Investors welcome Eskom’s R83-billion debt reduction

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Investors have cheered news that Eskom managed to reduce its debt by R83 billion in the year to March.

Public Enterprises Minister Pravin Gordhan made the announcement during his department’s budget vote in Parliament.

News of the big debt reduction by Eskom marks a big turnaround for the beleaguered power utility. Two years ago, Eskom was on the verge of defaulting on its massive debt which stood at R419 billion.

The government had to intervene and secure a R3-billion emergency loan for the power utility. The debt then shot up to R484 billion last year. The utility seems to have made a positive turnaround.

Gordhan also announced that Eskom’s cost-saving measures have netted the company R13 billion in the last financial year.

It remains to be seen if that will have any impact on the last round of wage negotiations with unions which is set to begin on Monday.

Unions are demanding a wage increase of between 9% and 15%. Management maintains those demands are unaffordable. It has tabled a 1.5% offer which it says is final.

Eskom says unbundling of the parastatal on track:

Eskom restructuring

Power utility Eskom says the unbundling of the parastatal into three entities is on track.

Eskom says the process to break the company into three separate entities will cost R500-million.  Most of the money will be spent on Information Technology, including system changes, configuration, transferring of data, and the implementation of new entities.

The power utility will be separated into three divisions, namely transmission, generation and distribution.

In a briefing to the Select Committee on Public Enterprises, CEO Andre De Ruyter says the functional separation of the three entities has already been completed while the legal separation will be concluded by the end of next year.

The company says the rest of the money will be for engaging with lenders internationally and locally, and for the changing of lender contracts where required. There will also be an amount for the establishment of entities, including changing of contracts, transferring of land and changing of commercial contracts.

De Ruyter says the exercise has been a challenging one. “It is indeed an ambitious ask particularly in terms of timelines. The typical timelines for restructuring of this magnitude and private sector is a number of years and without indulging in any self-praise I would venture to suggest that so far Eskom is moving very expeditiously in concluding the restructuring process along with timelines required by the roadmap. So we are on schedule. We have highlighted some of that looks particularly in terms of concluding the necessary legislative amendments and we look forward to being addressed inter-alia by the intergovernmental steering committee.”

Asked whether this unbundling will result in job losses, De Ruyter assures Eskom workers that there will be no forced retrenchments as a result of the restructuring process. He adds that the conditions of service will not be affected by their being transferred to the new divisions.

“Their terms and conditions of service will not be impacted and in fact, their payslip at the end of every month should still say Eskom. So we don’t anticipate that there will be a change even though they may be moved from Eskom Holdings as their employer to for example to Eskom Generation Pty Ltd as their employer but the conditions and terms of service will not be affected.

Monies recovered 

The CEO also updates the committee on the steps taken to recover monies lost to corruption.

“We’ve recovered R1.1 billion from McKenzie, we recovered R1.577 billion from ADB. We have recovered R1.71 billion from Deloitte consulting. We’re in the process of recovering some R108 million from PWC. We have launched a claim against 12 former Eskom executives board members and members of the Gupta family for the recovery of some R3.8 billion of money misappropriated. We also launched a number of claims to recover R1.2 billion excessively paid for the supply of fuel oil.

Action has also been taken against individuals in the company who have been implicated.

“We have also laid a number of criminal charges. Some 110 criminal charges have been laid with the law enforcement authorities. Two former Eskom executives have already been arrested and have appeared in court and we look forward to seeing more arrests being made. We also recently suspended a senior executive at the primary energy division and a bank account containing some 11 million rand morning to the senior manager was attached by the asset forfeiture unit.” Additional reporting by Joseph Mosia