u00a0billion in profit compared to the R14.1\u00a0billion in the year prior to that, and a very good Ebitda [earnings before interest, tax depreciation and amortisation] margin of 30.63%.<\/p>\n
What we are really now going to focus on is getting the efficiencies deepened across the business as we position ourselves to deal with the headwinds that will come from the liberalisation of the electricity market itself and also the new electricity pricing policy as proposed by the minister.<\/p>\n
JIMMY MOYAHA: Now, Ntate Marokane, we took a look at that pricing policy, and I want to look at what that would perhaps mean from a revenue and a balance-sheet perspective for Eskom.<\/p>\n
ADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n
You touched on the fact that there were some challenges in meeting some of your objectives and targets, one of those being the energy availability factor; it\u2019s not yet at the 70% level, but at 65% for the previous fiscal year.<\/p>\n
That, coupled with the lower sales volumes \u2013 how do you reflect on the risk that sits within the business at the moment? You\u2019re going into a new fiscal year with a new pricing policy that could further complicate the business, and you\u2019re already selling less electricity as of the previous financial year. How is this going to affect the business\u2019s thinking going into the new year?<\/p>\n
DAN MAROKANE: Jimmy, we should understand the decline in sales within the context of the increase in generators which has been enabled by the Energy Action Plan as part of the overall reforms.<\/p>\n
This you need to see against the background of an economy that has been growing at only 1.1% or so for the past three years. Admittedly, the electricity prices over the years have contributed to this contraction as far as economic growth is concerned.<\/p>\n
What we said we were going to do was to first make sure that electricity is available by recovering the operational performance of Eskom.<\/p>\n
And the next focal point, which is also a target that both we as Eskom and government have, is to begin to move towards affordable electricity pricing.<\/p>\n
Against a backdrop of a 3% economic growth target, we are comfortable that the demand will resurge.<\/p>\n
We\u2019ve already seen this with the smelter industries, for instance, which have shed almost 10\u00a0terawatt-hours \u2013 quite a substantial volume from a sales perspective in the past year. We\u2019ve now entered into arrangements that offer them pricing that enables them to restart their operations. We should see that volume coming back.<\/p>\n
But as the industry changes we also have to adapt and find a new customer base.<\/p>\n
Households are moving towards rooftop solar, but there are new product offerings that we can start focusing on. The data centres are growing, and this has to be within the context of very transparent data-centre licensing arrangements. We see huge opportunities in this space.<\/p>\n
We see huge opportunities in the electric vehicle market from a charging perspective, and our teams are focused on really driving this.<\/p>\n
JIMMY MOYAHA: Ntate Marokane, let\u2019s take a look at something that\u2019s probably been a thorn in the balance sheet of Eskom up to this point \u2013 and that\u2019s municipal debt. At the time of reporting, we were just north of the R111\u00a0billion mark; we are now just shy of the R120\u00a0billion rand mark with the new additions, or the new billings that have been added to that.<\/p>\n
Of course, from a business perspective, you\u2019ve clearly expressed that the revenue is considered lost until such time as those funds land in the account, because Eskom would have rendered the service but not been paid for it.\u00a0That surely is not a sustainable issue from a business perspective \u2013 something that keeps you and the team up at night, I\u2019d imagine?<\/p>\n
DAN MAROKANE: It\u2019s been something that we have consistently raised as a big concern for us.<\/p>\n
ADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n
It is at the point where it\u2019s no longer an Eskom risk; this is a country risk.<\/p>\n
The inability of the municipalities to pay for basic services is something that warrants attention from over and outside Eskom itself.<\/p>\n
This is why within the Eskom Debt Restructuring Task Team the resolution of the municipal debt is central to finding a solution towards financial sustainability of the entities that will emerge out of the unbundling process as envisaged by government.<\/p>\n
I\u2019m quite happy that all role-players understand the significance of this solution and the urgency that it requires.<\/p>\n
It\u2019s been something coming for a while. Something was tried before; it didn\u2019t work.<\/p>\n
We now need to be really creative and have no sacred cows in terms of finding a solution to this.<\/p>\n
It is a serious headwind for the business, yes.<\/p>\n
