ALU

Eskom

Anatomy of a crisis: why SA is on the brink of rolling blackouts

Eskom has shut down 11 power station units due for major maintenance because it lacks the funds to fix them. Original Link

Report urges Eskom, Transnet criminal probes

A forensic report into Eskom and Transnet found some executives and board members failed to act in the companies’ best interests and recommended criminal investigations against them. Original Link

Load shedding could be back by Christmas

State-owned power utility Eskom may be forced to implement controlled blackouts before the end of the year because of pressure on the national system, CEO Phakamani Hadebe said on Friday. Original Link

Eskom seeks new operating model as it fires executives

Eskom is considering a new operating model to move responsibility down the chain of command as the financially strapped utility seeks to cut costs and improve efficiency. Original Link

Real risk of load shedding as Eskom faces coal crisis

Eskom’s coal stockpile situation has deteriorated further, with five power stations having less than 10 days’ stock. Original Link

Eskom looks to cut management jobs

South Africa’s state-owned power utility has started consultations about possible job cuts for executives as the cash-strapped company looks to rein in soaring costs despite stagnant electricity output. Original Link

Beginning of the end of Eskom’s monopoly

The Democratic Alliance announced on Monday that it will revive legislation to break Eskom’s monopoly on the generation and transmission of electricity by introducing a private member’s bill. Original Link

Why SA can’t make a big shift to renewables – yet

South Africa has a lot going for it when it comes to renewable energy. But several factors stand in the way of its ability to move entirely away from coal. Original Link

Looters must be punished: Gordhan

South Africa’s recovery from corruption at its state-owned companies requires thorough reform and punishing those responsible, according to public enterprises minister Pravin Gordhan. Original Link

Eskom crisis deepens, load shedding narrowly averted

Eskom on Monday night narrowly averted load shedding despite a decline in peak energy demand compared to 2007 and the addition of more than 7.5GW of installed generation capacity over the last decade. Original Link

Get ready to fork out even more to Eskom

Standard electricity users will bear the brunt of the R32.7-billion the state-owned power utility can recover in unbudgeted costs incurred in the 2014 to 2017 financial years. Original Link

Delving deeper into Eskom’s chronic mismanagement

The failure of Eskom to adopt sound project management strategies that could have circumvented billions of rand wasted due to administrative failure and non-compliance. Original Link

Transnet CEO Siyabonga Gama to be fired

The board of Transnet said it plans to dismiss CEO Siyabonga Gama after losing confidence in his ability to lead South Africa’s state-owned ports and rail company. Original Link

Eskom is running perilously low on coal

More than half of South Africa’s core coal plants are running low on fuel, with at least four holding less than 10 days of supply, and the country’s power utility plans on trucking and railing emergency stocks as far as 400km. Original Link

Eskom to seek another big tariff hike

Struggling power utility Eskom is expected to submit an application to energy regulator Nersa for an average tariff increase of 15%/year for the next three years. Original Link

SA ditches nuclear, adds renewables to energy plan

South Africa has dropped proposals to boost supply from nuclear plants in its latest energy blueprint and will increasingly bring in renewable sources as it trims a reliance on coal. Original Link

High chance of load shedding, Eskom warns

There is a high risk of rolling electricity blackouts in South Africa on Wednesday evening, state-owned power monopoly Eskom said in a statement. Original Link

Eskom again implements load shedding

Eskom implemented rolling blackouts across the country on Tuesday as an ongoing protest over wages curbed electricity generation. Original Link

Eskom again implements load shedding

Eskom implemented rolling blackouts across the country on Tuesday as an ongoing protest over wages curbed electricity generation. Original Link

Fresh Eskom protests threaten power supply

Protests at some South African power stations amid deadlocked wage talks are stopping coal from getting to plants and threaten to force the country’s electricity provider to implement rolling blackouts. Original Link

Hadebe’s desperate bid to avert Eskom train wreck

Eskom’s newly appointed group CEO Phakamani Hadebe put on a brave face when he announced that the group showed a R2.3-billion net loss and received a qualified audit opinion for the year ended 31 March 2018. Original Link

Hadebe’s desperate bid to avert Eskom train wreck

Eskom’s newly appointed group CEO Phakamani Hadebe put on a brave face when he announced that the group showed a R2.3-billion net loss and received a qualified audit opinion for the year ended 31 March 2018. Original Link

Altron concludes sale of Powertech Transformers

Mteto Nyati

Altron has taken another big step in shedding its legacy industrial assets as the JSE-listed technology group transforms into an ICT-focused business.

It said on Thursday that it has finalised the disposal of its 80% stake in Powertech Transformers to a broad-based black economic empowerment consortium made up of European transformers company SGB-SMIT and the black-owned Power Matla Group in South Africa.

The effective date of the disposal is 31 July 2018.

“The conclusion of the disposal of Powertech Transformers is an achievement for my executive leadership team and me. We will now invest our time on what matters most and apply renewed focus on driving key levers of our strategy which will fast-track our growth,” said Altron CEO Mteto Nyati in a statement.

“In selling this asset, which is no longer core to our business, we considered the commercial interests of Altron and those of South Africa. We have ensured that the customers of Powertech Transformers, especially Eskom, continue to receive high-quality and consistent, if not better, services. For them, it will be business as usual.”

Altron’s share price was trading unchanged at R14.80 shortly after markets opened on Thursday. Over the past year, the share has added 21.3%.  — © 2018 NewsCentral Media

Original Link

Altron concludes sale of Powertech Transformers

Mteto Nyati

Altron has taken another big step in shedding its legacy industrial assets as the JSE-listed technology group transforms into an ICT-focused business.

It said on Thursday that it has finalised the disposal of its 80% stake in Powertech Transformers to a broad-based black economic empowerment consortium made up of European transformers company SGB-SMIT and the black-owned Power Matla Group in South Africa.

The effective date of the disposal is 31 July 2018.

“The conclusion of the disposal of Powertech Transformers is an achievement for my executive leadership team and me. We will now invest our time on what matters most and apply renewed focus on driving key levers of our strategy which will fast-track our growth,” said Altron CEO Mteto Nyati in a statement.

“In selling this asset, which is no longer core to our business, we considered the commercial interests of Altron and those of South Africa. We have ensured that the customers of Powertech Transformers, especially Eskom, continue to receive high-quality and consistent, if not better, services. For them, it will be business as usual.”

Altron’s share price was trading unchanged at R14.80 shortly after markets opened on Thursday. Over the past year, the share has added 21.3%.  — © 2018 NewsCentral Media

Original Link

Altron concludes sale of Powertech Transformers

Mteto Nyati

Altron has taken another big step in shedding its legacy industrial assets as the JSE-listed technology group transforms into an ICT-focused business.

It said on Thursday that it has finalised the disposal of its 80% stake in Powertech Transformers to a broad-based black economic empowerment consortium made up of European transformers company SGB-SMIT and the black-owned Power Matla Group in South Africa.

The effective date of the disposal is 31 July 2018.

“The conclusion of the disposal of Powertech Transformers is an achievement for my executive leadership team and me. We will now invest our time on what matters most and apply renewed focus on driving key levers of our strategy which will fast-track our growth,” said Altron CEO Mteto Nyati in a statement.

“In selling this asset, which is no longer core to our business, we considered the commercial interests of Altron and those of South Africa. We have ensured that the customers of Powertech Transformers, especially Eskom, continue to receive high-quality and consistent, if not better, services. For them, it will be business as usual.”

