Eskom’s adjusted loss for 2021 widens to a record R25 billion

Eskom revised the company’s reported loss for fiscal 2021 to R25.3 billion, about 38% more than before certain accounting adjustments.

The state-owned utility originally reported an annual loss of 18.9 billion rand for the period ended March last year, its fourth straight deficit. Eskom is struggling with operational problems that have necessitated nationwide power outages – known as load shedding – and faces about R400 billion in debt.

The record loss represents another blow to Eskom, which is surviving from taxpayer bailouts. It has reclassified some of its coal inventory held at power plants from current to non-current assets and made adjustments to real estate and equipment valuations, according to a statement on the Johannesburg Stock Exchange. The changes “significantly impacted the working capital ratio from 1.27 in the previous period to 0.95 after the restatements,” it said.

The main risk the utility faces is renewed governance and management issues, said Hilton Trollip, an energy research consultant and fellow at the University of Cape Town. “The government needs to support Eskom’s finances at least at a survival level and can do so for a few years before the next tipping point is reached.”

The Company’s financial year 2022 results have been deferred due to a delay in the appointment of a new auditor. The company also has “to address numerous findings and control deficiencies resulting from failure to follow well-documented policies and procedures,” Eskom said. It will publish the latest results by December 31st.

Other details:

  • The fair value of derivatives held for risk management has been adjusted to correct the curve approach used in determining the fair values ​​of financial instruments that were not aligned with market practice
  • A review of payment trends for defaulting municipalities, which are accounted for on a cash basis, revealed that certain trade accounts receivable were not expected to be recovered within 12 months of the period
  • The discount rate used in the valuation of the power plant-related environmental remediation and mine-related decommissioning, immission control and remediation provisions has been corrected.

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