Category Archives: DPE

An alarming picture emerges as Eskom’s liquidity dries up

The reports states that without any further funding, Eskom will have approximately R1,2-billion of liquid assets at the end November 2017 against a target of R20-billion, and will move into a negative liquidity position of approximately R5-billion by end of January 2018. This figure assumes the successful draw-down of R2,2-billion from development finance institution (DFI) loans and R1,3-billion export credit agency (ECA) facilities.

The report further states that the qualified audit opinion in Eskom’s 2016/17 annual financial statements relating to irregular expenditure, governance issues and changes in leadership has had a negative impact on investor sentiment, which is affecting the volume of future funding, current drawdowns and liquidity position of Eskom…

Eskom’s financial position

The report indicates that at 30 September 2017 Eskom Group revenue of R95,5-billion was R3,75-billion lower than budget.

This was attributed to lower than budgeted electricity sales volumes, the capitalisation of pre-commissioning revenue at Medupi and Kusile, and revenue of R2,64-billion deemed uncollectible at the date of sale.

Eskom indicates that average demand from key industrial customers remains low, with no recovery in demand or sales. Average demand for these customers has declined further to approximately 8200 MW during the past quarter, from an average of 8500 MW in the first quarter of the financial year, mainly due to customers’ response to higher winter electricity tariffs.

Primary energy costs were underspent by R3,87-billion across all main categories of coal, OCGTs, IPPs and international purchases.

The group’s operating expenditure (excluding depreciation and amortisation) of R25,3-billion was R4,7-billion below budget, as a result of underspend on employee benefit costs and other operating expenses.

Group capital expenditure amounted to R24,2-billion for the period, which is substantially lower than the budget of R31,8-billion due to underspend mainly at Kusile, Medupi and other power delivery projects, partially due to phasing of expenditure. Much of the capital spend shortfall is however expected to be incurred by year end.

Poor governance – a core issue highlighted in the report

The report highlights that the audit qualification in Eskom’s 2016/17 financial statements relating to irregular expenditure, governance related issues and continuous changes in executive management has had a severe impact on Eskom’s ability to raise funding in the domestic and foreign markets and has also resulted in delays in drawdowns on existing facilities.

Eskom says this will have a negative impact on financial sustainability and its status as a going concern.

The report identifies that in order to improve both liquidity and execution of funding initiatives, it is critical that governance related issues and investigations are resolved, and that stability returns within Eskom’s board and executive management.

Investors indicate that they are heavily reliant on these issues being resolved before any firm commitments on funding will be made.

Rating agencies have also indicated their deep concerns regarding governance and leadership at Eskom, and are closely monitoring the execution of the funding initiatives. Any further downgrades would exacerbate the current situation and put at risk the execution of Eskom’s funding plan.

Note: This article is a collaboration between EE Publishers and Fin24.

Here is the link to the article

State Capture Inquiry Day 1: Unpacking looting at Eskom

Fin24,  Matthew le Cordeur, 17 October, 2017.

Parliament’s public enterprises committee has started its first state capture inquiry, starting with allegations of corruption and capture at Eskom.

SA cannot afford new nuclear – Eberhard

South Africa cannot afford to build a new nuclear fleet, Professor Anton Eberhard told Parliament’s state capture inquiry into Eskom on Tuesday.

“From my research, a new nuclear fleet would be extremely difficult to finance with our current fiscus status,” he said.

President Jacob Zuma reshuffled his Cabinet on Tuesday, placing a new minister in the Energy portfolio for the second time this year.

This time, David Mahlobo was made Energy Minister. As State Security Minister, Mahlobo was part of Zuma’s visit to Russia in 2014, where reports alleged he signed a secret nuclear energy deal with Russian President Vladimir Putin.

With Zuma’s future uncertain, analysts believe the president is eager to push through the programme, which had been suspended by a court this year.

Eberhard said there has been a 400% electricity price increase over the last 10 years, which is highly unusual. “This has had a serious impact on the economy,” he said.

“The increases are mostly due to Medupi and Kusile, which has added massively to Eskom’s finance costs. An increase in coal costs are also contributing to this.

“The price should not have been much more than inflation,” he said. “If you look at renewable IPPs, there has been a 78% decrease in solar PV prices in last five years. This points to the fact that Eskom’s price increases are out of synch.”

