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Eskom posts net loss after tax of R20.7bn

Jul 30 2019 14:16
Sibongile Khumalo and Fin24

Power utility Eskom has reported a net loss after tax of R20.7bn for the 2019 financial year, with municipal debt rising to some R20bn.

The power utility attributed the loss to a lower-than-expected 5.23% tariff increase granted by the energy price regulator for the 2018/19 financial year, a 1.82% decline in sales volumes, an above inflation wage settlement with unions, as well as the abovementioned escalating municipal debt. 

This is the last set of financial results being released by the utility's outgoing CEO Phakami Hadebe, who quit his job in May citing health reasons. His last day is July 31.

On Monday, Public Enterprises Minister Pravin Gordhan announced that Eskom chair Jabu Mabuza would take over as the acting CEO of the power utility. 

Speaking at a briefing at Eskom's headquarters at Megawatt Park, Mabuza said Eskom's problems could not be solved "in isolation or overnight". 

"These require a partnership approach among all stakeholders, where difficult choices need to be made with the aim of achieving sustained success".

He added he would be a "placeholder" CEO for the next three months, to maintain "leadership stability".

"Selflessly I accepted this burden from the minister," he said. 

Mabuza also thanked the government for the tabling of a special appropriation bill. Finance Minister Tito Mboweni last week announced a R59bn financial support package for Eskom over two years. 

Turnaround plan 

Mabuza said the debt-laden power utility's board was committed to achieving it turnaround plan "through disciplined execution and stewardship". 

Speaking after Mabuza, outgoing CEO Hadebe said the utility's new board - appointed in January 2018 - had set its sights on containing costs.

He said some cost savings had been achieved, with the group's headcount reduced and an embargo on staff appointments. 

These savings were, however, negated by an increasing maintenance spend, high primary energy costs, the use of expensive diesel to avoid load shedding, and a wage settlement, and an increase in municipal debt. 

Dropping demand for electricity, meanwhile, also cut into revenue, as more South Africans go off the grid. 

'We are now facing the death spiral," he said. 

Hadebe said that the power utility had identified 10 companies that may have to pack it back money after conducting an internal probe, in addition to global consultancy McKinsey and Gupta-linked Trillian. He did not name the companies, but said that, in total they had done work worth R72bn with the utility. 

The outgoing CEO cautioned that this did not mean that the "full R72bn" was dubious, saying that Eskom believed that "some" of this money would have to be paid back. 

He said that utility's debt servicing costs and payback were higher than earnings before interest, tax, depreciation and amortisation. 

"The amount we are generating is not even sufficient to pay the interest," he said. He said this balance sheet issue had to change. 

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