Tag: broke

‘Broke’ Eskom wants to hand out bonuses

Eskom has been given the green light to pursue up to R60bn in clawback tariffs.

On Tuesday, the Constitutional Court dismissed an application to set aside the power utility’s regulatory clearing account (RCA) adjustments, clearing the way for Eskom to recover a potential R60bn through tariffs in the next year.

RCA adjustments deal with funds that Eskom needs to recover due to a shortfall in electricity losses or a escalation in operating costs, through possible tariff hikes.

The National Energy Regulator of South Africa (Nersa) will now hold hearings as Eskom argues why it should be granted the delayed tariff hikes.

However, Eskom has also Eskom is considering paying its employees a R150-million “winter challenge” bonus for avoiding power cuts, The Sunday Times reports.

The submission comes a month after the power utility reportedly paid R4.2-billion in performance bonuses to staff, and two months after public enterprises minister Lynne Brown approved bonuses totaling R13-million for its executives, including former CEO Brian Molefe, former chief financial officer Anoj Singh and suspended acting CEO Matshela Koko.

“I cannot think of any reason to pay bonuses to Eskom employees for doing their job: keeping the lights on,” said Brown.

“And particularly not in the current economic environment. It is an operational matter and therefore not the shareholders’ call, but I would like to believe Eskom’s interim leadership will take prudent financial decisions.”

Added to the no load-shedding requirement is that there can be no fatalities and no environmental contraventions.

An Eskom HR executive has indicated that the bonuses would be spread across the company and not limited to generation staff. Should the proposal be approved, Eskom would then pay an amount of R149.8 million to be shared among 47,053 employees.

Last year the Pretoria high court ruled that Eskom’s RCA adjustments were “irrational, unfair and unlawful”. This came after a four year court battle which set aside aside Nersa’s R11.2bn RCA award for Eskom’s 2013/14 financial year.

The battle started back in 2013, when companies from the Eastern Cape, led by alloy manufacturers Borbet SA, lodged an application against the RCA.

The court case prevented Eskom from processing future RCA submissions, which meant that RCAs for the 2014/15, 2015/16 and 2016/17 financial years were put on ice until the court case ended. While the companies initially triumphed in the Pretoria high court, the Supreme Court of Appeal (SCA) reversed the ruling and ultimately the Constitutional Court dismissed the application by Borbet SA and others for leave to appeal the SCA decision.

The ruling on Tuesday means that the 2013/2014 RCA tariff adjustment remains applicable and that Nersa will now have to process the three period applications of Eskom’s RCA adjustments. The SCA judgment will stand as the final word on the matter.

Eskom has applied to Nersa for a R19bn clawback for 2014/15, and a R22bn for the 2015/2016. The 2016/2017 application is not yet public, but is reported to be R20bn. This all adds up to R61bn that Eskom will try to recover, possibly over one year, energy analyst Chris Yelland said.

He said Eskom sales only amounted to R180bn and the R60bn will try to cover the shortfall.

“In order to recover this money, it would need to increase tariffs by 33%,” Yelland explained. “That is what Eskom will ask for at Nersa, this is not to say that they will get it.”

In addition, Eskom’s leaked, latest Nersa application asks for a 20% hike, which is apart from the possible 33% they are likely to ask for in the RCA adjustment, which could potentially bring the overall tariff hike up to 53%, Yelland explained.

“Even if they get half of that, it will put immense pressure on consumers,” he said. “The ruling certainly has heralded interesting times.”

Eskom’s plummeting electricity sales and increasing tariffs mean that the power utility will be selling even less power in future, Yelland said. “Eskom is in a utility death spiral.”

Eskom said the court’s ruling affirmed Nersa’s decision to allow Eskom’s application for a tariff adjustment .

This means that Eskom is not barred from making future RCA applications for electricity price adjustments to Nersa, the state utility said.

“The ruling also clears the path for Nersa to process Eskom’s RCA submissions for the 2014/15, 2015/16 and 2016/17 financial years.”

After losing the first round, Nersa and and Eskom approached the SCA to set aside the High Court ruling, and won the case. In July the companies then took their case to the Constitutional Court, which on Tuesday dismissed the case.

The Constitutional Court dismissed Borbet’s application on the basis that the application “bears no prospects of success”.

By Yolandi Groenewald for Fin24; BusinessTech

Eskom: we’re not broke

Eskom has lashed out at media reports that it was “broke”, saying it was confident it could keep going.

“Eskom refutes the notion that it is facing a cash crisis, and that it has only enough cash to last for the next three months,” it said in a statement.