Altron’s share price was trading unchanged at R14.80 shortly after markets opened on Thursday. Over the past year, the share has added 21.3%.  — © 2018 NewsCentral Media

Original Link

Altron concludes sale of Powertech Transformers

Mteto Nyati

Altron has taken another big step in shedding its legacy industrial assets as the JSE-listed technology group transforms into an ICT-focused business.

It said on Thursday that it has finalised the disposal of its 80% stake in Powertech Transformers to a broad-based black economic empowerment consortium made up of European transformers company SGB-SMIT and the black-owned Power Matla Group in South Africa.

The effective date of the disposal is 31 July 2018.

“The conclusion of the disposal of Powertech Transformers is an achievement for my executive leadership team and me. We will now invest our time on what matters most and apply renewed focus on driving key levers of our strategy which will fast-track our growth,” said Altron CEO Mteto Nyati in a statement.

“In selling this asset, which is no longer core to our business, we considered the commercial interests of Altron and those of South Africa. We have ensured that the customers of Powertech Transformers, especially Eskom, continue to receive high-quality and consistent, if not better, services. For them, it will be business as usual.”

Altron’s share price was trading unchanged at R14.80 shortly after markets opened on Thursday. Over the past year, the share has added 21.3%.  — © 2018 NewsCentral Media

Original Link

Backspace: ‘Shining a light on Eskom’






Backspace: ‘Shining a light on Eskom’ – TechCentral



















































Original Link

Backspace: ‘Shining a light on Eskom’






Backspace: ‘Shining a light on Eskom’ – TechCentral



















































Original Link

Backspace: ‘Shining a light on Eskom’






Backspace: ‘Shining a light on Eskom’ – TechCentral



















































Original Link

Backspace: ‘Shining a light on Eskom’






Backspace: ‘Shining a light on Eskom’ – TechCentral



















































Original Link

Eskom: a dilapidated, hollowed-out shell of a company

A South African state-owned entity no longer conjures a picture of an organisation to be proud of but rather a dilapidated, hollowed-out shell with perpetual problems. When a country cannot bring its SOEs into line, it is somewhat naive to expect foreign investors to plug a hole in the need for capital.

Unsurprisingly, Eskom was given a qualified audit report by its external auditors SizweNtsalubaGobodo. The report states that the power utility did not have “adequate internal control systems to identify, investigate and record all information as required by the Public Finance Management Act.

Therefore, the irregular, fruitless and wasteful expenditure of R20.7-billion (2017: R4.4-billion) may not be the total amount and the identification of criminals may fizzle due to lack of evidence.

The auditors could not obtain sufficient audit evidence that appropriate disciplinary steps were taken against officials, nor that allegations of financial conduct against members of the accounting authority were investigated. How will Eskom explain the loss of some R20.7-billion to the unions in wage negotiations?

Eskom further blotted its copy book by not being able to collect all revenue due. In addition, procurement and contract management is in disarray, and there were conflicts of interest (greedy hands mixing private business interests with that of their employee). The external auditors have reported the various reportable irregularities to the Independent Regulatory Board for Auditors.

The group incurred a total comprehensive loss of R5.6-billion (2017: R6.4-billion), and the group current liabilities exceed the current assets by R20.6-billion, a decline of R20.9-billion. The “loss for the year” of R2.3-billion is meaningless, as the reserves are reduced by the amount of R5.6-billion. The external auditors further state that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.

Fortunately, International Financial Reporting Standards require borrowing costs in regard to plant to be capitalised, otherwise the total comprehensive loss would have been R21.1-billion.

Not sustainable

Nevertheless, the concern with the capitalisation of borrowing costs in Eskom’s case is encapsulated in note 2.4: “Subsequent costs are capitalised only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.”

We can only wait and see if these future economic benefits will materialise. One would assume that additional interest costs resulting from labour unrest, cost overruns and inefficient construction were not capitalised.

However, this is an entity that is not currently sustainable, where future economic benefits are not a certainty and is miserably failing the going concern test. Be that as it may, R15.5-billion of interest was taken out of finance costs, thus reducing expenses, and added to the cost of plant and machinery. This gave the asset side of the balance sheet a much-needed boost, in the form of a somewhat flimsy “asset”. It is to be noted that rating agencies reduce retained earnings by the amount of capitalised interest.

From 2019, all leases will have to be brought onto the balance sheet. Eskom has not provided any information as to the expected impact.

The board does not appear to be duly perturbed by Eskom’s going concern status, and seems to have full confidence in energy regulator Nersa coming to the party, and the government’s continuous support. Perhaps if the board had “skin in the game”, they would take a more realistic view.

How bad is the situation? The International Standards of Auditing list numerous factors that should be taken into account in ascertaining whether an entity is a going concern. I have taken the liberty of amending some of these with Eskom in mind:

  • Whether maturing fixed term borrowings can realistically be repaid or renewed, and whether it is feasible to continue to rely on government as a honey pot;
  • Excessive reliance on short-term borrowings to finance operational costs (such as salaries);
  • Difficulties in negotiating new loans or issuing further bonds;
  • Negative cash flows, or where so-called near cash consists of new finance (in other words, doesn’t come from a positive operational cash flow);
  • Key financial ratios indicating a negative trend; and
  • Inability to monitor or collect moneys due from large debtors, such as municipalities.

Other key factors would be whether Eskom manages to improve corporate governance and implement a proper internal control system, a proper procurement system and solve the problem of the increasing cost of coal.

On that note, Eskom intends to collaborate with state-owned mining company Alexkor. I fail to see how Alexkor, situated on the diamond coast in Namibia, a floundering diamond mining company, can possibly assist in managing increasing coal costs. The board further referred to “capex investments into cost-plus mines”, and migrating from “road to rail”. Opining is easy; it is the outcome that will speak volumes.

The new board is optimistic at turning Eskom around, and repositioning it as the most trusted SOE. The 2019 interim results should indicate positive outcomes, including:

  • Implementing a proper system of internal control;
  • The status of employees, senior managers and executives (including close family members, partners and associated) who have any interest in contracts awarded by Eskom;
  • The status of the criminal charges that have been laid against corrupt employees;
  • Whether incidents of alleged irregularities, fraud and corruption have been brought to a halt;
  • Whether they have managed to curb incidents of irregular, fruitless and wasteful expenditure;
  • The outcome of lifestyle audits of senior management; and
  • Whether there was growing investor appetite for Eskom bonds.

At this point in time, though, Eskom is in a dire situation. It lurches on, leaving ageing power stations in its wake. It will take more than an optimistic board to put an end to this crisis.

  • This article was originally published by Moneyweb and is used here with permission

Original Link

Eskom: a dilapidated, hollowed-out shell of a company

A South African state-owned entity no longer conjures a picture of an organisation to be proud of but rather a dilapidated, hollowed-out shell with perpetual problems. When a country cannot bring its SOEs into line, it is somewhat naive to expect foreign investors to plug a hole in the need for capital.

Unsurprisingly, Eskom was given a qualified audit report by its external auditors SizweNtsalubaGobodo. The report states that the power utility did not have “adequate internal control systems to identify, investigate and record all information as required by the Public Finance Management Act.

Therefore, the irregular, fruitless and wasteful expenditure of R20.7-billion (2017: R4.4-billion) may not be the total amount and the identification of criminals may fizzle due to lack of evidence.

The auditors could not obtain sufficient audit evidence that appropriate disciplinary steps were taken against officials, nor that allegations of financial conduct against members of the accounting authority were investigated. How will Eskom explain the loss of some R20.7-billion to the unions in wage negotiations?

Eskom further blotted its copy book by not being able to collect all revenue due. In addition, procurement and contract management is in disarray, and there were conflicts of interest (greedy hands mixing private business interests with that of their employee). The external auditors have reported the various reportable irregularities to the Independent Regulatory Board for Auditors.

