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Eskom on firm operational, financial footing

‘We had almost 207 000 homes getting connected to the grid for the first time,’ reports Johnny Dladla.
Eskom CEO CEO Johnny Dladla. Picture: Moneyweb

NASTASSIA ARENDSE:  Eskom released results today, with revenue up 8%. The company said it has secured 53% of the funding it requires for its 2017/18 financial year, which runs to the end of March. However, its net profit fell 83% last year to R1bn. I’m joined on the line to break down the numbers by Eskom’s interim group chief executive, Jonny Dladla.

Jonny, Thank you so much for your time.

JONNY DLADLA:  Thank you, Nastassia.

NASTASSIA ARENDSE:  So take me through the utility’s salient points when it comes to the results.

JONNY DLADLA:  I can kick off by saying that we had an excellent set of results the past financial year. These are the results that we are presenting today. If one were to look at where Eskom has been the past two to three years, at some point we were even thinking that we wouldn’t be able to pay salaries. But we have, based on the turnaround strategy that the organisation has had, managed to at least report a good set of results which we are presenting today.

If you look at the numbers, if I may, for our revenue we’ve increased by 8% to about R177bn this year. The ebitda has registered an increase of 14.4% to R38bn against the target of R30bn. We also have improved on our cash flow from operating activities and we realised almost 23.1% to R46bn.

Our generation plant has also improved because we’ve got an availability now that has improved from 71.1% to 77.3%.

You know that, with our build programme whereby we bring in new capacity in our plant, all the Ingula units are now in commercial operation since January this year and that has added about 1 332MW, which really gives it enough to supply South Africa and be able to also export electricity across the borders. We do also have one of our stations, the Kusile unit – we synchronised that to the national grid also.

On the electrification side we had almost 207 000 homes getting connected to the grid for the first time. That for me is a step in the right direction because that’s what we’ve been aiming for, not only as Eskom but as a country, that people should have access to electricity. So that gives almost 90% universal access. So it’s quite an achievement that we believe as a country we can celebrate.

Lastly, if you look at the engagements, because we normally merger the participation of our staff on all the activities that an organisation is engaging on and, given the climate that Eskom finds itself in, we have seen great participation in our Eskom employee engagement surveys, whereby we can input from our own staff how they feel about the organisation, and what sort of recommendations and suggestions they have to improve on a number of things. And we’ve seen an improvement there that gives us comfort that, whatever we do, at least we get support from our people.

NASTASSIA ARENDSE:  Let’s look at your net profit. In the intro I mentioned that it fell by 83% to R1bn. What was the reason behind that figure?

JONNY DLADLA:  We are securing imploding [?] assets as it were. But there are a number of factors. One was the employee cost, which also came as a result of making provisions for employee benefits, which had to do with the incentive scheme. But also when we look at the net impairments lost, that also contributed to the reduction. Largely those are the big numbers that contributed to that.

NASTASSIA ARENDSE:  When you are looking at your finance costs, I see they have increased from R8bn in the previous financial year; it’s about R14bn. Do you see that being sustainable in the near future?

JONNY DLADLA:  That number is because of the build programme, Nastassia. So this number will remain as such until we complete our build programme.

NASTASSIA ARENDSE:  And with regard to the arrear debt from the municipalities and Soweto, can you give us an update on that?

JONNY DLADLA:  All the municipality debt – I don’t have here a copy of the our results – is that we’ve got those municipalities that who’ve signed a repayment arrangement. But unfortunately not all of them have stuck to that payment arrangement. We’ll continue to engage with our municipalities, but our drive is making sure that we do get paid what we are owed by the municipalities.

NASTASSIA ARENDSE:  In terms of the CEO position and where you are, and how you are perceiving things, what would you say the key concerns for you are – whether it’s from a governance perspective, or whether it’s from some of the allegations that come through about your CFO having sponsored trips by the Gupta family? When you are looking at the company as a whole, what is concerning you?

JONNY DLADLA:  At this stage, Nastassia, I’ve been given a clear mandate by the shareholder, Minister Lynn Brown, and the board has also given me a mandate on things I have to focus on. Now, if I have to answer your question within the mandate that I’ve been given, the minister was very clear in terms of contract management, procurement and also making sure that at a leadership level there is cohesion.

I’ll explain what she had in mind by so saying. It’s that there’s been a lot of instability in the organisation for a number of reasons and unless we have stability it doesn’t matter what we do. We’ll continue to have low morale in the organisation, we’ll continue reading about ourselves in the newspapers – and that was really a concern. One can understand that all of those things when they happen, as the minister she has now to be answerable for in parliament.

What the board has done to ensure that we carry through that mandate, they have given me a mandate to focus on governance, which also then is coupled with ethics and accountability. So the question you’ve asked around the CFO, we will be addressing related matters within that space.

But that’s not the only reason why we’ll be focusing on that. We are also focusing on those suppliers that one would have to start looking at – if there are any contracts, were those contracts done properly within the governance?

Now it’s not going to be everybody that will be painted with the same brush. Its taking each contract that has created uncertainties and also given a negative lie to us, Eskom, that I’ll be focusing on. So governance is what I’ll be attending to.

NASTASSIA ARENDSE:  All right, Mr Dladla, thank you so much for your time.

 

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