Mantra Eskom is ‘too big to fail is a fallacy’
Miller, who is based in the United Arab Emirates, concluded in his report, which was published last week, that Eskom has devolved into an “operationally dysfunctional, financially insolvent, unreliable and corrupt entity”.
Miller said a full independent “forensic audit” of Eskom - including the creation of detailed audit trails - must be conducted immediately for the benefit of its creditors, vendors, unions and other stakeholders.
Miller, an energy restructuring expert in the global energy and infrastructure industry for close to 30 years, also took issue with the unbundling of Eskom into three separate units.
“Eskom must be ‘ring-fenced’, triaged, and brought under the control of a new ‘hands-on’ senior energy CRO (chief restructuring officer), not another chief executive, and a new independent senior energy executive management team,” Miller said.
“Eskom is not ready to be decoupled or broken up into separate operating companies at this time, due to the severe financial, operational challenges, corruption, fraud and malfeasance facing the company.”
Miller, who issued another scathing report on Eskom in October, said he would issue an Eskom debt restructuring report by December 31.
Corporate governance and management have broken down at Eskom as the power utility has gone through more than 10 local chief executives and numerous board of directors over the past 15 years.
The government has appointed Nampak chief executive Andre de Ruyter to take over as Eskom’s chief executive in mid-January.
Earlier this year, the government announced the separation of Eskom into generation, transmission, and distribution units, and a chief restructuring officer was appointed to manage the process.
The power utility poses the biggest threat to the economy as it battles with operational and financial challenges.
Eskom this weekend began implementing rotational power cuts up to stage 4, as its ageing coal-fired power plants failed to provide a steady supply of electricity to the grid and keep up with the demand.
Load shedding weighed heavily on production in the three months to March this year, resulting in gross domestic product contracting by 3.1percent in the first quarter.
With a staggering debt of more than R450billion, Eskom expects to report a loss of R20bn this financial year after recording the same losses last year.
Eskom’s debt has exposed South African bonds to risk and pushed ratings agencies to review the country’s outlook to negative, with a possible downgrade to junk if reforms are not implemented urgently.
Miller said that the government’s mantra that Eskom is “too big to fail is a fallacy”.
He also said that a non-South African senior energy and infrastructure CRO needed to be hired to run the Eskom business and lead the financial and operational restructuring.
“Eskom has long since been a failed institution and has driven the SA Treasury to the brink,” Miller said.
“Attempting to hire another chief executive for a debtor in possession company like Eskom is doomed to fail, not practical, not feasible, and is not the way forward to correct the critical matters at hand.”