Spotlight on how Eskom will get its act together

ESKOM will today release its interim results for the six months to September last year, and it is likely that the focus will be on the steps that the utility will take to clean up its poor governance and avert a liquidity crisis.

Eskom is under the spotlight as ratings agencies and lenders are anxious about its deteriorating finances, as well as the government’s ability to provide direct equity support to Eskom.

Today’s results come days after Moody’s Investor Services downgraded Eskom’s longterm corporate family rating (CFR) from Ba3 to B1.

It downgraded the zero coupon eurobonds rating from Ba3 to B1 in line with the CFR and the global medium term note (GMTN) programme and the senior unsecured GMTNs of Eskom have been downgraded to (P)B2/B2 from (P)B1/B1.

Moody’s on Friday said Eskom was under review for further possible downgrades.

The new Eskom board is expected to reassure ratings agencies and lenders that it is serious about stopping the rot at the power utility.

Appointed on January 20, the board has been in contact with Eskom’s lenders amid concerns about several governance lapses at the utility.

Under the directive of the Presidency, the board has been decisive in removing officials implicated in corruption.

Executives and senior officials who either resigned or were dismissed last week include former chief financial officer Anoj Singh, senior general manager of outages Dhiraj Bhimma‚ group capital executive Prish Govender and acting commercial general manager Charles Kalima.

Former interim chief executive Sean Maritz is on the verge of suspension. Eskom spokesperson Khulu Phasiwe yesterday said that Maritz – whose official position is chief financial officer – has been on “temporary suspension” since Friday last week.

Phasiwe said Maritz was expected to make his representations on why he should not be suspended today.

He said Maritz would make the representations to interim chief executive Phakamani Hadebe. “His suspension is related to corporate governance lapses,” said Phasiwe.

Maritz is heavily implicated in the R400 million that Eskom allegedly paid to a company called Ideva International Group for raising a R25 billion loan from China’s Huarong Energy Africa. Maritz, who was appointed acting chief executive in October last year, reportedly defied legal advice on the matter.

Maritz is also likely to be hauled over the coals for the absurd decision by Eskom to declare the controversial contract with global management consulting firm McKinsey as lawful.

This flies in the face of the power utility’s previous assertion that the contract was illegal. Eskom has demanded a R1bn refund. McKinsey has previously undertaken to pay back the money.

Another former interim chief executive, Matshela Koko, has so far resisted steps to push him out of the power utility.

On Friday, Koko got temporary relief when the Labour Court granted an interim order, restraining Eskom from unlawfully terminating his contract of employment. Hadebe had given him an ultimatum to either resign voluntarily or be axed.

Meanwhile, Eskom is expected to report a drop in electricity sales in the six months to September last year.

According to a shareholder report that Eskom prepared last year, total municipal debt, which includes interest, has ballooned from R15.4bn in September 2016 to R23bn.

Municipalities in the Free State, North West and Mpumalanga accounted for most of the debt.