The group incurred a total comprehensive loss of R5.6-billion (2017: R6.4-billion), and the group current liabilities exceed the current assets by R20.6-billion, a decline of R20.9-billion. The “loss for the year” of R2.3-billion is meaningless, as the reserves are reduced by the amount of R5.6-billion. The external auditors further state that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.

Fortunately, International Financial Reporting Standards require borrowing costs in regard to plant to be capitalised, otherwise the total comprehensive loss would have been R21.1-billion.

Not sustainable

Nevertheless, the concern with the capitalisation of borrowing costs in Eskom’s case is encapsulated in note 2.4: “Subsequent costs are capitalised only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.”

We can only wait and see if these future economic benefits will materialise. One would assume that additional interest costs resulting from labour unrest, cost overruns and inefficient construction were not capitalised.

However, this is an entity that is not currently sustainable, where future economic benefits are not a certainty and is miserably failing the going concern test. Be that as it may, R15.5-billion of interest was taken out of finance costs, thus reducing expenses, and added to the cost of plant and machinery. This gave the asset side of the balance sheet a much-needed boost, in the form of a somewhat flimsy “asset”. It is to be noted that rating agencies reduce retained earnings by the amount of capitalised interest.

From 2019, all leases will have to be brought onto the balance sheet. Eskom has not provided any information as to the expected impact.

The board does not appear to be duly perturbed by Eskom’s going concern status, and seems to have full confidence in energy regulator Nersa coming to the party, and the government’s continuous support. Perhaps if the board had “skin in the game”, they would take a more realistic view.

How bad is the situation? The International Standards of Auditing list numerous factors that should be taken into account in ascertaining whether an entity is a going concern. I have taken the liberty of amending some of these with Eskom in mind:

  • Whether maturing fixed term borrowings can realistically be repaid or renewed, and whether it is feasible to continue to rely on government as a honey pot;
  • Excessive reliance on short-term borrowings to finance operational costs (such as salaries);
  • Difficulties in negotiating new loans or issuing further bonds;
  • Negative cash flows, or where so-called near cash consists of new finance (in other words, doesn’t come from a positive operational cash flow);
  • Key financial ratios indicating a negative trend; and
  • Inability to monitor or collect moneys due from large debtors, such as municipalities.

Other key factors would be whether Eskom manages to improve corporate governance and implement a proper internal control system, a proper procurement system and solve the problem of the increasing cost of coal.

On that note, Eskom intends to collaborate with state-owned mining company Alexkor. I fail to see how Alexkor, situated on the diamond coast in Namibia, a floundering diamond mining company, can possibly assist in managing increasing coal costs. The board further referred to “capex investments into cost-plus mines”, and migrating from “road to rail”. Opining is easy; it is the outcome that will speak volumes.

The new board is optimistic at turning Eskom around, and repositioning it as the most trusted SOE. The 2019 interim results should indicate positive outcomes, including:

  • Implementing a proper system of internal control;
  • The status of employees, senior managers and executives (including close family members, partners and associated) who have any interest in contracts awarded by Eskom;
  • The status of the criminal charges that have been laid against corrupt employees;
  • Whether incidents of alleged irregularities, fraud and corruption have been brought to a halt;
  • Whether they have managed to curb incidents of irregular, fruitless and wasteful expenditure;
  • The outcome of lifestyle audits of senior management; and
  • Whether there was growing investor appetite for Eskom bonds.

At this point in time, though, Eskom is in a dire situation. It lurches on, leaving ageing power stations in its wake. It will take more than an optimistic board to put an end to this crisis.

  • This article was originally published by Moneyweb and is used here with permission

Original Link

Eskom: a dilapidated, hollowed-out shell of a company

A South African state-owned entity no longer conjures a picture of an organisation to be proud of but rather a dilapidated, hollowed-out shell with perpetual problems. When a country cannot bring its SOEs into line, it is somewhat naive to expect foreign investors to plug a hole in the need for capital.

Unsurprisingly, Eskom was given a qualified audit report by its external auditors SizweNtsalubaGobodo. The report states that the power utility did not have “adequate internal control systems to identify, investigate and record all information as required by the Public Finance Management Act.

Therefore, the irregular, fruitless and wasteful expenditure of R20.7-billion (2017: R4.4-billion) may not be the total amount and the identification of criminals may fizzle due to lack of evidence.

The auditors could not obtain sufficient audit evidence that appropriate disciplinary steps were taken against officials, nor that allegations of financial conduct against members of the accounting authority were investigated. How will Eskom explain the loss of some R20.7-billion to the unions in wage negotiations?

Eskom further blotted its copy book by not being able to collect all revenue due. In addition, procurement and contract management is in disarray, and there were conflicts of interest (greedy hands mixing private business interests with that of their employee). The external auditors have reported the various reportable irregularities to the Independent Regulatory Board for Auditors.

The group incurred a total comprehensive loss of R5.6-billion (2017: R6.4-billion), and the group current liabilities exceed the current assets by R20.6-billion, a decline of R20.9-billion. The “loss for the year” of R2.3-billion is meaningless, as the reserves are reduced by the amount of R5.6-billion. The external auditors further state that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.

Fortunately, International Financial Reporting Standards require borrowing costs in regard to plant to be capitalised, otherwise the total comprehensive loss would have been R21.1-billion.

Not sustainable

Nevertheless, the concern with the capitalisation of borrowing costs in Eskom’s case is encapsulated in note 2.4: “Subsequent costs are capitalised only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.”

We can only wait and see if these future economic benefits will materialise. One would assume that additional interest costs resulting from labour unrest, cost overruns and inefficient construction were not capitalised.

However, this is an entity that is not currently sustainable, where future economic benefits are not a certainty and is miserably failing the going concern test. Be that as it may, R15.5-billion of interest was taken out of finance costs, thus reducing expenses, and added to the cost of plant and machinery. This gave the asset side of the balance sheet a much-needed boost, in the form of a somewhat flimsy “asset”. It is to be noted that rating agencies reduce retained earnings by the amount of capitalised interest.

From 2019, all leases will have to be brought onto the balance sheet. Eskom has not provided any information as to the expected impact.

The board does not appear to be duly perturbed by Eskom’s going concern status, and seems to have full confidence in energy regulator Nersa coming to the party, and the government’s continuous support. Perhaps if the board had “skin in the game”, they would take a more realistic view.

How bad is the situation? The International Standards of Auditing list numerous factors that should be taken into account in ascertaining whether an entity is a going concern. I have taken the liberty of amending some of these with Eskom in mind:

  • Whether maturing fixed term borrowings can realistically be repaid or renewed, and whether it is feasible to continue to rely on government as a honey pot;
  • Excessive reliance on short-term borrowings to finance operational costs (such as salaries);
  • Difficulties in negotiating new loans or issuing further bonds;
  • Negative cash flows, or where so-called near cash consists of new finance (in other words, doesn’t come from a positive operational cash flow);
  • Key financial ratios indicating a negative trend; and
  • Inability to monitor or collect moneys due from large debtors, such as municipalities.

Other key factors would be whether Eskom manages to improve corporate governance and implement a proper internal control system, a proper procurement system and solve the problem of the increasing cost of coal.

On that note, Eskom intends to collaborate with state-owned mining company Alexkor. I fail to see how Alexkor, situated on the diamond coast in Namibia, a floundering diamond mining company, can possibly assist in managing increasing coal costs. The board further referred to “capex investments into cost-plus mines”, and migrating from “road to rail”. Opining is easy; it is the outcome that will speak volumes.

