JOHANNESBURG-- Despite South African power utility Eskom facing many challenges, its newly appointed interim Group Chief Executive Officer (CEO) Phakamani Hadebe is confident that the State-owned company can turn the corner.
I am confident that Eskom can turn the corner. The challenges at Eskom are less about core operational issues, said Hadebe when releasing the company's interim results here Tuesday. He said while challenges including a qualified audit report, Eskom can still find its way.
The disappointingly low 2.2 per cent tariff increase granted in February 2017 to the utility by the National Energy Regulator of South Africa (Nersa) and declining sales volumes put a damper on the utility's performance.
The utility is optimistic that a point of agreement can be reached and Hadebe said Eskom would engage the regulator on challenges we face.
Eskom has also seen a 33% spike in arrears owed by municipalities, which rose during 2017 to 12 billion Rand (about 1.0 billion US dollars) from 9.0 billion Rand previously.
Hadebe said the qualified audit could have been avoided. Corporate governance issues at the utility had led to liquidity issues.
Since assuming the role of CEO along with the government's appointment of an entire new board earlier this month, Hadebe said funders had requested Eskom to address corruption issues. This, he said, had hindered the discussions between Eskom and investors regarding the utility's funding mix.
Referring to the balance sheet, Hadebe noted that the company's debt was not sustainable with Eskom's gearing ratio at 72 per cent. There is a need to convert some of the debt into equity, he said.
He noted that the utility had reached a stage where it is becoming clearer that the sustainability of Eskom cannot be achieved through borrowing. The financial performance of Eskom showed that external auditors issued an unqualified review conclusion, with an emphasis of matters regarding Eskom's going concern position.
Meanwhile, the utility reported earnings before interest, tax, depreciation and amortization (EBITDA) of 30 billion Rand for the period from September 2016 of 32 billion Rand, following the 2.2 per cent tariff increase. Eskom's net profit after tax came to 6.0 billion rand against 10 billion Rand previously, with higher depreciation and net finance costs due to new build units coming online.
On the issue of whether the utility would pursue the option of developing nuclear power plants, interim Chief Financial Officer Calib Cassim said the utility cannot commit to nuclear given its current circumstances.
If [we] don't have a sustainable balance sheet now [we] can't commit to nuclear if I have limited funds. Now the focus is on maintaining the current assets and then whether we can sustain nuclear in the future, said Cassim.
Source: NAM NEWS NETWORK