Eskom folding?

[Skinner]

Eskom faces funding woes
Feb 12 2008 01:20 PM

Johannesburg - Eskom on Tuesday said it has embarked on an exercise to "determine the financial sustainability of the organisation".

This exercise focuses on among other things the maintenance of the utility's investment grade and the establishment of broader funding options.

From: http://www.fin24.co.za/articles/default/display_article.aspx?Nav=ns&ArticleID=1518-25_2269121

:sick:

[timgaul]

Screw them! Get all that bonus money back from those inept, lazy, waste-of-matter management you employed to do sweet fanny adams and get us in this pile of poo!

[The_Librarian]

sies on you all

focus on service delivery and not on making more money :sick:

[!!DV!!]

That is the problem, they are here to deliver a service to SA but they make stupid amounts of profit... Look at the SABC :sick:
If they don't they want to increase the price or the license fee.

[Scooby_Doo]

Just have to up the cost for electricity, its unrealistic to expect the prices to remain so low and expect them to invest more.

[Moederloos]

Just have to up the cost for electricity, its unrealistic to expect the prices to remain so low and expect them to invest more.

It is unrealistic to expect us to continue to feed the gravy train and contend with **** service levels.

Screw Eskom and the ANC.

[The Cosmos]

screw south africa :D

[Scooby_Doo]

Yes but our electricity is very cheap. I agree they should all be fired and the gov should be all replaced but even if that all happened the price of electricity should still be increased.

[fivelza]

This has very little about making money but rather about sorting out their balance sheet so that they can raise the necessary funding.....

[Moederloos]

Yes but our electricity is very cheap. I agree they should all be fired and the gov should be all replaced but even if that all happened the price of electricity should still be increased.

It is not cheap anymore.
Cost our small company R150K to install a generator.
Cost me R2000 for my baby one.
We lost plenty of production last month.
I have all but left Africa for dead - so add that cost to the pile.

It is not cheap - it has cost this country plenty.



(I do know what you meant :D Just adding another view to the "cheapness" argument)

[Nod]

They can't claim that prices are too low AND pay out bonuses amounting to millions every year.

[Scooby_Doo]

:) all true

i kinda like the dark :rolleyes:

[fivelza]

They can't claim that prices are too low AND pay out bonuses amounting to millions every year.

True but don't let that cloud the issue that they have to fund the fixup somehow.

[Scooby_Doo]

They can't claim that prices are too low AND pay out bonuses amounting to millions every year.

Not about that (true, but thats a whole other issue) if prices for electricity were on par or higher that the world average private electrical companies would have setup shop here, but yeah that didn't happen. We can't expect that to still happen with our cheap ass electricity, guess we paying for all that cheap electricty with intrest.

[Nod]

True but don't let that cloud the issue that they have to fund the fixup somehow.

True, but they had budget for maintenance and/or expanding, or should have. At worst government should provide the funding, and if they can't, then there is always the world bank.

Placing the cost of the upgrading of the grid squarely on the shoulders of the consumer, is not going to work.

[fivelza]

True, but they had budget for maintenance and/or expanding, or should have. At worst government should provide the funding, and if they can't, then there is always the world bank.

Placing the cost of the upgrading of the grid squarely on the shoulders of the consumer, is not going to work.

The upgrading would have had to taken place in any event so the consumer would have paid for it.

[sox63]

Saying Eskom is folding is jumping the gun don't you think?

From what I understand from the article, there is just uncertainty as to where the additional funds are going to come from. Eskom had a healthy balance sheet, and I don't think they have spent it already, however the concern is that they don't have the resources to fund the expansion, without a significant capital contribution from its shareholder, the goverment.

We just have to wait for the budget speech. And unlike Sentech, Eskom can raise their own funding in the market, but they don't want to rely on that, as that will mean a helluva lot of debt.

[Nod]

The upgrading would have had to taken place in any event so the consumer would have paid for it.

Yes, and it would have been a gradual increase. But because it was not done, or not to the extent it should have been, they want to increase the price pretty dramatically.

Anyways, I believe government liked to boast how cheap our electricity was in relation to 1st world countries.

[fivelza]

Yes, and it would have been a gradual increase. But because it was not done, or not to the extent it should have been, they want to increase the price pretty dramatically.

Anyways, I believe government liked to boast how cheap our electricity was in relation to 1st world countries.

All true Nod, but has anyone done the sums that prove that if they had increased the tariff gradually we would not be in the same position. We are missing that we all 'benefitted' previously by having cheaper electricity.

One could also argue that the benefit is all wiped out by what is happening now.

