Eskom’s qualified audit paints bleak picture for utility

Following Eskom’s recent financial results, experts argue the power utility is no longer a going concern, with the migration of consumers threatening to put the final nail in the coffin to the already crumbling state-owned enterprise.

In the past couple of months, the power utility has exceeded initial expectations due to the rapid increase in solar power installations, reduced power station malfunctions, improved availability of diesel and the reactivation of certain units at the Kusile coal-fired power plant.

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Eskom: Rise in municipal debt, decline in generation capacity

However, Eskom’s financial figures for the year ended March, revealed qualified audit figures for the year and painted a bleak picture.

They showed a worsening energy availability factor of 56%, a rise in municipal debt and declining generation capacity due to unplanned outages.

Energy analyst Tshepo Kgadima said the energy efficiency factor was already below 29% as opposed to the normal 38%, while at maximum capacity – and Eskom’s management should be panicking.

He said if a company was R31.6 billion in debt before tax, there was something horribly wrong.

“Eskom has about R430 billion before tax debt and that on its own tells you this business is not a going concern. “They were saved by the socalled equity injection of R23 billion from Treasury,” he said.

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How long can Treasury sustain Eskom?

“So, the question is, how long can Treasury sustain this?

“If what Minister of Finance Enoch Godongwana told us last Wednesday is to be believed, how long can they sustain Eskom?

“There are so many problems and there is no reason for Eskom to have 67 days of stockpile.”

He said the risk was heightened because “we are entering the rainy season and that stockpile is out in the open; it’s not covered”.

“Based on the geochemical properties of that coal stockpile, we are going to witness what is called spontaneous combustion, meaning the coal is just going to go up in smoke. Money is going to be burned – literally.”

Load shedding means no change in Eskom financial crisis – DA

Ghaleb Cachalia, Democratic Alliance shadow minister of public enterprises, said in a statement that by getting another qualified audit, Eskom had once again proved it had no plan to stop the bleeding.

“The failure to rein in load shedding means there won’t be a change to Eskom’s financial crisis, even if they keep getting double-digit and above-inflation tariff increases every year,” he said.

“Load shedding is shaving off almost 10% of sales, hence revenues, from a business that is at least 60% fixed-cost business.

“In addition to the reduced topline comes an increased cost of goods sold because of the high diesel usage.

Diesel eating away at budgets

“It easy to see why the continuous burning of diesel to run the open-cycle gas turbines is not a sustainable long-term solution to fix load shedding,” Cachalia said.

“This practice is burning a hole in Eskom’s finances and eating away at budgets that could have been better spent on capital projects like the expansion of the transmission network.”

Eskom’s financial statements confirmed “what we have always known: Eskom is bankrupt and no amount of taxpayer-funded bailouts will return it to profit again”, he said.

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