Eskom posted a fifth straight loss and warned the gap may widen, while its auditor said it may not be able to continue as a going concern.
Eskom’s loss narrowed to 12.3 billion rand in the year to March, from an updated 25 billion rand a year earlier, outgoing chief executive Andre De Ruyter said in an online earnings briefing on Friday. Debt at the utility, which supplies more than 90% of the country’s electricity, fell 1% to R396.3bn at the end of March, he said.
A loss of R20.1 billion is anticipated for the current fiscal year, according to De Ruyter. The government has pledged to take over some of Eskom’s debt and said it will not allow it to go bankrupt.
“Without government support, Eskom will not be able to meet all of its debt service commitments,” Calib Cassim, Eskom’s chief financial officer, said in the results presentation. The utility repaid 38.9 billion rand worth of loans during the fiscal year, while raising 33 billion rand, he said.
The yield on Eskom’s 2028 Eurobonds, which are not guaranteed by the government, rose four basis points to 11.43% on Friday afternoon in Johannesburg. The benchmark 10-year rand South African government bond yield was little changed at 11.78%.
Eskom has instituted load shedding for a record 197 days this year to protect the national grid as it fights to curb frequent breakdowns at its aging and poorly maintained coal plants. The utility company does not generate enough revenue to cover its operating costs and interest bill, making it dependent on state bailouts to survive.
Deloitte & Touche, Eskom’s auditor, expressed concern that the company could not continue to operate, saying it had identified irregular spending, unsuccessful and wasteful costs and losses due to criminal conduct.
The auditor’s report found evidence that the utility failed to take action to correct breaches of the National Environmental Management Law or comply with the Public Finance Management Law, Eskom said in a stock exchange statement. He also found other irregularities, including the deliberate destruction of bidding documents in a fire, the possible re-creation or falsification of documents, and the failure to investigate and report irregularities and financial misconduct.
There is “material uncertainty related to Eskom’s ability to continue as a going concern,” Deloitte found, according to the filing.
Eskom also faces a leadership vacuum. De Ruyter, who served as chief executive for nearly three years, plans to leave at the end of March, COO Jan Oberholzer will retire in April, and several other senior management positions are open.
The energy crisis has hampered growth and discouraged investment in Africa’s most industrialized economy. The outlook for power supply for next year will be very limited and blackouts will continue until an additional 4,000 megawatts to 6,000 megawatts of generating capacity is added to the grid, De Ruyter said.
In October, the government said it would take on one-third to two-thirds of Eskom’s debt to help make it financially sustainable, details to be announced in the February budget.
The publication of the utility’s latest financial results was postponed for several months due to a delay in the appointment of a new external auditor.
