Eskom’s return to profit strengthens South Africa’s economic foundation - BLSA

ESKOM'S return to profitability after eight years offers some welcome positive news for the power utility and the broader economy. I want to congratulate Eskom for its financial results released last month, which showed it made a profit before tax of R23.9 billion. It is the first time the utility has posted a profit in eight years. I was impressed that this was achieved not just from higher tariffs, but from a fundamental and significant improvement in the operations of the state-owned entity.

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ESKOM'S success is foundational to South Africa's economic future,says the author. SUPPLIED

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Load shedding was damaging to Eskom for many reasons, but one obvious consequence was that it had less electricity to sell and therefore less revenue it could earn. It also meant that Eskom ran its diesel-based open-cycle gas turbines (OCGTs) much more, which cost considerably more than its other electricity production. The significant improvement in performance of its main fleet has enabled it to not only be a more reliable supplier of electricity, but also to use the OCGTs much less. The reduction in load shedding, while hugely beneficial to the whole economy, has also been good for Eskom's revenue. Profits were also substantially helped by a favourable settlement with Sars over fuel levy rebates, which accounted for half the total. Overall, Eskom managed to grow revenue by 15% while reducing the cost of primary energy by 14%. That is a significant achievement and CEO Dan Marokane and the board deserve congratulations.

The performance improvement has been helped considerably by the National Electricity Crisis Committee and efforts to support the improvement in plant performance. Over 350 private sector experts were mobilised through Necom and they have put over 12 000 hours of expertise into Eskom and other companies in the electricity supply value chain. Eskom's turnaround plan has been a partnership with the state-owned entity (SOE) involving Necom, the ministry of electricity and energy and many other parts of government. The 98% reduction in load shedding between 2023 and 2025 is the fruit of this effort.

Of course, not everything has been achieved. Eskom's energy availability factor, which improved from 54.6% in 2024 to 60.6% was still behind the target for the year of 65%. Next year, the target is 70%, so much more effort is going to be required.