What Eskom didn’t tell us

INTERIM RESULTS: SECOND READING GIVES A DIFFERENT PERSPECTIVE

Overdue debt from municipalities increases, and it has a R1.7bn liability.

Eskom on January 30, released its interim results, which showed a much-reduced profit of R6.3 billion – down from R9.5 billion a year ago.

But a second reading of Eskom’s results often provides a different perspective from the widely-reported “company line” presented.

First, Eskom only reported its interims at group level. Eskom said it only discloses the Stateowned company (SOC) results at year-end.

This is especially important in the light of the difference between the two sets of results at the previous year-end. In the last set of annual results a small profit, in fact, proved to be a loss, when Eskom Holdings’ other subsidiaries were stripped out and Eskom SOC was considered in its naked truth.

At that stage the group consisted of the utility and the Eskom Finance Company, Escap (a captive Eskom insurance company) and Eskom Development Foundation. The results of these entities boosted the company’s loss-making numbers at a group level.

It’s not clear whether this structure is still the same, since Eskom Finance Company was for sale. It’s not clear whether it has been sold yet.

The crucial issue that led to the delay in releasing Eskom’s interim results was the auditors’ concern about Eskom’s going concern status.

In the end they didn’t qualify the group’s results on this basis, but did raise their concern.

If the previous annual results are anything to go by, one would therefore wonder whether Eskom SOC is a going concern.

Changing debtors’ terms

Another thing that Eskom failed to mention in its interim results presentation, but that was disclosed in the financial statements, relates to the shocking increase of 35% in overdue debt from municipalities to R12.4 billion.

The presentation failed to mention that this increase was despite Eskom doubling the payment terms from 15 days to 30 days. It doesn’t disclose the comparable outstanding debt at 15 days.

Eskom further raised a contin- gent liability of a massive R1.7 billion for a claim from its reinsurers after the explosion at Duvha Unit 3 in 2014. Eskom was paid on condition that it concludes a binding contract for the reconstruction of the unit by March 2017.

Eskom failed to meet the deadline after a court wrangle with bidders.

The R1.7 billion was not ringfenced and since Eskom has been borrowing money for salaries, it’s doubtful that the insurance money has been left untouched.