Eskom posted a R2.3 billion loss for the year to end-March 2018, and announced that it lost R19.6bn in irregular spending since 2012. To put it in context, that's almost equal to an entire Telkom.
Irregular expenditure rocketed from a previously estimated R3bn is as a result of the new board “shaking the cupboard so hard that so many skeletons came tumbling down,” said chairperson Jabu Mabuza at the release of Eskom's financial results on Monday morning.
Eskom had 10 CEOs in 10 years and six boards in 10 years, which severely hindered the sound management of the power utility, said its new CEO Phakamani Hadebe. He believes it will take years for the power utility to restore liquidity and public confidence.
“There will be financial pressure until 2020 as we transition towards financial and operational sustainability requiring resolute tough and decisive leadership,” Hadebe said. "Eskom continues to face significant financial and liquidity challenges in the short term, mainly due to the high debt burden, low sales growth and increased finance costs."
What you need to know about Eskom’s latest financial results:
Total debt at the power utility went from R387 billion to R600 billion over the past four years. That's the equivalent of South Africa's entire budget for healthcare and education, plus another R60 billion. Eskom's debt burden is also much larger than South Africa's entire income from personal income tax (R556 billion).
Former FNB CEO Michael Jordaan estimates that Eskom’s debt adds R11,000 to the R50,000 each South African owes as part of South Africa’s R2,7 trillion total debt.
The utility said it had already raised R57 billion since January to improve liquidity. It has also raised 22% of the R72 billion in credit it requires for 2018/19, with a commitment to increase funding to 67%.
The power utility said nine executives who have been implicated in corruption have left the company, and 11 criminal cases have been filed. In April alone, there were 1,049 disciplinary cases, of which 628 have been finalised, and 75 employees have been fired as a result. 67 disciplinary cases are also underway for 122 concluded whistleblow cases. Some 117 whistleblower cases are still being investigated. Eskom has also investigated all the R2.3 billion irregular supplier contracts, of which five no longer do business with Eskom.
Hadebe said he wants to reposition Eskom as a trusted state-owned entity, by instilling transparent and effective governance.
Eskom warned that key financial ratios such as Earnings before interest, taxes, depreciation, and amortisation (Ebitda) will continue to deteriorate before the parastatal's financial situation improves. “The ratios are not in line with investment grade and will need substantive improvement to reach standalone investment grade,” the power utility said. Eskom said electricity sales were down 0.9%, but its revenue increased by 0.8%. It believes it will reach breakeven point by the end of the year.
Acting chief financial officer Calib Cassim said Eskom is on the verge of making a new three-year application for price increases to the energy regulator Nersa.
The energy regulator in December approved a 5.23% tariff increase for Eskom, which had requested a 19.9% increase for the 2018/19 financial year. Eskom has since launched a legal challenge against Nersa to force the utility to grant steeper hikes.
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