The R3.8-billion claim Eskom has made against former executives including Brian Molefe and Matshela Koko, as well as former minister Mosebenzi Zwane and the Gupta brothers, is a matter of principle, CEO André de Ruyter said on Tuesday.
Last week the utility filed a 73-page summons at the high court in Pretoria in which it spells out a case of a conspiracy to loot Eskom between the former executives, board members, Zwane and the Guptas and their associates in the purchase of Optimum Coal Mine in 2015.
Eskom states that it incurred losses of R3.8-billion because of this conspiracy, which it intends to recover from the 12 defendants listed in the papers.
“We are working with, among others, the asset forfeiture unit, as well as our own legal advisors to prepare what is known as anti-dissipation orders and that tries to prevent people from spending ill-gotten gains before we can recover them,” said De Ruyter at the Cape Town Press Club.
However, he said that while they want to preserve as much of the money as possible, Eskom will probably not be able to reclaim the full R3.8 billion. “I suspect a significant amount of money has already been spent.”
He said the utility could not afford to “sit back” and allow the alleged perpetrators to walk away without consequence. “I think it’s also a matter of principle at stake here that we have to pursue and I am quite confident based on advice received from our lawyers that we have a strong case.”
Debt mountain
The little that can be retrieved in the proceedings will assist the power utility which has a current debt burden of R450-billion. It is also owed about R30-billion by South Africa’s municipalities, another cost it doesn’t see being paid in the near future.
Eskom has been approaching the courts to acquire attachment orders with regard to the assets of municipalities and recently the bank account of the Maluti-a-Phofung council. De Ruyter said the challenge with municipal debt could largely be attributed to the inability of owing municipalities to collect debts, ensure meters are read, and bill correctly. He said the utility is working with provinces and the department of cooperative governance & traditional affairs to tackle the issue, which he said would be “resolved in time” with the requisite political will.
To run a financially sustainable enterprise, Eskom’s objective is to have a significantly reduced debt balance of R200-billion with a cash balance of R30-billion and an Ebitda (earnings before interest, tax, depreciation and amortisation) margin of 35%.
De Ruyter said there is no “single silver bullet” to tackle the R450-billion debt. A number of things need to be done, such as addressing the cost of debt and the utility’s cost base. He added that Eskom was grateful for the financial padding from bailouts provided by the government, which is why the recent court judgment reversing the energy regulator’s decision to treat the equity injection as revenue was significant.
“But the debt does not go away by itself, and this is still a conundrum that does not get resolved and it’s more than an Eskom issue – it is a national issue that we need to address.”
Asked if he supports the semi-privatisation of parts of Eskom, De Ruyter said private sector investment can be better encouraged through Eskom restructuring its operations. The utility is currently undergoing a divisonalisation of its generation, transmission and distribution operations with a final goal of unbundling. De Ruyter has previously said that the Eskom of the future will be more involved in transmission, allowing for a greater number of independent power producers in generation.
“We believe that this is an easier way for private sector involvement than trying to sell shares in an entity that has R450-billion of debt,” he said, adding that this is a policy question and not for Eskom to decide.
De Ruyter said Eskom had made good progress in its unbundling despite reports that the process is proceeding slowly.
According to the Road Map for Eskom in a Reformed Electricity Supply Industry, released by public enterprises minister Pravin Gordhan last year, the utility’s transmission subsidiary would be legally separated by December 2021. The unbundling of the generation and distribution units would take place in December 2022.
De Ruyter previously told parliament that as a number of issues pertaining to Eskom’s legal separation are not in Eskom’s control, these timelines were still to be confirmed and could be delayed by two years.
“We are working very hard to come up with an alternative plan to expedite and achieve essentially the same objective,” he said De Ruyter. This plan will be presented to the board and the shareholder.
- This article was originally published on Moneyweb and is used here with permission
