Eskom keen to reduce government guarantees

Wednesday, July 19, 2017

Power utility Eskom is not facing financial distress and aims to release R105 billion in government guarantees, it said on Wednesday.

"Our ambition is to release about R105 billion in government guarantees and that will ensure we focus on the sustainability of this organisation,” Eskom Interim Group Chief Executive Johnny Dladla told media at a briefing at the utility's Sunninghill offices in Johannesburg.

This was reiterated by the utility's Chief Financial Officer (CFO) Anoj Singh and Interim board chairman Zethembe Khoza who said the utility is financially sound and stable.

In addition, Singh said the utility is looking at alternative sources of funding not requiring government guarantees.

Briefing reporters on the company's 2017 integrated annual results, Dladla, who was appointed to the position in June, said that looking at the numbers will also give comfort in terms of where the utility is and that with the results Eskom is positioning itself to emerge from its challenges.

The results showed that Eskom's revenue increased by 7.9% to R177 billion, while there was an EBITDA (earnings before interest, tax, depreciation and amortization) of R38 billion representing an increase of 14.4%.

Eskom's own generation cost decreased by 8.5% to R60 billion with total primary energy costs down by 2.3%.

Cost savings at the utility of R20 billion were achieved against a R17 billion target.

When coming to electricity sales volumes, the power utility saw a 12.1% growth due to Eskom having surplus capacity. The utility said overall electricity sales volumes declined by 0.2% with local sales declining by 1%.

When coming to arrear debt, Eskom arrear debt by municipalities including interest increased from R6 billion to R9.4 billion.

"Payment arrangements were signed with 60 municipalities with 20 fully honouring the payment arrangement and 11 partially [did so]," said Dladla.

Over the year 15 494 split meters were installed in Soweto and Kagiso with 13 255 converted to prepaid. In addition, 14 105 meters were installed in Midrand and Sandton which will be converted to prepaid meters.

The Interim Group Executive said the utility has secured 53% of funding for the 2018 financial year. This is in addition to unplanned breakdowns at the utility reducing from 14.9% in 2016 to 9.9% in 2017.

The results also showed that Eskom reduced its reliance on open cycle gas turbines with a total of R340 million spent on the turbines to R8.7 billion in 2016.

The interim group executive said that since his appointment by Public Enterprises Minister Lynne Brown, his focus and that of the board have been on the Minister's concerns around leadership cohesion within the utility, as well as on contract management, among others.

"I will strive to meet those expectations of shareholder representative," said Dladla.

Probe into former CEO

The power utility also announced that it had received a report regarding allegations of impropriety on the former group chief executive Matshela Koko.

At a briefing in May, Minister Brown said the former executive had decided to go on leave until the investigation was concluded.

On Wednesday, Zethembe said the power utility received the report on 23 June. “We then sought legal advice… and the charges were drafted,” he said.

IPP connections and equipment theft

The power utility has connected a total 5027 megawatts of Independent Power Producers (IPPs) to the grid.

Meanwhile, when coming to network infrastructure, Dladla said 235 arrests have been made with progress in the arrest of syndicates targeting network infrastructure.

Electrification drive

A total 207 189 households were electrified during the year, an increase of 31% compared to 2016.

Turnaround plan

Dladla said the utility’s turnaround plan continues to yield positive results with the new build programme delivering to plan. This includes the synchronisation of Medupi Power Station’s Unit 4 in May 2017, among others. –

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