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Struggling power utility Eskom always seems to find themselves in the headlines with news that their losses from the 2021 financial year were 38% more than previously stated. The state-owned power provider originally reported an annual loss of R18.9 billion for the period through March last year, its fourth straight deficit. This has now risen to R25.3bn as it struggles with operational issues that have caused unprecedented load shedding and have brought the country to its knees. The record loss represents another blow for Eskom, which is surviving on taxpayer bailouts. The company’s results for the 2022 financial year were postponed due to a delay in appointing a new external auditor. It will publish the latest results by December 31. This article was first published on Bloomberg – Asime Nyide
Eskom’s Restated 2021 Loss Widens to Record $1.5 Billion
By Paul Burkhardt
(Bloomberg) — Eskom Holdings SOC Ltd. restated the company’s reported loss for the 2021 financial year to 25.3 billion rand ($1.5 billion), about 38% more than before certain accounting adjustments.
The state-owned power provider originally reported an annual loss of 18.9 billion rand for the period through March last year, it’s fourth straight deficit. Eskom is struggling with operational issues that have required nationwide rolling blackouts — locally known as loadshedding — and faces a debt pile of about 400 billion rand.
The record loss represents another blow for Eskom, which is surviving on taxpayer bailouts. It reclassified a portion of coal inventory held at power stations from current to non-current assets and made adjustments to how it values property and equipment, according to a notice on the Johannesburg stock exchange. The changes “significantly affected the working capital ratio from 1.27 reported in the prior period to 0.95 after the restatements,” it said.
The main risk the utility faces is renewed governance and management issues, said Hilton Trollip, an energy research consultant and fellow at the University of Cape Town. “Government will have to assist Eskom finances at least at a survival level and can do that for quite a few years before the next inflection point.”
The company’s results for the 2022 financial year were postponed due to a delay in appointing a new external auditor. The company also needs to resolve “numerous findings and control deficiencies emanating from the lack of compliance with well-documented policies and procedures,” Eskom said. It will publish the latest results by Dec. 31.
- The fair value of derivatives held for risk management were restated to correct the curve methodology applied in determining the fair values of the financial instruments, which were not aligned to market practice
- A review of payment trends of defaulting municipalities accounted for on a cash basis indicated that certain trade receivables were not expected to be realized within 12 months after the reporting period
- The discount rate used in the valuation of power station-related environmental restoration and mine-related closure, pollution control and rehabilitation provisions, was corrected
(Updates with comment from consultant in fourth paragraph.)
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