Eskom’s profitability has improved but falling electricity demand and mounting municipal arrears pose risks to its financial recovery as it prepares to invest R343 billion over the next five years.
Electricity sales fell by 6,2% to 178 TWh in the year ended March 31, 2026, while municipal arrears reached approximately R119 billion by June, according to the utility’s annual results released on August 31.
Improved generation performance and a long-term decline in electricity sales have created an estimated 2-3 GW of surplus capacity for the coming year. According to Eskom, this “introduces new risks to revenue and asset utilisation”.
The utility nevertheless reported group profit after tax of R30,3 billion for the 2026 financial year, up from a restated R14 billion the previous year and its second consecutive annual profit.
Eskom plans to increase annual capital expenditure from R45 billion in FY2026 to more than R70 billion from FY2029, taking its planned group investment to R343 billion over five years.
The improved financial performance will allow Eskom to reinvest in its generation, distribution and grid infrastructure. “This is the second consecutive year that Eskom has delivered a profit,” said Eskom Chairperson Mteto Nyati. “It now allows us to reinvest in Eskom Green, in a better customer experience in distribution, in the reliability of the coal fleet and in grid expansion so that new generation can connect.”
Eskom Chief Financial Officer Calib Cassim said the utility is also considering public-private partnerships, private-sector participation and blended commercial and concessional finance to deliver its objectives without placing “undue pressure” on its balance sheet.
Sales decline as surplus emerges
Eskom attributed the 6,2% reduction in FY2026 sales to weak industrial demand, embedded self-generation and energy-efficiency gains. Industrial demand recorded the sharpest fall, declining by 9,7 TWh, or 22,5%, year on year.
The decline is part of a longer-term trend with the utility reporting that its sales volumes have fallen by approximately 2% a year over the past decade. Eskom attributed this trend to weak economic conditions, embedded self-generation, energy-efficiency gains, electricity wheeling and reduced demand from energy-intensive industries.
Revenue nevertheless increased by 4,1% in FY2026, supported by a 12,7% standard tariff increase.
In response to the decline, Eskom Distribution is implementing what the utility described as a sales retention and demand activation plan. The measures include negotiated pricing agreements for ferroalloy and other smelter customers, supplying data centres and electric vehicle charging infrastructure, wheeling optimisation, renewable energy power purchase agreements and flexible load initiatives. Eskom also listed a Bitcoin mining pilot among the measures being considered.
Through these initiatives, Eskom is aiming to stabilise sales at approximately 178 TWh over the medium term with potential growth from new products, services and customer categories.
Generation recovery cuts OCGT costs
Improved generation performance contributed to Eskom’s profitability. The utility attributed this, in part, to better coal fleet performance and the return to service of both Koeberg units after scheduled maintenance, which reduced its reliance on more expensive generation.
Open-cycle gas turbine (OCGT) use more than halved year on year, reducing combined expenditure on Eskom-owned OCGT fuel and storage and electricity supplied by independent OCGT operators by R10,6 billion.
“Operations and finances are inseparable: when the generation fleet performs, Eskom relies less on diesel burn for the OCGTs and the financial benefit is immediate,” Cassim said.
Municipal arrears reach R119bn
Despite its improved operational performance, Eskom identified unpaid municipal accounts as its biggest financial threat. Municipal arrears increased by 17,9% to R111,6 billion at the end of March and reached approximately R119 billion by June.
The utility projects that municipal arrears could reach R358 billion by FY2031 if what it termed “decisive intervention” is not implemented.
Eskom did not recognise R15,8 billion – equivalent to approximately 4,5% of revenue – because of the elevated risk that amounts owed by municipalities, metros and residential customers would not be collected. This was up from R11,9 billion the previous year.
Eskom’s liquidity was also supported by an R80 billion government debt relief payment received in March. The utility reported cash and cash equivalents of R124,9 billion at year end although R38 billion was subsequently used to settle bonds that matured in April.
Debt securities and borrowings declined to R356 billion at the end of March and to approximately R320 billion by the end of June, according to Eskom.
