Eskom profit down by R4 billion

Eskom’s earnings for the 2017-18 financial year took a R2 billion knock, with net profit down by R4 billion, while liquid assets dropped from R30 billion to R9 billion.

The utility also needs to source at least R72 billion to meet the financial obligations for the year, and a R20 billion loan has to repaid by the end of August.

But the interim board believes the first steps have been taken to save the national electricity giant from ruin. It will reveal a turnaround plan by the end of September.

Members of the interim board who were appearing before parliament’s energy oversight portfolio committee yesterday revealed these plans.

But members of parliament were not convinced they were doing enough to avoid being dependent on government bailouts and increasing electricity costs to consumers.

Yesterday, Eskom maintained the 5.2% electricity fee hike was insufficient, as the company had to service debts and recover billions of rands lost to coal procurement contracts, while simultaneously having lower than expected electricity sales over the past four years.

They said the National Energy Regulator (Nersa) erred in declining their requested 20% fee hike as it should have, among other things, taken note of increasing coal costs during the past financial year instead of referring to coal prices during the 2013-14 financial year.

They said the low increase granted by Nersa would have a negative impact on operational and financial sustainability.

Eskom interim CEO Phakamani Hadebe told parliament that Eskom’s qualified audit during the previous financial year made it incredibly difficult for the utility to keep up with demands as lenders had refused to extend more credit.

“After that qualified audit report, investors just moved out of Eskom. In other words, they couldn’t fund and Eskom couldn’t source any new funding whatsoever.”

However, Hadebe believed the purging of executives and board members linked to graft and the notorious Gupta family has restored confidence somewhat.

He told the committee: “Eskom has been able to raise R43 billion from the market since the appointment of the new board. This is seen as a sign that fund managers are willing to welcome Eskom back into financial markets, and we can now begin to diversify our funding.”

Hadebe said they had asked new Minister of Public Enterprises Pravin Gordhan to restrict Eskom’s current corporate plan, which was drafted by the previous board, to just one year.

Their new plan, which will be completed by September, will replace the existing one: “We need to come up with a sustainable strategy, which will ensure Eskom can operate for another 100 years,” he added.

DA MP Gavin Davis, however, questioned the delay in drafting the new plan. He asked the board members if they had an interim strategy in place to prevent further government bailouts or increases to electricity prices.

He also asked what action was being taken to recover the R13 billion owed to Eskom by municipalities across the country, and how the utility could justify the 20% electricity tariff hike, which was the result of increased coal costs during what he called “the Gupta years”.

The IFP’s Jan Esterhuizen was concerned about the company’s rising wage bill.

He asked whether the Eskom board and executive would be willing to forego their annual bonuses until the company’s books balance, since a handful of senior staff members pocketed more than R4 million in bonuses last year, despite the company’s financial woes.

Info:

Eskom board member Nelisiwe Magubane says they are restoring confidence. Since the appointment of the new board in January:

• Five senior executives implicated in mismanagement and graft have resigned.
• Four more senior executives have been suspended and their disciplinary proceedings will kick off in April and May.
• Mandatory lifestyle audits are to be be conducted on all employees two levels below group CEO level.
• Employees are forbidden from doing business with Eskom, as had previously been the case.
• A whisteblower programme has been initiated, which has led to 239 matters being investigated.

– earlc@citizen.co.za

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