KEY POINTS
- Eskom expects to report R10 billion ($546 million) profit in 2025.
- Debt relief and operational reforms drive turnaround.
- R55 billion ($2.97 billion) loss linked to transmission unit separation.
Eskom, South Africa’s struggling power utility, is forecasting a financial turnaround with a projected profit of over R10 billion ($546 million) in the fiscal year ending March 2025.
This would mark its first profit in eight years, following a significant R55 billion ($2.97 billion) loss in the 2024 financial year.
Chief Executive Officer Dan Marokane announced the positive outlook during a press conference on Thursday, attributing the turnaround to operational stability and a substantial government debt relief package.
“Financial year 2024 was the most painful but also a year of building in which the generation recovery started picking up momentum,” Marokane said.
The company’s recovery from crippling power cuts, known locally as load-shedding, is seen as a critical win for South Africa, where rolling blackouts have plagued the economy for over a decade.
Debt relief, tariff hikes, and operational changes drive recovery
Eskom’s path to profitability is underpinned by several key factors, including reduced operational costs, increased tariffs, and significant debt relief from the South African government.
During the reporting period, the company’s gross debt fell by R11.7 billion ($631.8 million), settling at R412.2 billion ($22.26 billion).
This reduction was made possible by a R250 billion ($13.5 billion) government debt-relief package designed to stabilize the utility over the medium term.
Eskom Chief Financial Officer Calib Cassim said lower debt service costs, coupled with a 12.7 percent tariff hike, would contribute to the improved profit outlook.
According to Reuters, Cassim also highlighted the significant reduction in diesel costs, which dropped by R11.9 billion ($642.6 million).
The operational shift, which saw South Africa experience nine months without power cuts, played a key role in cost savings.
However, Cassim warned that unresolved municipal debt could hinder the utility’s progress.
As of November, municipal debt stood at R95 billion ($5.13 billion), a figure that poses a threat to the sustainability of Eskom’s turnaround efforts.
Eskom’s restructuring plan aims for long-term efficiency
Part of Eskom’s reform plan includes the ongoing separation of its business into three distinct entities to handle electricity generation, transmission, and distribution.
This structural change was first announced by President Cyril Ramaphosa in 2019 as a strategy to increase efficiency.
The separation resulted in a one-off tax charge, which contributed to the company’s R55 billion ($2.97 billion) loss for the 2024 fiscal year. Despite this setback, Marokane maintains that the long-term benefits of the reform will strengthen Eskom’s financial position.
With the goal of improving South Africa’s energy security, Eskom has pledged to continue efforts to modernize its operations and stabilize its finances.
