Eskom group chief executive Andre de Ruyter said yesterday that the utility would sell the assets to finance the R450billion (US$25.55bn) debts that investors and ratings agencies have identified as the government’s biggest contingent liability.
De Ruyter said Eskom was currently unable to service the debt from its balance sheet as sales volumes had declined at least 1percent a year against a 30percent increase in operating expenditure in five years to reach R151bn (US$8.57bn), forcing it to borrow more money.
“It’s an opportunity for us to also understand how we can save by diversifying and potentially exiting from that business,” De Ruyter said.
“We also have a finance cor- poration and this business is in a process of being sold. We are waiting for bids from a number of interested parties. To the extent that we receive any monies from the disposal of non-core assets, the proceeds will primarily be applied to the reduction in debt.”
De Ruyter said Eskom’s current financial modelling showed that the utility could achieve independent financial sustainability at a significantly reduced debt balance of R200bn (US$11.35bn), a closing cash balance of R30bn (US$1.70bn) and Ebitda margin of 35percent.
He said Eskom had also developed an “aggressive turnaround plan” for Rotek to repurpose it, but there were no plans at this point in time to sell it.
In March, Eskom’s acting chief procurement officer Solly Tshitangano identified Rotek as one of the entities that bled the utility millions of rand by deviating from procurement guidelines during the continuing construction of the Kusile and Medupi power stations.
De Ruyter said the services that Rotek was offering were incredibly important to Eskom, particularly for generation and centreline which is involved in the refurbishment of turbines.
“We don’t intend to sell Rotek but we are going to be optimising its asset base as well as its cost base. What we are talking about is a refocusing of our activities. Rotek for some time has been trying to access external markets outside of Eskom,” he said.
“We think that has been a distraction, it has resulted in Rotek resources not always been available to fulfil Eskom requirements.”
He said most of the work and resources that were outsourced by Rotek would be focused internally.
“Rotek does have a very large number of temporary employees in its staff complement, and we are going to be re-looking at how we can engage with those employees in order to reduce the cost base of Rotek,” De Ruyter said.
Group executive for human resources Elsie Pule said the power utility had reduced its staff number by 1690 from last year, and had a further exit through the voluntary separation packages.
“We continue to reduce our numbers through natural attrition. We will be demonstrating the reduction of the number of employees by the end of this financial year further than this,” Pule said.