[Nod]

In the long run, the cheap electricity has not been good. But that is hindsight.
Since '98, they should have planned better in order to prevent what we have today. Also hindsight.
Is there a easy way out of this? No.
Are they doing everything they can to rectify the situation? Maybe.
Will prices have to increase? Yes, and I'm all for it, if I can see where the money is going to.
Big bonuses, should have been stopped, and that money should have been saved for todays rainy day.
In the end, we will have to fall in line with whatever is decided at the top.

[fivelza]

In the long run, the cheap electricity has not been good. But that is hindsight.

It has attracted investment which is good but resulted in a power grid that cannot cope with the load.


Big bonuses, should have been stopped, and that money should have been saved for todays rainy day.

Agreed, bonusses should be paid based on performance...there has been no performance therefore no bonus.

[Crabby]

Agreed, bonusses should be paid based on performance...there has been no performance therefore no bonus.

And in light of the current crisis those bonuses that were paid for non performance should be paid back to EishKom.

[timgaul]

Not about that (true, but thats a whole other issue) if prices for electricity were on par or higher that the world average private electrical companies would have setup shop here, but yeah that didn't happen. We can't expect that to still happen with our cheap ass electricity, guess we paying for all that cheap electricty with intrest.

They did! They had offices here! They were ready to compete!

Eskom dragged their heels about providing information and after two years these companies left. Cheap electricity is an excuse, when in reality government and Eskom chased all competition off! :mad:

If Eskom increased prices, they still would have chased all competition off. Then they would have given management even larger bonuses. We would still be in this k@k and being paying even more in the future!

[DJ...]

This has very little about making money but rather about sorting out their balance sheet so that they can raise the necessary funding.....

How many companies do you know of who publicly state that they are embarking on an excercise to determine their financial sustainability? None - I havent heard of it. Any well run company would know this in the first place, but more than that, I am curious as to why they have publicly stated this though - what is the motivation? It makes no sense to me.

And not sure what Fitch and the like are worried about as Eskom's debt is secured by govt. Surely there must be some sort of guarantee to this affect in the prospectus. How many bonds has eskom issued in the last 10 years? Anyone know? Anyone have a copy of the prospectus for an eskom placement? I would be curious to see what their "events of default" clause states.

[VJB 449]

Eskom do what we all have to do when you fug up. Borrow money.

[HavocXphere]

Usually one just looks at the audited statements....but I suppose they were so busy building power plants that they did not have time such minor details. Audits also have this tendency to interfere with corruption...

[DJ...]

I have checked on BESA's website and found that Eskom issued numerous medium term notes since 1992 but I cannot find any pricing supplements. One of the MTN's was for R65bn in 1996 and the use of proceeds clause indicated that the funds were intended for Eskom to invest in a capital expenditure programme to increase electricity supply. The same clause exists in the a 2002 MTN but again the pricing supplements are not available. So the funding was clearly there, but they never made use of it or were blocked from doing so.

[Rozier]

screw south africa :D

The government is doing exactly that very effectively.;)

[HavocXphere]

In Fin Management today, we were told that if we see an Eskom bond rate, we're supposed to use that in the calcs as the risk free return (for CAPM calcs). Teh irony:D

[fivelza]

How many companies do you know of who publicly state that they are embarking on an excercise to determine their financial sustainability? None - I havent heard of it. Any well run company would know this in the first place, but more than that, I am curious as to why they have publicly stated this though - what is the motivation? It makes no sense to me.

And not sure what Fitch and the like are worried about as Eskom's debt is secured by govt. Surely there must be some sort of guarantee to this affect in the prospectus. How many bonds has eskom issued in the last 10 years? Anyone know? Anyone have a copy of the prospectus for an eskom placement? I would be curious to see what their "events of default" clause states.

This is not a public company....in any event if it were the analysts would be asking those questions if it were.

Rightly or wrongly they are addressing it as it is a real issue....their bonds will not be taken up in the market if they do not meet a certain rating, regardless of whether the government guarantees them or not.

[Milano]

As a resident of a previously lit area I now have my generator...so I couldn't care what they do. Someone PM me when there is a petrol shortage.

[DJ...]

This is not a public company....in any event if it were the analysts would be asking those questions if it were.

Rightly or wrongly they are addressing it as it is a real issue....their bonds will not be taken up in the market if they do not meet a certain rating, regardless of whether the government guarantees them or not.

I am referring to debt prospectuses.

Even private placement prospectuses are available and you dont have to be a public company to trade your bonds publicly - only your equity.

