EXXARO: 16,531 +102 (+0.62%)
South Africa's Eskom not insolvent but facing cashflow trouble
* Utility in leadership crisis
* Says 2017/18 tariff increase not sufficient
* Electricity sales muted, costs spiral upwards
* Company says has enough stocks to weather strike
(Adds Eskom says financially afloat, strike, details)
By Tanisha Heiberg and Mfuneko Toyana
JOHANNESBURG, Nov 13 (Reuters) - South Africa's
scandal-plagued power utility Eskom said on Monday it was not
insolvent but was facing serious liquidity issues and could be
in "trouble" if the situation persisted, adding that it was
working to control its costs.
Eskom, the sole power supplier in Africa's most
industrialised economy, is in the midst of a leadership crisis
and has been at the heart of allegations of illegal contracts
and undue influence in awarding tenders to the Gupta family,
friends of President Jacob Zuma.
Zuma and the Guptas have denied any wrongdoing.
Eskom spokesman Khulu Phasiwe said the firm's sales growth
had been muted while its operating costs were very high and its
tariff for the current financial year was low.
"We are not insolvent but we are projecting that if we
continue along this trajectory we might be in trouble," Phasiwe
"We as a company need to sort ourselves out and get our
house in order so that when we go out to the market to raise
money these things do not become a hindrance," said Phasiwe.
In a separate statement, Eskom said the 2.2 percent tariff
increase it was granted by the energy regulator for 2017/18 had
presented challenges to the company's liquidity position for the
current financial year.
Eskom was granted a 9.4 percent tariff rise in the previous
Over the years, Eskom has been imposing above-inflation
increases on its customers, provoking cries from industry and
households alike. But Eskom maintains big hikes are needed to
shore up its balance sheet and keep the lights on.
Eskom said as a result of the lower tariff it has had to
undertake cost containment as a key component of its strategy.
Eskom said it has secured about 56 percent of the funding
requirements for the current financial year, but to raise the
rest of its financial outlay it required, among other things, to
constitute a new board of directors, resolve internal governance
issues and appoint a permanent CEO and CFO.
Public Enterprises Minister Lynne Brown, who oversees Eskom,
told lawmakers the utility will appoint a new board and begin
the search for a new CEO at a special meeting in November.
Eskom said it was confident that it would carry out the
required changes and maintain liquidity to run its operations.
"Our liquidity levels are not at the desired levels;
however, they are sufficient to fulfil our commitments," Eskomís
interim group chief executive Sean Maritz said.
In a separate statement, Eskom said it had healthy
stockpiles across its coal-fired power stations and was building
them further ahead of a potential coal wage strike by the
National Union of Mineworkers.
The NUM is aiming to strike from Sunday after wage talks
broke down last week at mines run by Anglo Coal, Delmas
Coal, Exxaro, and Glencore GLEN.L, which account for
about half of South Africa's coal production.
"To mitigate the impact from this impending strike, the
utility is working tirelessly to reclaim coal from current
stockpiles, as well as build up operational stockpiles," Eskom
said in an emailed response to Reuters' queries.
($1 = 14.5198 rand)
(Additional reporting by Ed Stoddard; Writing by James
Macharia; Editing by Adrian Croft)
First Published: 2017-11-13 12:15:13
Updated 2017-11-13 19:36:32
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