The new board is optimistic at turning Eskom around, and repositioning it as the most trusted SOE. The 2019 interim results should indicate positive outcomes, including:

  • Implementing a proper system of internal control;
  • The status of employees, senior managers and executives (including close family members, partners and associated) who have any interest in contracts awarded by Eskom;
  • The status of the criminal charges that have been laid against corrupt employees;
  • Whether incidents of alleged irregularities, fraud and corruption have been brought to a halt;
  • Whether they have managed to curb incidents of irregular, fruitless and wasteful expenditure;
  • The outcome of lifestyle audits of senior management; and
  • Whether there was growing investor appetite for Eskom bonds.

At this point in time, though, Eskom is in a dire situation. It lurches on, leaving ageing power stations in its wake. It will take more than an optimistic board to put an end to this crisis.

  • This article was originally published by Moneyweb and is used here with permission

Original Link

Eskom: a dilapidated, hollowed-out shell of a company

A South African state-owned entity no longer conjures a picture of an organisation to be proud of but rather a dilapidated, hollowed-out shell with perpetual problems. When a country cannot bring its SOEs into line, it is somewhat naive to expect foreign investors to plug a hole in the need for capital.

Unsurprisingly, Eskom was given a qualified audit report by its external auditors SizweNtsalubaGobodo. The report states that the power utility did not have “adequate internal control systems to identify, investigate and record all information as required by the Public Finance Management Act.

Therefore, the irregular, fruitless and wasteful expenditure of R20.7-billion (2017: R4.4-billion) may not be the total amount and the identification of criminals may fizzle due to lack of evidence.

The auditors could not obtain sufficient audit evidence that appropriate disciplinary steps were taken against officials, nor that allegations of financial conduct against members of the accounting authority were investigated. How will Eskom explain the loss of some R20.7-billion to the unions in wage negotiations?

Eskom further blotted its copy book by not being able to collect all revenue due. In addition, procurement and contract management is in disarray, and there were conflicts of interest (greedy hands mixing private business interests with that of their employee). The external auditors have reported the various reportable irregularities to the Independent Regulatory Board for Auditors.

The group incurred a total comprehensive loss of R5.6-billion (2017: R6.4-billion), and the group current liabilities exceed the current assets by R20.6-billion, a decline of R20.9-billion. The “loss for the year” of R2.3-billion is meaningless, as the reserves are reduced by the amount of R5.6-billion. The external auditors further state that “a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern”.

Fortunately, International Financial Reporting Standards require borrowing costs in regard to plant to be capitalised, otherwise the total comprehensive loss would have been R21.1-billion.

Not sustainable

Nevertheless, the concern with the capitalisation of borrowing costs in Eskom’s case is encapsulated in note 2.4: “Subsequent costs are capitalised only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably.”

We can only wait and see if these future economic benefits will materialise. One would assume that additional interest costs resulting from labour unrest, cost overruns and inefficient construction were not capitalised.

However, this is an entity that is not currently sustainable, where future economic benefits are not a certainty and is miserably failing the going concern test. Be that as it may, R15.5-billion of interest was taken out of finance costs, thus reducing expenses, and added to the cost of plant and machinery. This gave the asset side of the balance sheet a much-needed boost, in the form of a somewhat flimsy “asset”. It is to be noted that rating agencies reduce retained earnings by the amount of capitalised interest.

From 2019, all leases will have to be brought onto the balance sheet. Eskom has not provided any information as to the expected impact.

The board does not appear to be duly perturbed by Eskom’s going concern status, and seems to have full confidence in energy regulator Nersa coming to the party, and the government’s continuous support. Perhaps if the board had “skin in the game”, they would take a more realistic view.

How bad is the situation? The International Standards of Auditing list numerous factors that should be taken into account in ascertaining whether an entity is a going concern. I have taken the liberty of amending some of these with Eskom in mind:

  • Whether maturing fixed term borrowings can realistically be repaid or renewed, and whether it is feasible to continue to rely on government as a honey pot;
  • Excessive reliance on short-term borrowings to finance operational costs (such as salaries);
  • Difficulties in negotiating new loans or issuing further bonds;
  • Negative cash flows, or where so-called near cash consists of new finance (in other words, doesn’t come from a positive operational cash flow);
  • Key financial ratios indicating a negative trend; and
  • Inability to monitor or collect moneys due from large debtors, such as municipalities.

Other key factors would be whether Eskom manages to improve corporate governance and implement a proper internal control system, a proper procurement system and solve the problem of the increasing cost of coal.

On that note, Eskom intends to collaborate with state-owned mining company Alexkor. I fail to see how Alexkor, situated on the diamond coast in Namibia, a floundering diamond mining company, can possibly assist in managing increasing coal costs. The board further referred to “capex investments into cost-plus mines”, and migrating from “road to rail”. Opining is easy; it is the outcome that will speak volumes.

The new board is optimistic at turning Eskom around, and repositioning it as the most trusted SOE. The 2019 interim results should indicate positive outcomes, including:

  • Implementing a proper system of internal control;
  • The status of employees, senior managers and executives (including close family members, partners and associated) who have any interest in contracts awarded by Eskom;
  • The status of the criminal charges that have been laid against corrupt employees;
  • Whether incidents of alleged irregularities, fraud and corruption have been brought to a halt;
  • Whether they have managed to curb incidents of irregular, fruitless and wasteful expenditure;
  • The outcome of lifestyle audits of senior management; and
  • Whether there was growing investor appetite for Eskom bonds.

At this point in time, though, Eskom is in a dire situation. It lurches on, leaving ageing power stations in its wake. It will take more than an optimistic board to put an end to this crisis.

  • This article was originally published by Moneyweb and is used here with permission

Original Link

Ex-Telkom CIO Len de Villiers joins JSE

Len de Villiers

Former Telkom Group chief information officer Len de Villiers has joined the JSE as acting CIO with immediate effect. He has also been appointed as advisor on IT to Eskom CEO Phakamani Hadebe.

De Villiers will work two weeks per month at the JSE, he told TechCentral by telephone on Friday. He replaces Tshwantsho Matsena, who resigned recently as CIO.

He joins the JSE at a critical time, as the bourse is involved in several major strategic IT projects, including a new trading platform that is scheduled for launch soon.

“I started last week and am trying to familiarise myself with the challenges,” De Villiers said. He will work with JSE CEO Nicky Newton-King to hire a permanent CIO. He plans to leave the role by December 2018.

The JSE employs about 150 people in its IT division and also works with external partners who provide contractors and part-time specialists to work on big projects.

Meanwhile, De Villiers has been brought on at Eskom by Hadebe to assist with several big projects. He is working with Eskom acting CIO Nondumiso Zibi, who was named to the position following the resignation of Sean Maritz, who had been acting as the utility’s CEO.

Maritz, who was under suspension and facing a disciplinary inquiry, resigned in March before the disciplinary could happened. It had emerged that Maritz had approved a payment to a Hong Kong company — widely seen as a kickback — after Eskom secured a R25-billion loan from the Chinese company Huarong Energy Africa, The Times reported. He had also written a letter to McKinsey & Company absolving the consulting firm from paying back R1.6-billion unlawfully paid to it and to the Gupta-linked Trillian.

‘Key role’

De Villiers retired from Telkom at the end of May after four years with the telecommunications group.
De Villiers has a storied career in technology management, having served as CIO for several of South Africa’s top corporate entities, including three major banks. These include BP South Africa, Gencor, First National Bank, Nedbank, Absa and Transaction Capital.