“The company is confident that it will maintain sufficient liquidity to support its operations,” it added.

The state-owned enterprise said that it had noted weekend media reports about apparent financial problems.

However, it said that, because it was making an official announcement on its finances this coming Wednesday, “Eskom is not in a position to respond comprehensively to the specific issues raised at this stage”.

The power utility said that “external auditors have confirmed Eskom as a going concern, and as a result the company sees these reports as being inaccurate and misleading…

“It is important to reiterate that Eskom is not facing any liquidity challenges.”

The parastatal also said it wanted to highlight certain points, including that “whilst Eskom’s financial position has always been supported by significant reliance on debt and borrowings, its improved overall financial and operational performance over the last two years has led to an improved balance sheet”.

Eskom said it had “sufficient government guarantees” in order to be able to carry out its funding plan. It also had “maintained access to capital markets and raised committed funding”.

‘Eskom may not be able to pay salaries’

The Sunday Times newspaper published an article on Sunday in which it claimed that, according to financial statements it had seen, Eskom only had enough money to last approximately three months.

According to the weekly publication, Eskom has R20bn left, but has proposed to pay millions in bonuses, including to former CEO Brian Molefe and suspended acting chief executive Matshela Koko.

This week, Fin24 reported that, late last Monday, Eskom postponed its financial results presentations which had been due to take place last Tuesday.

Earlier this month, external auditors SizweNtsalubaGobodo reported the state utility to the Independent Regulatory Board of Auditors for apparent irregularities.

Koko has been on special leave since May, pending an investigation into an apparent conflict of interests, while a legal battle continues into the reinstatement and subsequent removal of Molefe.

On Sunday, the DA called on Public Enterprises Minister Lynne Brown to reject the proposed multi-million rand bonuses for the executives, past and present.

“The fact is that Eskom may not be able to pay salaries to its 49 000 employees come November,” said DA MP Natasha Mazzone in a statement.

Recent controversy

Here is a list of some recent controversies Eskom has been embroiled in.

  • Boiler tender worth R4-billion set aside

At the end of June‚ the Johannesburg High Court set aside a R4-billion tender given to Chinese firm Dongfang to replace a boiler at Mpumalanga power station Duvha.
Losing bidders‚ Murray and Roberts and General Electric‚ which had put in much cheaper bids than the Chinese firm‚ approached the Johannesburg High Court to have the tender set aside. Price was supposed to be a factor in the choice‚ Eskom had said.

  • Eskom paid Trillian R266-million without invoices

The Trillian report‚ released recently by advocate Geoff Budlender‚ SC‚ found millions were paid by Eskom to Trillian without proof any work was done for the power utility.
One invoice was for the broken boiler station that Dongfang had won a bid to fix. The boiler remains broken.
Budlender linked the Trillian company to the Guptas because their associate Salim Essa owns 60% of Trillian.

  • US firm acts

US auditing firm McKinsey has taken steps against its SA director‚ Vikas Sagar‚ after he wrote letters saying McKinsey was doing work for the company‚ something the company denies took place. The action taken against Sagar is part of a probe that is looking into Eskom contracts given to a Gupta-linked company.

  • Tegeta‚ Eskom and the Guptas

The Guptas received a R600 million pre-payment for coal from Eskom and used this money to buy the Optimum Coal mine.
Eskom said this was a pre-payment‚ but former Public Protector Thuli Madonsela said in her State of Capture report that this prepayment was irregular.

  • CEO Brian Molefe resigned‚ retired‚ rehired‚ rescinded

Molefe announced he was stepping down as Eskom CEO in November 2016 in the wake of the Tegeta incident and Madonsela report.
In May‚ he returned to Eskom as CEO‚ saying he had just retired.
After Public Enterprises Minister Lynne Brown was forced to explain his reappointment‚ she filed an affidavit saying he had never retired but had taken “unpaid leave”.
The scandal led to the Eskom board firing him at the end of May

  • Revelations in the Denton report‚ published in the Financial Mail

Eskom wasted about R200m over two years by failing to negotiate proper discounts with diesel suppliers. The company paid billions to companies without having received proper invoices‚ in many instances paying for services without evidence of having received the supplies for which it was paying.
Eskom contributed to its own financial problems‚ and contravened the Public Finance Management Act by failing to put proper controls in place.
It consistently overpaid for diesel‚ coal‚ logistics and other contracts.
Eskom employees diverted business opportunities to themselves at the expense of the utility.

Source: News24; timesLive
Image credit: National Geographic

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