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Eskom facing threats on multiple fronts, Maritz acknowledges

12th October 2017 BY: Terence Creamer
Creamer Media Editor
Eskom interim group CEO Sean Maritz

Eskom’s newest interim group CEO Sean Maritz has acknowledged that the utility is facing threats on multiple fronts in light of rapid changes to the global electricity landscape and the constrained outlook for domestic electricity sales.

However, in a statement calling for “space and time to focus on stabilising the company”, Maritz did not immediately outline his approach to dealing with serious allegations of corruption at Eskom.

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In only an oblique reference to the crisis, he noted a statement by McKinsey in relation to returning R1-billion in fees paid to it unlawfully in 2016. “Eskom’s lawyers are handling the matter, and will in due course advise on the way forward,” he said in a statement.

The corruption allegations, together with concerns that the utility has been “captured” by a powerful elite seeking to repurpose State-owned companies for narrow commercial gain, are undermining the highly indebted group’s credibility and potentially placing its funding plan at risk.

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The power utility’s debt stood at R355-billion at the end of March and is expected to peak at close to R500-billion.

Eskom has requested a 19.9% tariff hike from 2018 from the National Energy Regulator of South Africa (Nersa), which will hold public hearings into the application in all nine provinces during October and November.

There are already strong indications that the allegations of corruption and maladministration will be raised as a reason for Nersa to disallow the request. The hearings will partially coincide with an inquiry by Parliament’s Portfolio Committee on Public Enterprises into allegations of State capture of State-owned companies. The committee will begin calling witnesses from October 17.

Both electricity intensive firms and municipalities have also warned of possible grid defection, as well as the triggering of a so-called ‘utility death spiral’, of falling demand and rising costs, should the hike be approved.

Maritz was surprisingly “rotated” into the position by the board on October 6, replacing Johnny Dladla, who had himself taken over as interim CEO from Matshela Koko only in June.

Koko, along with several other executives and senior managers, including CFO Anoj Singh, is currently suspended in light of allegations of a serious conflict of interest in relation to contracts awarded to a company in which his stepdaughter had an interest.

The integrity of Maritz, who has hitherto been CIO and group executive for information technology (IT), has also been called into question.

A media report emerging only days after his appointment stated that he had been found guilty of hiring a Church friend, without declaring the friendship, and alleged that he had deleted some information from the Eskom server.

Maritz acknowledged the “oversight” with regard to hiring a friend, but refuted suggestions that the awarding of the contract was irregular, saying it had been “adjudicated upon by a panel as per Eskom’s internal processes”. His six months written warning in relation to the conflict of interest expired in 2010 and had been expunged. He also refuted claims that he had deleted some information from the server, adding that the IT security system was built in such a way that no email could be deleted.

Somewhat refreshingly, Maritz acknowledged that Eskom was not immune to the current disruptions under way in the international and domestic electricity and energy markets.

He said there was a “wave of change” in customer, supplier and competitor behaviour and that Eskom was also facing a “constrained electricity sales path”.

Maritz said the executive management team remained focused on its five priority initiatives, namely: increasing demand for electricity; reducing primary energy costs; implementing advanced analytics to deliver savings; releasing government guarantees; and ensuring the completion of the new build programme.

“Potential sources of revenue growth range from those that are close to our current capabilities to those that are entirely new. By exploiting both regulated and unregulated opportunities, we have an opportunity to deliver significant revenue impact,” Maritz said in a statement.

To unlock the opportunities, Eskom will focus on local demand stimulation, cross-border sales and unregulated opportunities.

“A clear distinction exists between the business of today and the Eskom of tomorrow, necessitating a focused and structured approach, which will ensure the right level of focus and drive for each identified opportunity.”

Maritz asked for space and time to focus on executing his duties as mandated by the Eskom board, with the support of Public Enterprises Minister Lynne Brown

EDITED BY: Creamer Media Reporter
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