Here is the link to the full article – and there is lots more!

Eskom considers relaunch of pebble bed modular reactor programme

EE Publishers, 14 August, 2017.

(Ed, note: This is unbelievable! Perhaps it is a joke? Just the sort of project to strengthen one’s balance sheet!)

This article outlines Eskom’s approach in the development of the advanced high temperature reactor (AHTR) programme, commonly known as the pebble bed modular reactor (PBMR) restart. The proposed AHTRs are intrinsically safe, modular, efficient and modern gas-cooled reactors which are deployable in even the remotest areas of the country.

The technology base for these reactors, although in research stage, is relatively established with potential commercialisation within the next few decades. Eskom’s approach is to develop a 100 MWth/50 MWe “proof of concept” machine, based on the key lessons from the PBMR, with energy storage capability tailored to customer needs. The research effort is primarily hinged on the PBMR technology with advances in Generation IV reactors.

(Ed. note: Evidently Eskom failed to learn the key lesson of their first PBMR attempt – DONT DO IT! Ir would be interesting to find out where the funding is coming from.)

Read the full article here and hope that good sense prevails

Brown instructs Eskom board to rescind Molefe reappointment

Daily Maverick, Wired World, NEWS24, 31 May, 2017

(Ed. note: Here we go again, and we didn’t have to wait for the weekend revelations this time!)

Cape Town – Public Enterprises Minister Lynne Brown has ordered the Eskom board to rescind the reappointment of Brian Molefe as chief executive on Wednesday.

Brown has asked the Eskom board to provide her with two names from the Eskom executive to become acting chief executive. She will announce who that acting CEO will be within 48 hours’ time, she said.

“We met with the Eskom board today,” she said at a media conference in Cape Town. “Collectively, looking at all the facts… I directed Eskom to rescind the decision to reappoint Mr Molefe.”

This follows the announcement by the inter-ministerial committee that it concluded that Brown should order the board to rescind the reappointment.

“It will be in best interests in government, Eskom and the country that the Minister of Public Enterprises directs the board to rescind the re-appointment of Mr Molefe,” said inter-ministerial committee convenor Justice Minister Michael Masutha on Wednesday in Cape Town.

The decision by the Eskom board to grant Molefe early retirement and then the decision to reappoint him were two mistakes that could have been prevented, the committee found.

“Both mistakes could have corrected administratively and not by the board reinstating Mr Molefe,” said Masutha.

Here is the full article

Brian Molefe returns as chief executive of Eskom

BusinessDay, 12 May, 2017

Board spokesman Khulani Qoma confirmed his return in an interview on Talk radio 702

Board spokesman Khulani Qoma confirmed his return in an interview on radio 702 www.702.co.za on Friday.

“Definitely‚ he is coming back on Monday‚” Qoma said.

Molefe has resigned as an MP in order to resume his former position.

His return was sparked by a dispute over a reported R30m pension payment that he was awarded after he announced in November that he was stepping down “in the interest of good corporate governance”.

The Sunday Times revealed that he was awarded the hefty “golden handshake” despite being at the power utility for only 18 months.

Public Enterprises Minister Lynne Brown said shortly afterwards that there was no justification for the payment.

(Ed. note: I wonder what Lynne Brown is up to? Trying to save the R30m, getting rid of Koko, looking for another way to get rid of Brian, but without the handshake – waiting for the State Capture report to implicate him so he can be fired?)

Qoma said the Sunday Times story had resulted in Brown instructing the board to review the payout and come up with a mutually acceptable agreement. “We could not agree … so a decision was made to rescind the initial decision by the board for a pension payout.”

That effectively nullified his resignation and he would return to work on Monday‚ he said.

Molefe resigned from Eskom after it was revealed in the State of Capture report by former public protector Thuli Madonsela that he had exchanged 58 calls with Atul Gupta.

The report also detailed how cellphone records had placed Molefe in Saxonwold‚ the Gupta residence in Johannesburg‚ several times around the time of the controversial Tegeta-Optimum coal mine deal signed with Eskom.

Eskom chairperson Ben Ngubane said he was “absolutely delighted” to have Molefe back.