14 November 2017

South Africa: Eskom Notes Liquidity Reports

Photo: Chris Kirchhoff/MCSA
Beaufort West, Western Cape province (file photo).

Eskom says it has noted media reports that relate to its liquidity challenges and financial sustainability.

The power utility on Monday said it has always maintained that the 2.2% tariff increase for the 2017/18 financial year will present challenges to the company's liquidity position for the current financial year.

"As a result, Eskom has had to undertake certain financial commitments to ensure sufficient liquidity, in line with its funding requirements. Cost containment has been one of the key components of our strategy. The company's cost-cutting measures are bearing fruit, with a saving of R47 billion realised from the 2012/13 to 2017/18 financial year," said the power utility.

Reports emerged on Monday that the utility is on the brink of insolvency with only R1.2 billion of liquidity reserves expected to be on hand at the end of November.

Eskom said in order to manage the surplus capacity, it has adopted an aggressive sales volume growth to support economic growth by encouraging increased local and cross-border sales.

To date, Eskom has secured approximately 56% of the funding requirements for the current financial year.

However, the execution of the remaining funding requirement is largely dependent on Eskom being able to address several issues including:

The constitution of a new board of directors;

Resolving internal governance related matters;

The appointment of a permanent Group Chief Executive and Chief Financial Officer and other executive positions and,

Remedying the issues that gave rise to the qualified audit opinion on the 2017 financial result.

"Eskom is confident that the board of directors and the executive management team with the support of the South African government will address the above-mentioned issues that have negatively impacted its liquidity. As such, Eskom will maintain sufficient liquidity to support its operational and financial requirements," the company said.

Interim Group Chief Executive Sean Maritz said the company remains resolute that it 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 fulfil our commitments," said Maritz.

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