“Len played a key role in establishing the Telkom Group IT function and in migrating Telkom to the new decentralised operating model that currently supports our five separate business units,” the operator’s CEO, Sipho Maseko, said in an e-mail to staff at the time of his retirement.

De Villiers continues to chair the CIO Council of South Africa, which consists of the country’s top 200 CIOs, and continues to directly mentor about 30 CIOs.

He also continues to serve on the boards of Zanaco, Moyo Business Advisory, Iemas Financial Services and Arise Investments. He is “activating” a longstanding dormant company called The CIO Recruitment Firm, which he created seven years ago. The firm will mentor, train and place CIOs into large organisations.

Listen to the podcast: Interview: Len de Villiers on being a CIO

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Eskom poses systemic risk to the SA economy

The author, Ian Matthews, says Eskom depends on government to service its massive debt load

Eskom published a JSE stock exchange announcement earlier this week warning its bondholders that there may be more bad news relating to irregularities when it releases its financial results for the year ended 31 March, likely to be released later this month. Eskom said disclosure on the quantum of the uncovered reportable irregularities and irregular expenditure would be published with the release of the company’s annual financial statements.

The company came dangerously close to having its bonds suspended by the JSE and to defaulting on debt and other obligations when the release of its interim financial statements for the six months to the end of September 2017 was delayed in January this year. After Eskom secured commitments of support from certain banks, its auditors issued an unqualified review but with an “emphasis of matter” on its ability to continue as a going concern for the next year to 18 months. Eskom’s liquid assets dwindled to R9-billion at the end of September from R30-billion the year before as a result of flat revenue caused by falling sales and lower-than-anticipated tariff increases.

The new chairman of Eskom, Jabu Mabuza, recognised at the time that the overriding problem at Eskom — apart from governance — was the company’s R360-billion debt burden. At the end of September 2017, its gearing ratio (debt to equity) had risen to 72%. Mabuza said that Eskom’s debt levels were simply “unsustainable”.

The latest announcement by Eskom raises serious concerns. Eskom spokesman Khulu Phasiwe explained that as part of the JSE debt listing requirements, Eskom had to inform bondholders about the looming disclosure of irregularities because its bonds were listed on the bourse. Is there more bad news coming? Eskom’s auditors qualified its results for the year ended 31 March 2017 because they could not express an opinion on the completeness of the irregular expenditure reported. Its auditors, SizweNtsalubaGobodo, also said that they had identified reportable irregularities in Eskom’s financial results for the six months ended 30 September 2017.

The Eskom announcement was made against the background of finance minister Nhlanhla Nene daring Eskom unions to table proposals on how the fiscus can foot the bill for wage increases when they meet with him. This was after the National Union of Mineworkers, Solidarity and the National Union of Metalworkers of South Africa had sought intervention from Nene and public enterprises minister Pravin Gordhan after they failed to reach an agreement on wage increase with Eskom earlier this week.

No money

Three weeks ago, Nene commented during an investor road show in the UK that there was no money to bail out Eskom to help the entity with the salary hikes. Speaking during the World Economic Forum roundtable, Nene said Eskom posed a serious challenge to attracting investment in South Africa. Former finance minister Gordhan warned earlier this year that major international investors refused to buy bonds from Eskom because of bad governance and rampant corruption. Goldman Sachs said in September 2017 that Eskom is the biggest single risk to South Africa’s economy.

Eskom depends on government support to service its R368-billion of debt. Eskom needs R72-billion of funding until the end of 2019, including the refinancing of a R20-billion loan obtained with a government guarantee, according to a March report published by Moody’s Investor Services. An Eskom default on its debt would be catastrophic for the South African economy as it would trigger cross defaults of all government debt.

Developments in the next few weeks will be keenly watched by international and South African investors alike.

  • Ian Matthews is head of business development at Bravura, an investment banking firm specialising in corporate finance and structured solutions services

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McKinsey ‘sorry’ for overcharging Eskom

McKinsey & Co has apologised to South Africa again over how business was handled with state-owned Eskom, saying it overcharged the utility and was slow to admit wrongdoing.

The consulting firm admitted in October to failing to follow its own procedures while doing business with the power company when it worked alongside Trillian Capital Partners, a business linked to the Gupta family. McKinsey reached a settlement last week to repay almost R1-billion in fees to Eskom.

“The trust of our clients and the public in South Africa is now, understandably, very low,” Kevin Sneader, global managing partner of McKinsey, said on Monday at a business school in Johannesburg. “We did not communicate well enough how seriously we were taking this, or how sorry we were for our involvement.”

McKinsey became embroiled in claims that the Gupta family used their friendship with former President Jacob Zuma to win lucrative contracts from state companies, particularly through Eskom, which provides more than 90% of the nation’s electricity. The Guptas and Zuma deny any wrongdoing. Financial services firm Trillian is linked to the Gupta family through business associate Salim Essa, who was its principal shareholder until he sold out.

Sneader, who became global managing partner at McKinsey this month, gave a speech at the Gordon Institute of Business Science to “confront our mistakes”, saying governance processes had failed and due diligence should have been done earlier. “They were not attentive enough to the fact that Trillian was a new entity or to the scale of the challenges facing Eskom,” he said.

The mistakes, illustrated over the past year as various investigations and reports emerged, have had a significant material effect on McKinsey’s business, Sneader said in an interview. Clients including Coca-Cola’s South Africa unit and petrochemicals company Sasol have said they’re awaiting results from corruption probes before they’ll award new business to the firm.

No evidence of corruption

While acknowledging that correct procedures weren’t followed, Sneader reiterated that a review of records including millions of e-mails and dozens of interviews showed there’s “no evidence our firm engaged in corrupt activity”.

In May, the National Prosecuting Authority’s Asset Forfeiture Unit filed a lawsuit aimed at recouping R1-billion in consultants’ fees it said were unlawfully paid to McKinsey by Eskom, after talks with the US firm about voluntarily repaying the money stalled.

“The fee was weighted towards recovering our investment rather than being in line with Eskom’s situation,” Sneader said. “In that context the fee was too large.”

Trillian was the so-called supply development partner of McKinsey in an agreement it had to provide services to Eskom until the relationship between McKinsey and Trillian ended in March 2016.  — Reported by Paul Burkhardt, (c) 2018 Bloomberg LP

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Eskom mulling 15 000 layoffs as it seeks way out of crisis

Eskom utility is considering asking for extensions on some debt and staff layoffs as it grapples with its finances after years of burning through funds, according to people familiar with the matter.

The company, which depends on government support to service its R368-billion of debt, is evaluating a so-called liability management exercise as it seeks to implement a turnaround plan, said the people, who asked not to be identified because the matter is private. Management have discussed seeking to recover unpaid bills and increase tariffs to boost revenues by about 50% in four years and lay off about 15 000 workers, the people said.

Representatives for the company declined to comment on the debt extension proposal and said any headcount reductions would need support from stakeholders. Eskom is in the process of appointing financial advisers to “assist the company with possible balance sheet optimisation solutions,” they said in an e-mailed response to questions.

Eskom has been at the centre of scandals involving the financing of transactions and awarding of contracts to firms linked to the Gupta family, who are alleged to have used their connections with former President Jacob Zuma to secure business and influence government appointments. Zuma and the Guptas deny any wrongdoing.

The utility, which faces more than R62-billion due in principal debt payments in the next five years, has burnt through about R40-billion a year since 2013. The new management, brought in as President Cyril Ramaphosa took over leadership of the nation earlier this year, is struggling to pass measures aimed at improving its financial position.

