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Real Economy News in Real Time
R/€ = 16.89 Change: -0.43
R/$ = 14.16 Change: -0.27
Au 1288.59 $/oz Change: 0.19
Pt 942.50 $/oz Change: 0.00
 
 
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Eskom admits liquidity is ‘not at desired levels’

13th November 2017 BY: Terence Creamer
Creamer Media Editor
Eskom interim CEO Sean Maritz
Photo by: Duane Daws
Eskom interim CEO Sean Maritz

State-owned electricity producer Eskom acknowledged on Monday that its liquidity levels were “not at the desired levels” and indicated that securing the balance of its funding requirement for the current financial year would depend on addressing pressing governance and leadership issues.

Nevertheless, in response to a media report stating that the utility would only have R1.2-billion in cash by the end November, against a target of R20-billion, interim CEO Sean Maritz insisted that the company’s liquidity levels were “sufficient to fulfill our commitments”.

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The report by EE Publishers and Fin24 revealed that Eskom had outlined its dire liquidity position in a recent report to Public Enterprises Minister Lynne Brown. The document reportedly warned that the utility’s liquidity could fall to a negative R5-billion by the end of January; a situation that could result in cuts of between R5-billion and R10-billion to its capital expenditure in the short term.

In its response, Eskom said that it had always maintained that the 2.2% tariff increase for its 2017/18 financial year would present challenges to the company’s liquidity position. The group had since applied to the National Energy Regulator of South Africa for a 19.9% increase from April 1 next year.

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However, Eskom had also only secured 56% of the funding requirement for the current financial year, with serious governance and leadership problems currently constraining the group’s ability to secure the balance.

Eskom said execution of the remaining funding requirement was largely dependent on being able to address the following:
• The constitution of a new board of directors.
• Resolving internal governance related matters.
• The appointment of a permanent CEO, CFO and executive team.
• And remedying the issues that gave rise to the qualified audit opinion on the 2016/17 financial results.

Last month, Brown announced that she would convene a special general meeting in November to appoint a permanent board at Eskom. "The advertising process for new board members of State-owned companies closed on 8 September 2017, and candidates are currently undergoing a vetting process."

She said that among the new board's first mandate would be the appointment of a permanent CEO.

Subsequently, Finance Minister Malusi Gigaba insisted that “Eskom is simply too important to the country to fail, and we will not allow it to”.

In its statement, Eskom expressed confidence that its board and the executive management team, with the support of the South African government, would address the issues weighing on its liquidity.

It also insisted that it would maintain sufficient liquidity to support its operational and financial requirements.

“We remain resolute that we will fully execute the required funding for the year, albeit under challenging conditions. Our liquidity levels are not at the desired levels; however, they are sufficient to fulfill our commitments,” Maritz said.

Eskom added that cost containment was a key component of its strategy and reported that savings of R47-billion had been realised from 2012/13 to 2017/18.

The utility was also taking measures to increase domestic and cross-border sales in light of its current surplus position, which had arisen as a result of a weakening in demand and the introduction of new capacity. 

EDITED BY: Creamer Media Reporter
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