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Eskom results: very captured and full of holes

Eskom’s annual results this week are the first since it was publicly outed as a state-owned entity firmly “captured” by the Guptas. They aren’t good.

Financial state of Eskom, Debt securities and borrowings (green) at around R340bn - guaranteed by you, the taxpayer.

“Not only have the results been prepared and signed off by the Gupta-appointed and captured CFO, but the Eskom chairman is also squarely in their camp,” says Ted Blom, OUTA’s Portfolio Director for Energy.

The results were presented by Eskom CFO Anoj Singh, acting Chairman Zethembe Khoza and acting CE Jonny Dladla.

The report and the Eskom team’s explanations involved obfuscations, avoidance and lies.

The Eskom group all insisted that the entity is on a sound financial footing. This is despite the massive drop in profit from R5.2 billion in 2015/16 (the restated net profit) to R900 million for 2016/17. It doesn’t explain why Finance Minister Malusi Gigaba recently promised “soft support” for Eskom until the next price increases or why it’s apparently planning to ask for big price increases.

Electricity sales are down. Electricity prices are up.

Eskom claims it has been cost cutting, but coal costs are down because sales are down (you buy less coal if power stations are producing less electricity) not cost cutting.  And the cost-cutting claim is reduced to rubbish by the fact that Singh has just ordered that Matla coal (at around R95 a ton) be cut back in favour of Gupta coal (over R600 a ton including delivery).

“Pity the acting CEO, Jonny Dladla, who tried to make light of the calamity facing Eskom. Having accepted the poisoned chalice in good faith, it would be a miracle if Dladla survives more than 90 days,” says Blom.

“He has to find a way to control a rogue CFO, who willy nilly signed a guarantee to the value of over R1.6 billion, paid the Gupta-linked company Trillian at dollops of R500 million a throw and wrote off a R2.1 billion fine for the Gupta’s for Optimum coal mine. Singh’s nonsensical explanation was that Eskom’s coal crusher at Optimum led to deteriorating results, so Eskom reduced the fine which the Guptas inherited from Glencore. Glencore would be justified in claiming back the R2.1bn fine levied against it, based on Singh’s incoherent explanation.”

It’s not clear how much the Optimum fine was reduced; Eskom’s current version is that it’s R550 million and will be paid off over time as an offset against coal payments. The report includes a Treasury report that notes there’s no evidence the fine was paid.

“The Eskom pack of cards is crumbling and it can surely only be a matter of months before it succumbs to financial collapse, despite promises by Singh that liquidity is absolutely not an issue. With rampant cost increases in salaries and other unnamed expenditure, a perennial shortfall in cash to complete Medupi and Kusile, and an evaporating electricity market, the best Eskom could hope for is another bailout by government,” says Blom.

“Finance Minister Gigaba has tried to deflect future cash calls to NERSA, claiming that Eskom’s financial hardship could be relieved by another round of excessive price hikes.”

OUTA again calls for a full judicial commission of inquiry into Eskom’s mismanagement since 2001. Until the Gupta stranglehold on Eskom is broken, the public has little hope of clarity on the billions of rand in largesse being handed to the Zupta empire.

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