Energy regulator Nersa gave Eskom permission to raise prices by 5.2% from 1 April, far short of the almost 20% Eskom had applied for. The power utility implemented rolling blackouts last month for the first time since 2015 after protesters blockaded roads and attacked staff when wage negotiations broke down.

Workers have demanded a 9% annual salary increase annually for three years, while the utility had previously offered 5%. Eskom has since raised its offer.

Biggest risk to economy

Eskom, which Goldman Sachs Group said in September is the biggest single risk to South Africa’s economy, needs R72-billion of funding until the end of 2019, including the refinancing of a R20-billion loan obtained with a government guarantee, according to a March report published by Moody’s Investor Services.

The power company has been meeting investors since December to drum up demand for a new dollar bond but has so far failed to get enough support for the transaction, the people said.

“Eskom regularly engages with various stakeholders including financial markets stakeholders as a matter of course,” Eskom officials said in the response to questions regarding the bond sale. “Various funding sources are accessed as and when market conditions are conducive to do so.”  — Reported by Luca Casiraghi, Antonio Vanuzzo and Paul Burkhardt, with assistance from Sam Mkokeli, Katie Linsell and Chris Vellacott, (c) 2018 Bloomberg LP

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Eskom workers offered above-inflation wage increase

If trade unions accept Eskom’s latest wage offer, workers in the Eskom bargaining unit will receive above-inflation wage increases for the next three years.

According to Solidarity deputy general secretary for energy, aviation and defence Deon Reyneke, Eskom has offered workers 6.2% in the current year, CPI +0.75% or 6%, whichever is the greatest in the second year, and CPI +0.5% or 6%, whichever is the greatest, in the third year.

The three unions in the bargaining unit — the National Union of Mineworkers (NUM), the National Union of Metalworkers (Numsa) and Solidarity — will take this to their members and will reconvene with Eskom on 5 July, says Reyneke.

If the offer is accepted, it will apply from 1 April this year, which means workers will receive the increase retrospectively for the months that have passed.

Eskom initially offered no increase, but had to change its position after striking workers disrupted operations and caused rolling blackouts. Public enterprises minister Pravin Gordhan intervened in an effort to get the parties back to the negotiating table. Eskom then increased its offer to 4.7% in the first year and an inflation-linked increase in subsequent years.

NUM and Numsa initially demanded a 15% increase, but later all the unions adjusted their demands to 9% in the first year, 8.6% in the second and 8% in the third year.

The wage increase comes against a background of doubt about Eskom’s ability to operate as a going concern. The utility blames this largely on decisions by national energy regulator Nersa’s decisions to award it considerably less revenue that it applied for over an extended period.

Moneyweb earlier reported that the median earnings of workers in the Eskom bargaining unit, mostly technical staff, is about R300 000. According to economist Mike Schüssler, this compares favourably with a teacher with a tertiary qualification and 25 years’ experience.

Consumers will pay

Schüssler adds that the inflation rate is currently not even 5%, and that few employers in the private sector can afford to give their staff an increase above the inflation rate.

In one way or another, he says, the consumer will end up paying for the Eskom workers’ salary increases. “We cannot allow a monopoly that simply passes its costs on to consumers, in the current milieu, to grant above-inflation increases.”

Schüssler says everybody at Eskom should cut costs. The majority of consumers are poor, and those who are employed don’t get the same kind of salary increases as Eskom staff, who are already among the best paid in the country.

Earlier this week, Eskom announced that it had taken gold (first) position in the category of South Africa’s most attractive employer for engineering and technology students and bronze (third) position for most attractive employer for engineering and technology professionals in “South Africa’s Most Attractive Employer” awards conducted by Universum Global.

Eskom said in a statement that the South African Student Survey and the South African Professional Survey are annual independent studies conducted by Universum South Africa.

“The Student Survey is done in partnership with the careers centres of all the state universities and the professional’s survey is done in partnership with Alumni Associations and Professional Associations. The survey questions respondents on a rage of career related matters including who they believe to be the Most Attractive Employers — those companies that they would most like to work for. The Most Attractive Employer Rankings are the official rankings generated from this study.”

  • This article was first published on Moneyweb and is used here with permission

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Eskom a threat to investment, finance minister says

Finance minister Nhlanhla Nene. Image: GCIS

South Africa’s cash-strapped power utility is “a threat” to the nation’s investment strategy, finance minister Nhlanhla Nene said on Thursday.

The government plans to offer incentives to lure US$100-billion in investment to the country, President Cyril Ramaphosa said in April.

That’s an attempt to bolster economic growth, which hasn’t exceeded 2% annually since 2013. Goldman Sachs Group said in September that Eskom, which has more than R62-billion due in principal debt payments in the next five years, was the biggest single risk to the economy.

The structure of the economy is limiting the country’s growth potential, Nene told reporters in Johannesburg on Thursday. Better regional integration among Southern African Development Community nations is critical to boost investment, he said.

South Africa’s power grid was constrained after protesters blockaded roads and attacked staff after wage negotiations between Eskom and its workers broke down earlier this month.

The utility said it couldn’t offer any pay increase due to poor finances. That forced Eskom to introduce rolling blackouts for the first time since 2015.  — Reported by Amogelang Mbatha, (c) 2018 Bloomberg LP

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Load shedding: SA not yet out of the woods

Eskom said that although the probability of load shedding on Monday is low, it could still implement it if the demand for electricity increases in the evening.

“There is a low probability of rotational load shedding during the day as a result of power station units being returned to the system, but the probability of load shedding increases for the evening peak period from 5pm to 9pm due to the normal expected increase in demand,” said the power utility.

Eskom said should the need for load shedding arise, this would be carried out for four hours.

It will also advise if the rotational load shedding will be conducted in either stage 1, 2, 3 or 4, depending on the capacity shortage. Stage 1 requires 1GW to be shed nationwide, stage 2 2GW, stage 3 3GW and stage 4 calls for up to 4GW to be shed, said Eskom.

Load shedding is conducted as a measure of last resort to protect the power system from a total collapse or blackout.

The power utility said recovery teams at power stations continue to work hard to stabilise the power system and to return the generation plant as quick as possible.

“Eskom’s prognosis is that the power system will take up to approximately 10 days to recover from the effects of the recent industrial action, once all staff eventually return to work today.

“The estimated 10-day prognosis for full restoration is due to the effects of the industrial action which interrupted continuous processes at the power plants. These processes have now to be cleared out and restarted which would take additional time.”  — SANews

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What Eskom workers are really paid

The country is facing load shedding due to the disruption of Eskom operations by striking Eskom employees. The management of the utility, which is at risk of losing its going concern status, earlier announced there would be no wage increases or bonuses for employees this year.

This angered unions who are insisting on a 15% increase. The talks broke down and the matter was referred to the Commission for Conciliation, Mediation and Arbitration (CCMA).

Even though Eskom workers are classified as providing an essential service and therefore precluded from lawful strike action, workers went on a strike characterised by intimidation of colleagues and alleged sabotage of Eskom operations, which resulted in load shedding countrywide.

Public enterprises minister Pravin Gordhan has since intervened, saying on Friday that the 0% increase is off the table, and it seems negotiations might proceed this week.

But how sound is the workers’ case?

Last week, renowned economist Mike Schüssler angered unions representing Eskom workers when he tweeted that the average remuneration per employee at Eskom is R798 000/year.

Schüssler went on to say that even if the income of executives and senior managers is excluded, Eskom workers still earn more than R600 000/year, on average.

In an article discussing Eskom’s unsustainable wage bill, Nedbank CEO Group Mike Brown quoted a number of R770 000/year.

