File image: IOL

CAPE TOWN - Eskom interim CEO, Phakamani Hadebe admitted on Tuesday that the power utility is facing significant financial challenges emanating from lack of integrity, lack of corporate governance and proper leadership.

In its release of its interim results, the utility has revealed that its performance capacity is not optimal but "satisfying".

Eskom chairman, Jabu Mabuza said the power utility had increased performance capacity despite the utility facing major challenges.

Eskom acting CFO, Calib Cassim said Eskom had financial challenges experienced during the first six months due to:

  • Flat revenue attributable to the 2.2% price increase or 2017/18 and sales volumes declining by 1.9%, exacerbated by escalating municipal arrears debt.
  • The 2016/17 audit qualification on irregular expenditure
  • Access to funding restricted
According to thE Eskom's report, government has prioritised the resolution of governance and liquidity concerns affecting Eskom. Cassim said the generation plant performance had improved, with plant availability at 83.2% (Sept 2016: 78.4%).

"External auditors have issued an unqualified review conclusion, with an emphasis of the matter regarding Eskom’s going concern position" he said. Eskom has recorded a net profit after tax of R6 billion down from R10 billion in September 2016; with higher depreciation and net finance cost due to new build units coming online.

Net cash registered from operations was R22 billion, which decreased from R32 billion in September 2016. This was due to lower profit and increase in municipal arrear debt.

"Liquid assets of R9 billion were recorded from R30 billion for September 2016". The power utility also said the overall electricity sales volumes reduced by1.9% (2 038GWh) compared to comparative period.

These financial results were expected to be released last year in December 2017 but postponed for early 2018 as Eskom claimed it needed an opportunity to review the impact of the 5.23% price increase as well as to allow the newly-appointed board members sufficient time to review the financials.

Eskom's board is in the process of appointing a permanent group chief executive and group chief financial officer within the next three months.

The state-run company which has been embroiled in a governance crisis and allegations of undue influence in awarding tenders, said in a statement it would address governance concerns and stabilise the firm through its new board.