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Embattled utility Eskom is now facing a shortage of cash. Reports indicate that without further funding‚ Eskom would only have R1.2bn in liquid assets at the end of November and would move into negative liquidity of about R5bn by the end of January.

Eskom heading for business rescueThis has not been denied by Eskom executives. Eskom spokesman Khulu Pasiwe told the media that the utility’s position is not where it should be or could be, blaming the low revenue on low electricity demand caused by low economic growth.

Phasiwe told Fin24 that drawdowns from committed facility agreements are being expedited to improve liquidity as a main priority. He indicated that Eskom is targeting municipalities which owe the utility money, as well as trying to recoup money through the Regulatory Clearing Account (RCA).

The RCA is a monitoring and tracking mechanism that compares certain uncontrollable costs and revenues assumed in the multi-year price determination made by the energy regulator to actual costs and revenue incurred by Eskom. Municipalities currently owe Eskom R11.2bn in arrears debt, Phasiwe said.

Eskom is in talks with banks for more funding, but irregular expenditure and changes in leadership have had a negative impact on investor sentiment. Several key Eskom executives, including suspended chief financial officer Anoj Singh, ex-Eskom boss Brian Molefe and suspended executive Matshela Koko are being investigated for their role in state capture, with a parliamentary committee hearing how looting took place at Eskom with the assistance of key executives.

According to Phasiwe, cost cutting has been effective in further improving liquidity, and an increase in tariffs over time and additional funding initiatives will keep Eskom afloat. However, reports indicate that a special task force consisting of Treasury, The Department of Public Enterprises and Eskom has been established to find a solution. Finance Minister Malusi Gigaba has indicated that government will not allow Eskom to fail, leaving government with little option but to provide a bailout.

Eskom initially projected R337bn worth of loans for the 2017/18 to 2021/22 financial years, with R72bn earmarked for 2017/18. However, this was brought down to R54bn, of which only slightly more than half has been raised.

“A tariff increase is not the only factor that will get is out of this situation. We need to improve our efficiencies. Where we are able to cut costs‚ we will be able to do so. But we are not looking at retrenchments as a cost-cutting measure,” Phasiwe said. “Our fundraising efforts had been ongoing as we are trying to raise R337-billion for new build programmes.”

Image credit: https://twitter.com/khuluphasiwe

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