The National Union of Mineworkers (NUM) angrily hit back at Schüssler:

About 37 000 of the 43 000 employees of Eskom as a company (not the group) belong to the bargaining unit. It is their salary increases that are now being negotiated between the unions and Eskom management.

Confidential document

Moneyweb has obtained a confidential document that sets out exactly what workers in the Eskom bargaining unit earn. These employees fall into 10 salary bands, with the lowest earners earning R135 390/year and the highest R595 410/year. Bargaining unit members therefore earn between R11 282.50 and R49 617.50/month.

Here is the table of salary scales implemented on 1 July 2017:

It’s clear that most Eskom workers do not earn Schüssler’s average of R798 000 per person per year or Brown’s R770 000 per person per year. Brown in fact acknowledged that “the calculations were complicated” and that there was “some margin for error as a portion of salary costs could be capitalised”. He added that it was also not quite clear to what extent consulting fees were reported as salaries and wages.

Numsa spokesman Phakamile Hlubi-Majola on the other hand told TimesLive that the average employee earns R135 000/year, which is also incorrect.

Pravin Gordhan. Image c/o GCIS

Knowing the salary scales is one thing, but to be able to compare it with salaries elsewhere one also must know what the job entails.

Moneyweb obtained this rough indication from an informed source:

  • The lowest scale, T04, refers to general labourers who earn between R11 282 and R16 915/month;
  • T06-T08 are the clerks and secretaries, earning from R14 330 to R27 292/month;
  • Artisans and power station operators are on scales T08-T09 and earn between R20 510 and R34 665/month;
  • Grade T11/P11 refers to senior artisans and senior unit controllers earing between R26 045 and R39 072/month;
  • Grade T12/P12 refers to supervisors who earn between R29 357 and R44 032/month; and
  • Grade T13/P13 are entry-level professionals who are not in management, earning between R33 085 and R49 617/month.

In assessing the case of the Eskom workers, it must be noted that the utility’s expenditure on bonuses almost doubled to R4.2-billion last year.

In fact, on 11 July last year almost all Eskom staff got performance bonuses at an average of R88 883.35/employee. While averages once again do not show whether the members of the bargaining unit got their “fair share”, the unions were quiet at the time.

The bonuses came at a time when Eskom on an alone-standing basis showed a loss of R870-million for the year ended 31 March 2017 and a few months before the cash ran out.

If Eskom was run like a business, would it have considered salary increases amid doubts that it could continue as a going concern?

Would its shareholder have “intervened” to reopen negotiations with unions and take the 0% off the table?

No, but Eskom is a state-owned company funded by consumers and taxpayers with a politician representing the shareholder. And an election is fast approaching.

  • This article was originally published on Moneyweb and is used here with permission

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Eskom, unions in talk talks to end load shedding

Pravin Gordhan. Image c/o GCIS

Eskom and its labour unions have agreed to hold new negotiations over pay, the government said, ending protests at power plants that have caused disruptions to power supply.

Public enterprises minister Pravin Gordhan called a meeting Friday with Eskom, the National Union of Mineworkers, the National Union of Metalworkers of South Africa and the Solidarity union “to normalise relationships and normalize operations” at the utility, he said in a statement. It was agreed at the talks that Eskom’s proposed zero-percent wage increase is “off the table”, Gordhan said.

The government intervention wasn’t enough to spare South Africans from power cuts on Saturday night. Stage-two load shedding started at 5pm and may last until 9 pm, Eskom said in a statement. The utility had said earlier that the power system would be “severely constrained” amid cold winter weather. There are four levels of cuts, with the second stage indicating a shortage of as much as 2 000MW.

Eskom, which generates almost all of the nation’s electricity, has been locked in a dispute with workers after wage talks broke down last week over the state-owned utility’s insistence that it can’t afford pay increases. The company began cutting power to some areas on Thursday night for the first time since 2015, as demonstrators blockaded roads and attacked staff.

The protests by employees came at a tough time for Eskom and the South African economy more broadly. While demand for electricity increases over the winter, Eskom has also battled coal shortages, allegations of corruption and mismanagement, and struggled to raise the funding it needed earlier this year. A prolonged repeat of outages from three years ago would undermine signs of recovery in the economy.

The utility got a court order declaring the protests unlawful and prohibiting the intimidation of other workers and contractors. Employees were also barred from hijacking coal trucks and sabotaging Eskom’s electricity infrastructure.  — Reported by John Viljoen, (c) 2018 Bloomberg LP

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Eskom extends load shedding into Friday

State-owned power utility Eskom resumed rolling blackouts Friday after protesting employees blocked others from working and interfered with the electricity grid.

Eskom, which generates almost all of the nation’s electricity, is locked in a dispute with workers after wage talks broke down last week over the utility’s insistence that it can’t afford pay increases. The company cut power to some areas on Thursday night for the first time since 2015 as demonstrators blockaded roads and attacked staff.

Eskom will implement rolling blackouts from 11.30am to 9pm “due to multiple trips of its power generation units”, spokesman Khulu Phasiwe said on Twitter. “Acts of intimidation and sabotage continue today at some of Eskom’s power stations, a move that has begun to threaten the security of power supply,” he said a few minutes earlier.

The situation is likely to remain “severely constrained” until the wage dispute is resolved, Phasiwe said by phone.

The utility got a court order declaring the protests unlawful and prohibiting the intimidation of other workers and contractors. Employees are also barred from hijacking coal trucks and sabotaging Eskom’s electricity infrastructure.

Members of Eskom’s biggest unions plan to picket during their break midday on Friday, when the activity is allowed, Livhuwani Mammburu, a spokesman for the National Union of Mineworkers, said by phone. Legally, workers are not permitted to strike because the power producer is considered to provide an essential service.

The unions are waiting to hear from the Commission for Conciliation, Mediation and Arbitration about the next steps after the dispute was referred to mediation, Mammburu said.

“We are not on strike,” Phakamile Hlubi, a spokeswoman for the National Union of Metalworkers of South Africa, said late on Thursday. The unions delivered a memorandum to Eskom headquarters earlier in the day demanding a 15% salary increase.  — Reported by Ntando Thukwana and Paul Burkhardt, with assistance from Alastair Reed, (c) 2018 Bloomberg LP

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Eskom woes see the return of rolling blackouts

State-owned power utility Eskom said it will start rolling blackouts for the first time since 2015 as protesting workers blockaded plant entrances and disrupted distribution networks.

“Acts of intimidation and sabotage have resulted in Eskom being unable to ensure uninterrupted power supply,” Khulu Phasiwe, Eskom’s spokesman, said via his Twitter account on Thursday. Blackouts would occur for about two hours until 8pm in Johannesburg, he said.

Eskom, which generates almost all of the nation’s electricity, has stopped all road deliveries of coal after demonstrators blockaded roads, attacked staff and damaged infrastructure, it said in a statement on Thursday. Wage talks broke down last week after Eskom, which is working to improve its financial situation under a new board and CEO, insisted it can’t afford pay increases.

The company called on consumers to cut usage to reduce pressure on the “constrained” system. It is working with stakeholders to keep power stations operating, it said in an e-mailed statement.

“As a last resort, Eskom will implement its power system contingencies, including controlled load shedding, to avoid a blackout/shutdown of the national power system,” the company said.

The rand weakened 0.4% to R13.36/US$ by 6.15pm in Johannesburg after gaining as much as 1.6% earlier.

Legally, workers aren’t permitted to strike because the power producer is considered to provide an essential service. The company will get court orders to stop the protests if needed, CEO Phakamani Hadebe said on Wednesday.

