State-owned power utility Eskom reported a net loss after tax of R20.7bn for the 2019 financial year on Tuesday, on outgoing chief executive Phakamani Hadebe's second-last day on the job.
Hadebe resigned in May, citing the "unimaginable demands" of the job on his health. The power utility has since advertised for a new CEO and applications close on Friday. In the interim, its chairman Jabu Mabuza has been appointed as acting CEO for three months.
During the results presentation, Hadebe gave an overview of the past financial year under his watch.
On entering the job:
The past 18 months have been challenging…The mandate that was given to the board [in January 2018] was very simple: Deal with Eskom's weak financial position, declining revenue and governance failures which threaten the sustainability of the company. It was financial oversight, revenue issues and governance. We were unfortunately oblivious to the underlying factors.
On load shedding:
We have to apologise to all South Africans for all the pain they had to endure, and all forms of impact it had on them.
On doing the maths:
The first thing that was a challenge for the board and management to understand was an entity that between 2008 and 2018 had the privilege of receiving 325% increases amid an average annual inflation of about 6% - why was it facing these problems? …[A]n entity that over and above these tariffs had an advantage of recapitalisation to the tune of R83bn should have been in a different position.
[D]uring the past 18 years from 2000, there had been about four instances where Eskom had been able to generate enough revenue to service the debt. The crux of the matter became clear to us. If government were to recapitalise us and we held all other things constant, if government were to give us R100bn, within a period of 4-5 years we would be back to where we had been before.
Business separation by itself will not bring about the necessary change, but if we do the other three things [contain costs, increase tariffs and manage debt] it will ensure that we run the business in terms of agility and increase accountability and transparency. Out of the 15 biggest utilities in the world there are only three that are centrally run, and that includes Eskom. The time was right to move in 1998, 99. We didn't do so, and we are paying the price now.
On municipal debt:
In March 2018 municipal debt was R13.6bn. By the end of the year it was R19bn. As I am talking to you now it has increased to 22bn. The speed at which it is moving is of concern. Unfortunately, in areas where we have cut electricity we have been interdicted… the court has said that problem must be solved by government and Eskom. This is the story of the declining revenue.
On irregular spend:
Yes, we recovered [R1.3bn] from McKinsey, and we are happy... We have done our own internal investigation and identified about 10 companies who we think have to pay us back. The total amount spent with those companies is about R72bn. Let me be clear, not all R72bn is dubious. But that is the amount that has been paid. We have spoken with some of them, and one of these companies is willing [to pay]. The other two are playing hide-and-seek. [But] it will be easier for the companies to come forward. We are going to arrive at that. That is our intention.
If we can deal with operational challenges, there is a market available to us. But that is not within our control. What is within our control is the cost side. If we can manage that, we can effect other changes.
Improved governance is not adequate to ensure Eskom is sustainable. There is a need to optimise the whole balance sheet to deal with debt issues. Our earnings [stand] at R32bn, debt servicing costs and debt payback amounts to R70bn. The amount we are generating is not sufficient to even pay the interest. We are like an individual who borrows money to pay interest on the credit card.
We have a different view from Nersa. We felt the court would be the best arbiter, and have taken the case to court.
On Eskom's trajectory:
Eskom employees have helped the entity to navigate through all these challenges. They have stepped up, doing more than what was required. They put South Africa first, and that was important.
We closed the year with an energy availability factor (EAF) of 69.95. The EAF for the first quarter of this new financial year is sitting at 70.95. COO Jan (Oberholzer) tells me the July number has touched 72. We are on the right trajectory.