Loss before tax for the 2024 financial year improves by R9 billion to R25.5 billion; NTCSA separation triggers once-off accounting adjustment leading to loss after tax of R55 billion; profit forecast for the 2025 financial year due to improved performance.

• FY2024 (1 April 2023 to 31 March 2024) was exceptionally challenging, operationally and financially, however, the net loss before tax improved to R25.5 billion (FY2023: R34.6 billion) and earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 26% to R43.4 billion (FY2023: R34.6 billion). As Eskom executed significantly increased planned maintenance to operationalise the generation recovery plan, loadshedding increased to 329 days (FY2023: 280 days), and diesel usage increased to R33.9 billion (FY2023: R29.6 billion). Sales volumes declined by 3% year-on-year (YOY). High levels of electricity theft led to an estimated R23 billion revenue loss.  
• The first six months of FY2025 (1 April 2024 to 30 September 2024) unaudited results show remarkable improvement, with substantial efficiencies achieved and a profit is forecast for the full FY2025. There has been no loadshedding during the six-month period, while diesel usage was reduced by R11.9 billion YOY. Sales volumes have increased by 4% YOY. 
• Eskom is facing several systemic operational, financial and sustainability issues that are receiving intense focus by the newly capacitated and recruited executive team to ultimately improve internal controls and service to customers.  Consequence management and interventions are being actioned to address reportable irregularities raised relating to legacy management control issues.

 Eskom has announced its group annual results for the 2024 financial year, covering 1 April 2023 to 31 March 2024. The period marked one of the most challenging moments in the history of the company given the urgent need to deliver on the Generation Recovery Plan to address South Africa’s energy crisis. This was required to deliver a structural improvement in generation performance and end loadshedding, which consumed management focus to set the organisation up for improved performance in the future. 

“Today’s challenging results demonstrate the extremely tough choices we had to take, for which we are experiencing the benefits of today. We have continued to deliver progress and consistency in the diagnostic from two years ago to address the crisis that the current Eskom Board inherited when they took office in October 2022. Many of the actions we are working on require policy changes, so we cannot do this without the Government and in particular the ministries with oversight over Eskom’s operations who have been very supportive on this journey,” said Mteto Nyati, Chairperson, Eskom Board. “We are ultra committed and focused on using public money efficiently by strengthening governance and our management controls through appointing the right people to the right roles to drive an ethical, high-performance culture that is coupled with consequence management to deliver a sustainable and investable Eskom,” he continued.

“It is encouraging that we recorded a lower loss before tax despite the momentous operational challenges we faced. I believe that we have reached a turning point and that the 2024 financial year will be remembered as the year in which we laid the foundation for future success,” said Calib Cassim, Group Chief Financial Officer of Eskom. “We must reach a position where we can service our debt obligations without further Government support, however, the National Treasury has acknowledged that its debt relief and Eskom’s efficiency efforts alone are not enough to enable Eskom’s long-term financial sustainability – it must be supported by appropriate tariff increases, with measures to address affordability for vulnerable sectors, and a sustainable solution to the municipal arrear debt challenge, with the arrear debt owed to Eskom expected to reach R110 billion by March 2025,” Cassim continued.

“The results our employees have delivered under the most challenging circumstances show what Eskom is capable of in a reformed market. For South Africa to reap the rewards of these efforts, the migration to cost-reflective tariffs is a crucial step, not just for Eskom’s financial sustainability, but to foster a competitive future electricity supply industry that attracts investment and enables market players to operate and maintain their assets in a reliable state,” said Dan Marokane, Group Chief Executive, Eskom. “An inadequate tariff path will continue to constrain Eskom’s financial position, leading to insufficient investment to sustain and expand our infrastructure, thereby perpetuating past operational challenges. It may also necessitate further reliance on Government support beyond March 2026,” he continued.

The loss after tax of R55 billion occurred mainly due to the derecognition of a deferred tax asset of R36.6 billion. This was triggered by the separation of the National Transmission Company South Africa SOC Ltd (NTCSA) on 31 March 2024 and it being deemed unlikely that the remaining business would generate sufficient taxable income within the next five years to fully utilise Eskom’s unused assessed tax losses. The derecognition has no impact on Eskom’s right to utilise assessed tax losses against future taxable income. Eskom still expects to return to profitability within the period of the current corporate plan ending March 2029.

While the financial results for FY2024 remain disappointing, financial performance has improved significantly in FY2025 on the back of the Government’s debt relief and Eskom’s improved operational performance. Eskom recorded a much-improved energy availability factor (EAF) of 62.97% for the first six months of FY2025 on the back of lower unplanned losses. Eskom’s focus remains on further reducing unplanned unavailability, to reach an EAF level of 70% during the month of March 2025 and an average EAF for the year of around 62%, through effective implementation of the Generation Recovery Plan, which includes carrying out extensive planned maintenance.

Eskom must be placed on a more sustainable footing, which requires the support of all stakeholders. Ultimately, this requires resolving Eskom’s highly leveraged balance sheet, below cost-reflective tariff structures and the municipal arrear debt challenge; delivering on Eskom’s operational recovery to improve the performance of the generation plant and alleviate the constrained power system; and bringing much-needed structural reforms to the electricity industry.

Addressing reportable irregularities and legacy management control issues

The publication of the FY2024 results was delayed by investigations into legacy management control issues.  The qualified external audit opinion received for FY2024 was a result of PFMA records that were not complete or accurately maintained in line with legislative requirements relating to irregular expenditure, fruitless and wasteful expenditure, and losses due to criminal conduct. Except for this qualification, the financial statements are considered to be fairly presented in terms of the International Financial Reporting Standards (IFRS).

The audit findings call for appropriate steps to hold officials accountable, and this action is underway. The steps that are already being taken to address the control issues include a strengthened executive team that has the appropriate skills and leadership to drive adherence to internal controls, risk management and PFMA oversight. A resourcing drive to adequately capacitate the finance, internal audit and forensics functions to address key skills lost over the years will commence shortly. 

Eskom has consolidated its forensics, security and investigative functions under the Group Investigations and Security function reporting directly to the Group Chief Executive. Additionally, a dedicated project management office has been created to address findings from data analytics as well as internal and external investigations and to address the backlog in investigations and consequence management both internally and externally with law enforcement agencies.

Investigation into non-technical losses

As part of the action plan to address electricity theft (non-technical losses), a forensic investigation uncovered the bulk generation of illegal prepaid electricity tokens on Eskom’s online vending systems, for both Key Revision Number (KRN) 1 and KRN 2 prepaid meters. Indications are that this is only likely if there is collusion between Eskom staff and illicit operators who breached controls within the prepaid ecosystem to facilitate the creation and sale of fraudulent prepaid electricity tokens.  

A forensic investigation is still underway to identify the root causes and make recommendations for improvement as it progresses. An update from the investigation will be provided once it is finalised. The matter is also being handled by the relevant state investigative authorities.

Eskom will continue to focus on implementing the Generation Recovery Plan, strengthening governance, and tackling crime, fraud and corruption while future-proofing the organisation to enable energy security, growth and long-term sustainability of the business to the benefit of South Africa and the region.

SOURCED FROM THE ESKOM WEBSITE.