Analysts and economists are still filtering through the shocking financial results that came from state-owned power utility Eskom this week – but energy expert Ted Blom believes things are much worse than even the latest reports let on.

Eskom this week reported a loss after tax of R2.3 billion for the year ended March 2018, from a profit of R900 million 12 months earlier. Sales declined 0.9%, while its gearing ratio, which measures debt relative to equity, went to 72% from 68%.

The group has been in a widely reported financial crisis for some time, with its debt numbers currently the single biggest liability on South Africa’s books – making it the biggest risk to the economy.

While the group has worked to secure funding (like the $2.5 billion long-term loan facility from China Development Bank), some of the group’s other plans to plug the funding gap may be bound for failure.

Speaking on Jacaranda FM, Blom – who is one of Eskom’s biggest critics, and accurately predicted the group’s downfall over the past few years – said one of the strategies Eskom is looking at to boost its revenues is to hike to prices of electricity sold to South Africa’s neighbouring countries.

Eskom not only supplies power to South Africa on its ageing network, but also sells electricity to many of South Africa’s neighbouring countries – often at cheaper prices.

But the plan to increase these sales, Blom said, isn’t going to work.

“Eskom is projecting that they will sell their way out of this mess by increasing sales to the neighbouring countries,” Blom said.

“If Eskom had done the effort to pick up the phone and called electricity regulators in the five neighbouring countries they would have found out that Botswana is doing a massive power expansion project.”

“Namibia is also on the cusp of doing the same thing, while Zambia has tenders out, Zimbabwe has the Chinese helping with its infrastructure, and Mozambique has massive gas reserves.”

With these projects underway, Eskom is almost certain to lose these countries as clients, Blom said, as their power supplies will be much cheaper than and more reliable than Eskom.

Ironically, Blom said that these projects would “absolutely” be able to even supply power to South Africa should things falter back home.

Corruption at Eskom

Blom expressed disappointment that management was only able to identify R20 billion in irregular expenditure at the power utility, saying that his analysis of the group shows the corruption runs deep.

Ahead of Eskom’s financial results, the expert said that there were many skeletons in Eskom’s closet, with hundreds of billions of rands being fed off in all directions.

Only about 30% of the billions spent on corruption would likely ever be recouped, he said.

According to Blom, the ‘quantifiable’ losses – among others – are:

Approximately R30 billion in derivative losses emanating from the Gupta capture of Eskom treasury;

Approximately R50 billion in contractors claims on capital build;

Approximately R500 billion in asset overvaluation directly attributable to the high tariff regime currently prevailing;

Overvalued coal stocks and continuing corruption in coal procurement of around R8 billion per annum.

Read: Eskom counts R2.3 billion in losses as irregular spending blows up to R19.6 billion