The protests come as the utility is faced with the seasonal increase in demand for electricity over the winter. The company has also battled coal shortages, allegations of corruption and mismanagement, and struggled to raise the funding it needed earlier this year. A repeat of outages from three years ago would undermine signs of recovery in the economy.

Megawatt Park in the dark

Power supply to the company’s Johannesburg head office, Megawatt Park, was “mysteriously” cut off on Thursday morning, Phasiwe said earlier on Twitter. The problem, which affected the surrounding area, has been resolved, he said by phone.

Unions scheduled a picket at the office on Thursday, and more than 100 buses delivered thousands of people to the site by around lunchtime, according to security personnel.

Eskom has seven days to respond to the unions’ demands, National Union of Mineworkers spokesman Livhuwani Mammburu said by phone. The dispute has been referred to mediation under the Commission for Conciliation, Mediation and Arbitration and NUM is prepared to “give negotiations a chance”, he said.

Eskom was meeting the country’s generation needs of just more than 30 000MW, Phasiwe said earlier.

“Later in the evening, when people go back home and they start using geysers and heaters and other things, usually it rises to about 32 000MW,” he said. “So we’ll see as to how we manage it.”  — Reported by Odwa Mjo and Robert Brand, (c) 2018 Bloomberg LP

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Eskom implements stage-one load shedding

Eskom confirmed just before 6pm on Thursday that it has been forced to implement stage-one load shedding. This is due to a strike by the utility’s workers which has involved “acts of intimidation and sabotage”.

Spokesman Khulu Phasiwe tweeted at 5.51pm that “due to severe power constraints, Eskom will implement stage one load shedding from now (5.50pm) until 8pm”.

“Acts of intimidation and sabotage have resulted in Eskom being unable to ensure uninterrupted power supply,” he tweeted.

The load shedding comes in spite of a promise by Eskom on Tuesday that it had put contingency measures in place to mitigate against the industrial action. Workers are striking over the utility’s decision to implement a wage freeze as it struggles with an unsustainable debt load.

“Eskom sympathises with its over 47 000 employees who have worked very hard to help keep the lights on during the past financial year,” it said in Tuesday’s statement. “However, due to the difficult financial situation that the company currently faces, Eskom has decided to offer no salary increases this year.”

Eskom said that because it has been designated as an “essential service provider”, its workers are “not allowed to participate in strike actions”.  — (c) 2018 NewsCentral Media

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Eskom operations ‘optimal’ amid industrial action

Eskom said on Wednesday that it is operating normally despite protests by workers outside four of its power plants following a breakdown in wage negotiations.

Police surrounded five of the stations earlier when protesters tried to block other employees from arriving for night shifts. Eskom has put in contingency measures to ensure supply.

“We are hopeful our ability to continually generate electricity will remain sustainable, but the situation is not ideal,” spokesman Khulu Phasiwe said by phone. Eskom’s power stations and other facilities “continue to operate optimally”, he said.

Wage talks between Eskom and unions broke down last week, with labour organisations saying they’re planning a protest march on Thursday after the cash-strapped utility insisted it can’t offer any pay increases. Because the power producer is considered to provide an essential service, legally workers are not permitted to strike.

The utility is taking measures to improve its finances as demand has lagged since rolling blackouts in 2015 curbed the country’s economic growth. In addition to scrutinizing its business model, it’s reining in costs.

The National Union of Mineworkers and National Union of Metalworkers of South Africa said at a joint press conference on Tuesday that they would exhaust all legal measures following the breakdown in wage negotiations last week. A NUM spokesman couldn’t immediately comment on Wednesday.

“We are waiting for information from our regions regarding events as they unfold in Mpumalanga,” Numsa spokeswoman Phakamile Hlubi said in a text message response. “The official day of action is the march which happening at Megawatt Park tomorrow,” she said, referring to Eskom’s head office.

Phasiwe said the action has been largely peaceful, with some burning of tyres.

“In the morning today around 3am, that’s when some of the protesters were trying to go into our power stations to blockade the road,” he said. However police on the site were “quick off the mark”.  — Reported by Amogelang Mbatha, Paul Burkhardt and Odwa Mjo, (c) 2018 Bloomberg LP

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New Eskom boss’s momentous little decision

It may seem a trivial matter, but the significance of the decision by new Eskom group chief executive Phakamani Hadebe to reintroduce weekly system status bulletins cannot be overstated.

On Thursday, at the launch of the first system status report to be released in more than three years, he said: “I believe that transparency is one of the solutions to our goal of building trust. The second one is to deliver honestly on our mandate of delivering electricity to power our nation’s economy.”

It’s worth considering the historical context of these updates to understand the significance of Hadebe’s move. The first system status bulletins were released in January 2012, as then-CEO Brian Dames tried to ensure that information about the power system was made available in a “regular and transparent” manner. Issued on Mondays and Thursdays, they provided a forecast of peak demand and supply for the week or weekend, as well as actual demand and supply data for the preceding days.

The bulletins offered an accurate glimpse into the health of Eskom’s generation fleet, which in 2014 and 2015 was largely incapable of meeting peak demand. The crisis reached near-breaking point in April 2015, when then-minister of public enterprises Lynne Brown briefed the media on the “state of the grid”. By then, stage-two load shedding was in place almost every day from 6am to 10pm. Because of plant breakdowns and outages, Eskom could no longer even meet demand through the day, never mind peak periods. (Years later there exists a school of thought which argues that much of this load shedding was “manufactured” to create a crisis.)

Brown “seconded” Brian Molefe to Eskom as acting CEO on 17 April 2015. Suspended CEO Tshediso Matona and Eskom “parted ways amicably” on 18 May 2015. The last system status bulletin was published on 21 May 2015.

It must be remembered that this communication ceased in the midst of utter chaos at the utility. During Molefe’s tenure (officially September 2015 to May 2017), communication from Eskom resembled that of the Soviet Union. At times, it arguably verged on Stalinist.

Source: Eskom website

While both energy regulator Nersa and Statistics South Africa publish generation and statistics data, these are at best monthly reports, released months later. This means we’ve had very limited insight into the power system, save for what Eskom chose to release at its infrequent (roughly quarterly) media briefings.

As recently as three months ago, Eskom had a major coal crisis which nearly went unseen. Thanks to persistent questioning by EE Publishers’ Chris Yelland, Eskom finally admitted that it had been burnt R140m of diesel in March alone to run open-cycle gas turbines in order to keep the lights on (more detail in this Mail & Guardian report: Eskom burning through diesel again).

This is why Hadebe’s decision to reintroduce Eskom’s system status updates ought to be applauded widely and loudly. The amount of information provided is also significantly more than that previously released by the utility.

The system status report for week 22 (28 May to 3 June 2018) shows the following:

  • Peak weekly demand in the year to date was 34 147MW. This is 3.43% lower than the peak of 35 361MW experienced last year.
  • This peak (so far) was hit in week 22, and Eskom relied on “demand response” to remove 398MW of demand from the grid (in effect, large industrial customers reduce load in seconds when/if required to do so by Eskom).
  • Eskom’s energy availability factor is at 77.26%, the highest this year (remembering, of course, that Eskom does most of its maintenance in summer months, when demand is lower).
  • At the end of March, 30% of Eskom’s generating plant was unavailable.
  • Eskom has sent out 1.19% less electricity so far this year, when compared (year to date) to 2017. If its financial year is used (from 1 April), it has sent out 2.07% less electricity than in the 2017 financial year.
  • Eskom’s installed capacity is 46 964 MW (this excludes independent power producers/renewables).
  • The prognosis for the rest of winter is positive, with no forecast risk of load shedding.
  • This article was originally published on Moneyweb and is used here with permission

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