Eskom's profit doubles even as it sells less electricity - Mteto Nyati — Eskom chairman Mteto Nyati

Eskom more than doubled its profit in the year to 31 March 2026, reporting net profit after tax of R30.3-billion against R14-billion the year before. It is the utility’s second consecutive annual profit after eight years of losses.

Revenue rose 4.1% to R354.7-billion, earnings before interest, tax, depreciation and amortisation climbed 10.9% to R108.6-billion, and net debt fell R45.3-billion to R313.3-billion.

The accumulated loss shrank from R40.9-billion to R12.1-billion. Eskom Holdings on its own, stripping out the transmission subsidiary, swung from a R14.3-billion loss to a R14.1-billion profit.

But almost none of it came from selling more electricity.

Sales fell to 178TWh from 189.7TWh, a decline of 6.2% in a single year. Eskom attributed it to smelter curtailments, unplanned shutdowns and shaft closures in mining, weaker-than-expected demand recovery, and – in its own words – “solar installations across many sectors”.

Operating earnings came instead from the 12.74% average tariff increase energy regulator Nersa granted for the year, together with lower primary energy costs as generation performance improved. The energy availability factor rose to 65.16% from 60.6%, though it still missed the target of 70%.

Looking for new demand

The rest of the profit came from further down the income statement. Eskom attributes the improvement in profit before tax mainly to lower net finance costs and to smaller losses on financial instruments. Net fair value and foreign exchange movements cost the utility R10.4-billion in 2025 but only R1.1-billion this year — a R9.3-billion swing that accounts for more than half of the R17.5-billion improvement in profit before tax. Depreciation rose R4.6-billion, offsetting some of the gain.

The combination of higher prices and fewer units is a pattern utilities elsewhere have found hard to escape.

Board chairman Mteto Nyati acknowledged the constraint at Monday’s results presentation, telling the audience that “tariff increases alone are not the strategy” and that they cannot carry the weight of municipal debt, declining sales, an ageing fleet and the capital needed for the energy transition.

Eskom is looking for new demand. It has agreed concessionary pricing of 62c/kWh with the Samancor Chrome and Glencore-Merafe ferrochrome smelters, and a separate two-year deal with Manganese Metal Company. It is expanding wheeling arrangements. And it says it is preparing for potential growth in electricity demand from the data centre sector.

Gross municipal arrear debt rose R17-billion, or 17.9%, to R111.6-billion. Eskom wrote off R3.6-billion during the year and will write off a further R4-billion in 2027 across 21 municipalities on national treasury’s instruction, under the municipal debt relief programme.

The City of Johannesburg breached the conditions of its payment arrangement on 13 April, making its entire debt immediately due. Eskom issued formal notice on 19 May of its intention to reduce, interrupt or terminate supply to certain City of Johannesburg and City Power bulk supply points. The city settled its arrears in full on 21 August, and Eskom withdrew the process.

The financial statements describe municipal arrear debt as a key matter that should be resolved before the distribution business is legally separated.

Deloitte issued a qualified opinion for the year. Eskom did not fully record irregular expenditure as the Public Finance Management Act requires, the auditors found, because of inadequate internal controls to detect and record it and to assess potential irregular expenditure arising from non-compliant supply chain processes.

Irregular expenditure is disclosed at R4.9-billion for the group, down from R10.9-billion restated, but Deloitte says it was “unable to determine the full extent of the misstatement” because doing so was impracticable. Group materiality for the audit was set at R2-billion.

The statements also carry a material uncertainty related to going concern. The board concluded that Eskom can continue as a going concern, but flagged inadequate tariffs, falling sales volumes, high debt service costs, escalating municipal debt, above-inflation cost increases and the impact of crime, fraud and corruption, including revenue losses from illegal connections and illicit prepaid tokens.

After year-end

The finance minister approved converting Eskom’s R80-billion shareholder loan into equity on 9 August. Share capital had already risen R64-billion during the year, to R381.6-billion. Guarantee fees of R980-million for 2025 and R984-million for 2026 have been deferred to March 2027, and R329-billion of government guarantees remain in place.

The R38-billion ES26 bond matured and was settled on 2 April. Fitch upgraded Eskom’s local currency rating to B+ in June and Moody’s affirmed its ratings in May, both with stable outlooks.

President Cyril Ramaphosa endorsed the restructuring task team’s first report on 31 July, confirming that an independent transmission system operator will own the grid. The statements set out the interim measures proposed to make the National Transmission Company South Africa independent in the meantime: no common directors between the Eskom and NTCSA boards, NTCSA appointing its own chief executive and senior management, financial and operational autonomy, the unwinding of the upstream guarantee NTCSA issued to Eskom’s lenders, and information barriers for commercially sensitive material.

Eskom says it cannot yet assess the full impact of the restructuring on its financial statements. The utility and Business Leadership South Africa issued a joint statement on Monday declaring common ground on the reform programme, after a public falling-out in July over how the transmission assets should be separated.