Less than R1billion profit on a turnover of R177billion is an appalling result. Not the way the jokers at Eskom painted the picture.

The really telling figures are the effects of depreciation rising to R20-billion and net financing costs on debt ballooning by some 82% to over R14-billion. Both these figures will increase year on year as more units come on at Medupi and Kusile.

Only 2 units of 800MW (each) are on line, with a 3rd being synchronized to the grid. There are another 5 units to be added over the years (intended by 2022). The costs of both power stations have escalated to more than double their estimated build cost (to over R250-billion) as well as being years late.

What this in turn means for Eskom’s financial results going forward is more depreciation costs, and more and more interest being added to the expense line as the units come on line. Being marked down to junk bond status results in additional debt finance costs.

To compensate Eskom have two options, to increase electricity sales and to raise the price of electricity.

Increasing electricity sales is difficult in a country officially in recession, they fell 0,2% last year despite a 12,1% rise in international sales, (Zimbabwe is in default of $40m).

So electricity prices will have to go up and up and up and up. This of course results in mining, agriculture, industry, and manufacturing all having higher expenses and becoming less competitive.

For the end consumer it means more and more financial pain.

Projecting forward Eskom is bust but claim financial sustainability due to government guarantees of R350-billion. Yes, it sounds more and more like SAA but the scale is hugely more. Before long Eskom’s shareholder will need to consider the sale of non core assets to bolster the balance sheet.

ADD IN THE CORRUPTION

The big story is Eskom’s future but we are rightly distracted by the never ending corruption at Eskom.

Unfortunately the rot is so deep and toxic, and it will go on and on, whether it be Matjila, Molefe, Koko, or Singh (the next hood to fall), along with Tegata, Trillian, Mckinsey, KPMG, Zwane and of course the Gupta’s that we sit dumbstruck and incredulous.

It is beyond scandalous, and while Mrs Brown requests yet another special inquiry, and the Directors are fired and replaced again and again, we all in reality know that no one is really going to be held to account.

GREAT NEWS FOR BEHIND THE METER RENEWABLES

For you the consumer only expect huge price hikes in electricity for years to come. Domestic power consumption fell 0,5% in the last year and as you go renewable this figure will only increase.

We have said it before and we will say it again and again. Behind the meter renewables in the form of solar water heaters and rooftop solar PV will change the financial picture for you, the consumer and for Eskom.

At its simplest, you can already heat water much cheaper than Eskom or your municipal electrical supplier can. As the price of electricity goes up, sooner or later you will convert to solar water heating, it is just a question of when you decide to do it.

Within a few years it will also be cheaper to generate your own electricity from rooftop solar PV.

What this means for you is lower electricity bills, and for Eskom continuing declines in electricity sales and revenues from the domestic and business sector. Such declines in sales will again force even greater price increases in electricity.

Whether you do it today, next month, next year, unlike just buying electricity from Eskom or your municipal supplier, you need to know what you are investing in and what returns you will get for your money.

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