Besides, it doesnt change the fact that the MTN's use of proceeds clauses in 2002 and 2006 state that the funds raised will be utlilized for capital expansion. Its a really expensive process to go through (setting up funding) without actually going to market. So the placements under the MTNs must be available somewhere. It is clear what they intended to do with the money, not clear how much they raised - thats why we need the pricing supplements. If anything, the MTN would be private, not the pricing supplement as it does not stipulate the Ts and Cs. It merely references the MTN umbrella Ts and Cs.

You sound like you also work in the financial markets - know any credit analysts or debt traders?

[BTTB]

I would like to know a few things:

1. What happened to all the Dividends that Government receives from Eskom from it's business over all these years?
2. Why is that Eskom's Capacity is maxed out to the point that The National Grid virtually cannot cope, yet they need to charge us more.
3. Would it be pertinent to state that The Residential Market and Small to Medium Enterprises are subsidising Big Business as the pricing parity between these differentials is quite substantial.

Would anyone here tend to agree that Government may be using Eskom's shortfalls, notwithstanding the cost of the new Power Stations yet to be built, as a reason to simply charge us more like they did with Water, Rates and a host of other items and Government alone can be blamed for the high level of Inflation that we now have to endure.

[Gooku]

yo yo yo
Eskom needs 1.3 trillion Rand for new plants...etc
no wonder people want to know how or where is it going to come from ?

http://free.financialmail.co.za/08/0208/features/afeat.htm

[DJ...]

I would like to know a few things:

1. What happened to all the Dividends that Government receives from Eskom from it's business over all these years?
2. Why is that Eskom's Capacity is maxed out to the point that The National Grid virtually cannot cope, yet they need to charge us more.
3. Would it be pertinent to state that The Residential Market and Small to Medium Enterprises are subsidising Big Business as the pricing parity between these differentials is quite substantial.

Would anyone here tend to agree that Government may be using Eskom's shortfalls, notwithstanding the cost of the new Power Stations yet to be built, as a reason to simply charge us more like they did with Water, Rates and a host of other items and Government alone can be blamed for the high level of Inflation that we now have to endure.

1 - I found info relating to 2005 which is a bit perplexing. Telkom reported profits of R6.7bn and paid govt a dividend of R1.86bn - they are 37% owned by govt. Eskom who is 100% owned by govt reported profits of R5.2bn yet paid out just R1.6bn to govt. Why such a small figure in comparison to our other parastatal Telkom? Was Telkom bribing govt or was Eskom shafting govt at their approval? Whose back pocket were lined here I wonder? These funds are paid into the National Electrification Fund and it is the responsibility of the Department of Minerals and Energy to manage these funds. City of Johannesburg in 2002 warned that this fund will be used to fund capital expansion in rural areas and not urban areas. (http://www.johannesburgnews.co.za/budget_2001/city_power/citypower_internal.html) I would like to scrutinize the books for this fund.

2 - To fund capital expansion as required. My question is, what has the NEF been doing with all the funds over the last few years? How can we find out what Eskom's annual budget has been?

3 - Pricing wise maybe, but utlilization amongst residential and SME is much much smaller than that of corporates. Not sure if the utlilization is significant enough for the price disparities to count as a subsidy. But I could be completely wrong here.

[Piepalook]

Just have to up the cost for electricity, its unrealistic to expect the prices to remain so low and expect them to invest more.

I am under correction here, but i heard that Escom supplies municipalities at 4.5 cents per kilowatt hour.
Municipalities in turn sells electricity at 50 cents to us .
Escom is not making the money, our local municipalities are.
To them it is a scource of revenue.

[BTTB]

I am under correction here, but i heard that Escom supplies municipalities at 4.5 cents per kilowatt hour.
Municipalities in turn sells electricity at 50 cents to us .
Escom is not making the money, our local municipalities are.
To them it is a scource of revenue.
Interesting!:eek:

This point has come up in several discussions on TV (like summit) and in the media. Just great to see something in black and white, even if it may be incorrect, but looks plausible.
This is the disparity I am talking about. Local Authorities use Electricity and since the year 2000 Water as well, as a means of Revenue Collection.
They make any excuse to hike the prices to the consumer.
And this is something that alarms me every day - being screwed over by your own Government. I can understand Businesses trying to make profits out of us, but not the Government, the very people that are there to protect us from these sorts of evils.

If one had to dig deeper into this mess, The Hellkom Saga might look like a walk in the park.

I wonder if there is not a case for The Competition Commission?
Eskom, a Monopoly selling Electricity to Local Authorities, essentially a bunch of Monopolies as well, who in turn make it their business to maximise the profit made from the sale of that Electricity, which for all intense and purposes should be a service.