Mark and Brett Levy eyes municipal power revenue boost

Mark Levy says Blu Label Unlimited is positioning its subsidiary Cigicell to help municipalities recover billions of rand in lost electricity revenue, a strategy he believes will strengthen margins and improve group earnings.

Speaking during the company results presentation for the six months to November, Levy said revenue assurance in the electricity sector represents one of the most significant growth opportunities for the business.

Blu Label reported net profit after tax of $24.4 million for the period, excluding a $327 million accounting adjustment linked to the listing of Cell C and the revaluation of its stake. Headline earnings came in at $0.44 per share, with earnings per share at $2.72.

Cigicell, embedded in 95 municipalities, has historically processed between $188.8 million and $ 251 .4 million in prepaid electricity transactions each month on behalf of municipalities and Eskom. Despite rising volumes, Levy acknowledged that margins have been under pressure.

He explained that the company earns income per kilowatt hour sold, meaning increased volumes have not translated into proportional earnings growth.

Municipal electricity debt remains a major concern. Eskom is currently owed $6.4 billion by municipalities and has warned that the figure could climb to $18.9 billion within the next eight years.

Levy said around 30 percent of electricity is either lost or stolen, representing tens of billions of rand in uncollected revenue.

To address declining margins, Blu Label pursued smart metering opportunities under National Treasury $125.9 million RT29 transversal programme. The initiative aims to install 250,000 smart electricity meters by the end of the 2027 financial year, with 67,000 already installed at a cost of $31.4 million as of September last year.

Smart meters are designed to improve billing accuracy, enhance transparency and strengthen revenue collection while reducing opportunities for tampering and loss.

Blu Label has structured its municipal offering so that Cigicell is paid only if it successfully recovers outstanding revenue for city authorities.

Levy said the company has signed two key agreements, including a 10 year revenue assurance programme with Ekurhuleni and a three year programme with Tshwane. He said the projects are expected to generate employment while addressing structural weaknesses in municipal electricity collections.

He added that if municipalities recover even 40 percent of uncollected electricity revenue over a decade, the uplift could reach $1.19 billion, boosting tax income and improving payments to Eskom.

Cigicell activities complement BluEnergy, another group subsidiary that recently secured a multi year energy trading licence from the national regulator. The licence enables BluEnergy to connect municipalities, independent power producers and energy users across the energy value chain.

Levy said the combined strategy places Blu Label at the centre of South Africa efforts to stabilise municipal finances and strengthen the power system.