The big Eskom asset lie

Jamie McKane

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The big Eskom asset lie

The Organisation Undoing Tax Abuse (Outa) said it is horrified by Eskom’s highly inflated valuation of its assets.

According to Outa chairperson Wayne Duvenage, Eskom has pushed its asset base to over R1 trillion – significantly more than the R300 billion to R400 billion that they would say it is.
 

Gordon_R

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I suggested as much in a reply to a thread about Eskom’s profit/loss accounts. It is very difficult to put a number on assets, but they are certainly worth less than the cost of borrowing to build those new power stations. It doesn't necessarily make them bankrupt, but more like a 'zombie corporation', unlikely to ever become profitable.
 

Fuzzbox

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They want to borrow money against assets they dont have.
Is that not fraudulent.?.
If their Debt is about R420 Billion and assets about R300 Billion they are actually insolvent.
 
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lucifir

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scrap them already and let each municipality self provision ... or better yet subsidise each household to self provision with solar
 

Gordon_R

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They want to borrow money against assets they dont have.
Is that not fraudulent.?.
If their Debt is about R420 Billion and assets about R300 Billion they are actually insolvent.
There is no way to place an accurate value on their assets, since no one will buy them, and no one else can use them. They can keep pretending they are worth more, since it is impossible to prove otherwise...

See: https://en.wikipedia.org/wiki/Zombie_company

"Zombie company" is a media term for a company that needs bailouts in order to operate, or an indebted company that is able to repay the interest on its debts but not repay the principal.
Zombie companies are indebted businesses that, although generating cash, after covering running costs, fixed costs (wages, rates, rent) they only have enough funds to service the interest on their loans, but not the debt itself. As such they generally depend on banks (creditors) for their continued existence, effectively putting them on never-ending life support.
Eskom is both a zombie company, and currently a loss-making. Tariff increases can fix the cash-flow position, but not the debt problem.
 

FNfal

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The people that are running this country are like a bunch of school kids playing at monopoly .
They have no idea what they have done to this country and the consequences of their actions .
Bunch of fools running this country .
 

Utterly Confused

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The people that are running this country are like a bunch of school kids playing at monopoly .
They have no idea what they have done to this country and the consequences of their actions .
Bunch of fools running this country .
And that's putting it mildly
 

Gordon_R

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I cannot find out how Eskom values its assets, but its own annual report highlights the risk of 'stranded assets': http://www.eskom.co.za/IR2018/Documents/Eskom2018IntegratedReport.pdf

Based on the current sales forecast, combined with displacement of capacity from IPPs, EUF from coal-fired plant is anticipated to reduce to 68% in the next five years. This means that we are likely to be left with stranded assets which cannot be optimally utilised. A long-term strategy is required to deal with the operating surplus capacity, while minimising the impact on our workforce, suppliers and the community at large.
A collaborative effort with Government, industry players, clients and interest groups is crucial to ensure that the consumer and the economy are not disadvantaged by paying for stranded assets.
Inability to sell in the region in the long term, partly due to an inability to build transmission lines fast enough to support the capacity increase, leading to stranded assets in South Africa and over-investment in transmission assets in the region.
 

Fuzzbox

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"Based on the current sales forecast, combined with displacement of capacity from IPPs, EUF from coal-fired plant is anticipated to reduce to 68% in the next five years. This means that we are likely to be left with stranded assets which cannot be optimally utilized. A long-term strategy is required to deal with the operating surplus capacity, while minimizing the impact on our workforce, suppliers and the community at large. "

IF they have surplus capacity as stated in report why do they even need to build more transmission lines.
Why dont they scale down the workforce and save on the hefty wage bill of R31 Billion rand.
Compared to other countries ESCOM is overstaffed by at least about 14000 employees.
I also see that we have so many non executive board members.
What could the reason be for this?
Reading further the DEBT of borrowing is R42 Billion on a total of R175 Billion income.
That is neary 25% of all income goes to servicing DEBT.
I don think there is any hope for this company.
Also this report shows a loss of about R2.3 Billion .
How come the other day they announced a loss of about R15 Billion rand.
The figures somehow dont add up.
But then this is ESCOM we are talking about.
 
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Swa

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They want to borrow money against assets they dont have.
Is that not fraudulent.?.
If their Debt is about R420 Billion and assets about R300 Billion they are actually insolvent.
They have the assets. As others have stated it's hard to value them as Eskom is the only entity that can use them. Rather a conundrum as they're also useless as collateral as nobody can get anything for them.
 

Fuzzbox

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They have the assets. As others have stated it's hard to value them as Eskom is the only entity that can use them. Rather a conundrum as they're also useless as collateral as nobody can get anything for them.
I am sure some of the IPP's would buy some of the assets because they WOULD know what to do with them.
 

Gordon_R

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I am sure some of the IPP's would buy some of the assets because they WOULD know what to do with them.
In theory IPPs could buy Eskom power stations. In practice there are major hurdles: Power-lines, price-setting, politics, unions, coal contracts, environmental regulations, etc. For base-load production I don't see this happening anytime soon.
 
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