JOHANNESBURG, Gauteng — Eskom has reported a R30.35 billion profit for the 2026 financial year, marking a significant operational turnaround for the state-owned power utility. This figure represents more than double the R14 billion recorded in the previous year, achieved even as the entity sold 6.2% less electricity amid South Africa’s milestone of going more than a year without load shedding.
The improved financial performance was driven by a 12.74% electricity tariff increase, which pushed the utility’s total revenue to R355 billion. Concurrently, operating costs fell by R11.5 billion, largely because more reliable power stations reduced the need to rely on expensive open-cycle gas turbines. Improved power station performance also created an estimated 2 to 3 gigawatts of spare generating capacity, allowing the utility to focus on attracting new customers rather than restricting supply. Eskom’s electricity availability factor improved to 65.16%, up by approximately 5 percentage points from the previous year, though it remains below the 70% target due to unexpected breakdowns at several facilities.
Despite the headline profit, Eskom leadership emphasizes that earning more while selling less electricity is not a sustainable long-term model. Eskom Chief Financial Officer Calib Cassim highlighted that resolving municipal debt is critical to collecting current accounts, which would improve liquidity and contribute directly to the bottom line. Kasim noted that continuous profitability is essential to improve the utility’s credit rating before it returns to the capital markets in 2028.
Kasim also pointed to massive unrecovered revenue from energy losses. The utility is currently not collecting revenue on 13.1 terawatt-hours of electricity. At an average selling price of approximately R220, this equates to R29 billion in lost top-line revenue. When combined with another R16 billion in related losses, the total unrecovered amount reaches R45 billion. Kasim stated that securing and improving just 50% of that figure moving forward would generate a starting point of R20 billion per annum in entirely new revenue.
Power and energy expert and former Eskom executive manager Prof. Vally Padayachee noted that while the R30.35 billion profit is a positive indicator, it is a combination of multiple factors. Emphasizing that “profit is an opinion and cash is king,” Padayachee explained that actual cash flow remains somewhat constrained due to outstanding municipal debt and plummeted sales volumes.
Addressing public criticism that consumers are facing a “pay more for less” business model, Padayachee explained that decades of non-cost-reflective tariffs are now catching up with the system. However, he stressed that this pricing trend must come down significantly. To that end, recent strategic interventions by the government and the National Treasury have introduced amendments to the electricity pricing policy, which had not been updated since 2008. Now open for public comment, the revised policy is designed to facilitate a drop in electricity prices and is being hailed as one of the most critical energy policy documents in the last 30 years.
Prof. Padayachee also clarified that Eskom’s improved profitability does not delay the long-planned unbundling of the utility. Pursuant to the amended Electricity Regulation Act, which saw significant updates culminating in August 2024, South Africa’s energy landscape is set for a major revolution. Eskom and municipalities will no longer operate as monopolies. By April of next year, a five-year transition period will begin, establishing a fully competitive market where private sector independent power producers (IPPs) and traders operate as equal players.
A key component of this transition is the creation of an independent Transmission System Operator (TSO) and an Independent Market Operator (IMO). While business groups like Business Leadership South Africa (BLSA) have focused on ensuring the outcome is investor-friendly, Eskom has emphasized the importance of the process. Eskom has cautioned against a “big bang” approach that could dilute its balance sheet, noting that the TSO assets are valued at R110 billion. Recent discussions have resulted in an agreement to pursue a phased unbundling approach, ensuring a win-win situation that protects Eskom’s financial stability while achieving market reform.
While the structural reforms aim to minimize political interference by empowering technocrats through shareholder compacts, Padayachee acknowledged that electricity remains a public good and will always retain some level of government oversight.
Finally, addressing concerns over Eskom negotiating reduced electricity rates for energy-heavy industries while ordinary consumers struggle, Padayachee explained the complexity of the situation. Municipalities initially expressed concern over a proposed discount (from R1.35 to 62 cents, a roughly 90-cent difference), fearing the cost would be passed on to them. However, recent clarifications confirmed that Eskom and the government will carry the brunt of this discount without transferring the cost to other stakeholders. Supporting these large industries is deemed vital for national economic growth and job creation, particularly to facilitate the return of approximately 70 currently mothballed smelters to the national grid.
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