Eskom suffered a net loss of R2.3bn in 2018, compared with a R0.9bn profit the previous year, the state-owned power producer revealed at its financial results presentation on Monday.
CEO Phakamani Hadebe said the poor results were compounded by allegations of corruption and mismanagement, challenges of governance and negative investor sentiment.
The power utility said its net cash from operations declined from R45.8bn to R37.6bn, as it struggled with leadership and operational challenges.
Eskom Chair Jabu Mabuza also said there had been R19.6bn in irregular expenditure since 2012, with much of the irregular expenditure being reported in 2018.
“This was a result of us shaking the cupboard so hard that so many skeletons came tumbling down,” he said.
“The verification and cleaning up exercise resulted in a significant increase in the number of reported irregular expenditure in 2018 (from R3bn to R19.6bn), with many of the items reported arising in prior years. Where information was not readily available, alternative methods were used where practical to identify irregular expenditure,” the utility said.
The power utility admitted that its “transition towards financial and operational sustainability required resolute, tough and decisive leadership”.
Its liquidity remained a going concern, with a massive R4.2bn owed to it by municipalities.
“Eskom continues to face significant financial and liquidity challenges in the short term, mainly due to the high debt burden, low sales growth and increased finance costs”.
Eskom debt has increased from R387bn to R600bn withing four years, but steps have been taken by the board to boost investor confidence, Hadebe said.
“We have raised 22% to date of [the] R72bn borrowing requirement for 2018/19, and have a firm commitment to increase funding to 62% of the 2018/19 borrowing requirement.” He said growing investor appetite for Eskom bonds was a concern.
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The power utility, which has been hit by leadership challenges, is battling a long-standing financial stability crisis, including a debt of R13.5bn owed to it by a number of municipalities.
In March, Moody’s downgraded Eskom’s credit ratings from B2 from B1, citing an absence of concrete plans to place its business on a sound financial footing. B2 is the fifth rung of sub-investment grade debt.
The current wage demands by unions are also adding to the firm’s financial woes, with labour unions currently discussing Eskom’s latest options of 7% and 7.5% increases, which were tabled after a round of bruising negotiations.
The firm initially offered no increases, citing its difficult financial position. Eskom and the unions were drawn to the negotiation table by Public Enterprises Minister Pravin Gordhan in a bid to avert a crippling strike by workers.
In June, the National Energy Regulator (Nersa) has approved R32.69bn for Eskom’s multi-year price determination Regulatory Clearing Account (RCA) applications – funds Eskom must recover due to an electricity shortfall or an escalation in operating costs.