Andre de Ruyter lists Eskom's 16 greatest challenges

Eskom CEO Andre de Ruyter, while addressing the State of the System on Thursday 21 May, listed 16 challenges that the power utility currently faces. 


De Ruyter did, however, say that despite these major challenges in the last four months, there have also been a number of successes. 

ESKOM'S 16 CHALLENGES 


De Ruyter, using a slide presentation, listed Eskom's challenges. He listed them under five key areas including debt, revenue, costs, operations and outdated business model. 


Here's how the challenges were broken down: 

DEBT

  1. Debt is now approaching R450 billion; 

  2. Eskom is unable to service debt from own EBITDA (earnings before interest, taxes, depreciation, and amortisation); and[*]Eskom must borrow to service debt. 


ESKOM'S REVENUE

  1. Volume declining at +1% per year; 

  2. Tariffs not cost-reflective; and [*]R38 billion in receivables are outstanding; 


COSTS

  1. Opex (operating expense) increased  by 30% in five years reaching R151 billion in FY19; 

  2. Large increases in employee and coal costs; and [*]Procurement costs are above market norms. 


ESKOM'S OPERATIONS 

  1. EAF below 70% during FY19 and FY20; 

  2. Load shedding, increased costs, lost revenue; and [*]Environmental challenges. 


OUTDATED BUSINESS MODEL 

  1. Utility death spiral; 

  2. Operational and structural inefficiencies;[*]Lack of transparency; and [*]A change in the energy landscape. 


ANDRE DE RUYTER CITES PROGRESS IN TURNAROUND STRATEGY  


De Ruyter said that despite major recent challenges, which have included IT failure, COVID-19 and load shedding, Eskom has made some progress in its turnaround. 


De Ruyter listed five areas of progress: 

  1. Operational stability; 

  2. An improved income statement; [*]A strong balance sheet; [*]Progressive restructuring; and[*]High-performance culture. 


TOTAL OF 21 ESKOM EMPLOYEES TEST POSITIVE FOR COVID-19 


De Ruyter also mentioned that 21 Eskom employees, as of 7:00 on Thursday morning, have tested positive for COVID-19. 


"Comprehensive and focused effort is in place to protect employees and contractors, in compliance with the government's COVID-19 health and safety regulations," said De Ruyter. 


De Ruyter said Eskom has supported the COVID-19 pandemic in a number of ways. 


It has made the Eskom Academy of Learning available as a quarantine site, it has produced large volumes of hand sanitiser in its research laboratories and two types of cost-effective and non-invasive ventilators will also be prototyped as part of the SOE ventilator initiative. 


The power utility is also designing and producing 100 000 low-cost N95 face masks for the country's healthcare workers and Eskom staff. It is also designing and deploying a low-cost walkthrough spray system that is in use at Megawatt Park thus far.