JIMMY MOYAHA: Ntate Marokane, you touched on the unbundling, and I want to take a look at that in a bit more detail because we\u2019ve been getting mixed messages around it. There\u2019s been a very clear mandate provided by the president and by government that we will unbundle Eskom into three entities. There have also been conversations from within Eskom\u2019s own board that perhaps unbundling is not the most appropriate direction for the business.\u00a0Understandably here, you might still be having this as part of an ongoing conversation, but can you tell us where Eskom stands on this as we go forward?<\/p>\n
DAN MAROKANE: Jimmy, let me assist you.<\/p>\n
The Eskom board has always supported the reforms pronounced by the president. We began the process of unbundling three years, four years ago. We have brought to light the existence of the unbundled NTCSA \u2013 The National Transmission Company of South Africa, the transmission business that used to be inside Eskom.<\/p>\n
We have said that the reforms are necessary, but we\u2019ve also said that the reforms need to be executed in a manner that does not bring undue risk to the remaining entities, and in that way bring about a risk to the country as a whole.<\/p>\n
It is about the modalities of implementing the reforms themselves.<\/p>\n
Specifically, we raised the issue of the municipal debt. We said that, at the rate at which the municipal debt is increasing, left unattended it will undermine the financial sustainability of the business that remains.<\/p>\n
ADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n
As a matter of fact, we could have already unbundled the distribution business. We are ready to press the button tomorrow.<\/p>\n
The only thing that we\u2019re unable to do now is to pass the solvency and liquidity test as required for a transaction of this nature in terms of company law.<\/p>\n
So we\u2019ve given attention to the need to resolve this issue so that we can have sustainable entities that will emerge from these transactions that we envisage undertaking. This message has been consistent from the Eskom board perspective.<\/p>\n
We are also very pleased that this message is beginning to occupy centre stage in terms of the reforms anticipated. You\u2019ll have noticed by now that phase two of the Eskom Restructuring Task Team is focusing on about two of four of these key elements of sustainability \u2013 or will address the sustainability question from an Eskom unbundling perspective.<\/p>\n
JIMMY MOYAHA: Ntate Marokane, as we end our conversation, I want to take a look at some sad news from Eskom. We had confirmation that the chief financial officer, Calib Cassim, would be stepping down after more than two decades of service to the state-owned entity.<\/p>\n
Obviously, from a continuity perspective, there aren\u2019t any concerns there; the business will begin looking for an appropriate CFO. But certainly it\u2019s the end of an era for a CFO that\u2019s been with the business for quite some time. Your thoughts and your parting words to a fellow colleague?<\/p>\n
DAN MAROKANE: Calib has been a guardian for the last 24 years, the last seven or eight serving in the role of chief financial officer of the business.<\/p>\n
In fact, Calib\u2019s intention to retire early was announced last year.<\/p>\n
We indicated that he was going to reach the age of early retirement in October this year. That is around the corner now. We began the process of finding his successor, and that process is unfolding. We\u2019ll make an announcement in due course.<\/p>\n
We have, of course, said to Calib face to face that we are grateful for the commitment he has shown to the business. He has continued to show this until today, and he\u2019ll do so and be willing and available to support the transitional arrangements that are typical of a role change of this type.<\/p>\n
JIMMY MOYAHA: A second consecutive year of profitability for the national power utility, and prospects of growing that business\u2019s profitability into future financial years if we can deal with some of the long-standing challenges. It\u2019s a business that remains optimistic on how the future of the country\u2019s electricity will be managed.<\/p>\n
We\u2019ll leave the conversation on that note. Group chief executive officer Dan Marokane joined us to reflect on Eskom\u2019s performance.<\/p>\n
#Eskoms #R30.3bn #profit #rebound #faces #test<\/p>\n","protected":false},"excerpt":{"rendered":"
You can also listen to this podcast on iono.fm here. JIMMY MOYAHA: Eskom Holdings Limited,…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[3507,712,2117,20491,3718,1272],"_links":{"self":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/14961"}],"collection":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14961"}],"version-history":[{"count":0,"href":"https:\/\/stock999.top\/index.php?rest_route=\/wp\/v2\/posts\/14961\/revisions"}],"wp:attachment":[{"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14961"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14961"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stock999.top\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14961"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}