Without ongoing financial support from government, Eskom will collapse

September 11th, 2019, Published in Articles: EE Publishers, Articles: Energize

Eskom’s chairperson and acting CEO, Jabu Mabuza, says that the power utility is no longer able to borrow money from financial institutions – because it is struggling to meet the commitments on its massive existing debt – and that its only short-term option is to turn to the shareholder (i.e. the South African government) for support.

According to the South African government’s news agency, SAnews.gov.za, Mabuza told members of parliament recently that Eskom’s finances are “not in good health”. Mabuza says the utility’s cash flow falls far short of the levels required to service its almost R450-billion debt. “The cash we generate from our operations amounts to R33-billion and we need R69-billion to service our debt. Our debt funding has exceeded R440-billion, we have reached the ceiling now,” he said.

This means that Eskom has a shortfall of R36-billion a year. Mabuza says Eskom is unsustainable and that the power utility is in a situation where it has to borrow money to service debt.

Although Mabuza says progress is being made in implementing its turnaround plan to bringing about debt relief, better revenue management, implementing cost initiatives, separating business units and achieving operational stability, the reality is that Eskom is experiencing the so-called “utility death spiral” – which was predicted some years ago – and without ongoing government aid, will collapse.

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