Eskom in big trouble

Eskom has announced that it will release its audited annual financial statements for the 2024 financial year by no later than 20 December 2024.

However, the Johannesburg Stock Exchange (JSE) has warned that the power utility faces possible suspension from the bourse after repeatedly failing to produce its audited financials by deadline.

“Eskom is pleased to advise that substantial progress has been made in finalising the 2024 AFS, with the audit being largely completed,” the power utility announced on 5 December.

Its latest announcement comes after the power utility provided assurances at the end of October that its financial report would be published in December.

On 1 November, the JSE issued a statement to warn holders of Eskom’s debt securities that the utility had failed to submit its financial information on time.

In addition, the exchange said that the listing of Eskom’s debt securities and the registration of their programme memorandums is under threat of suspension and possible removal.

“If the above Issuer still fails to submit their financial information by 30 November 2024, then the issuer’s programme and the listing of their debt securities may be suspended,” the JSE warned.

Business Day reported that Eskom attributed the delay to a prolonged investigation affecting its results, though it has not disclosed specifics.

In its March year-end results, the utility promised to release its financial statements in December. However, this conflicts with the JSE’s 30 November deadline. 

When asked whether it had submitted its statements by the 30 November deadline, Eskom told Daily Investor that it plans to announce its Integrated Results this month through a media briefing. The utility did not provide a reason for the delay.

While this will bring some relief to Eskom bondholders who were alarmed at the delay, it still means that the utility missed the JSE’s deadline and could face suspension from the exchange.

Director of Issuer Regulation at the JSE, Andre Visser, told Daily Investor that, as of 17:00 on 2 December, Eskom had not yet published its annual financial statements on SENS.  

He explained that, in terms of the Debt and Specialist Securities Listings (DSS) Requirements, Eskom will now be afforded an opportunity to submit written representation stating why the JSE should not suspend the utility.

“The JSE will consider these representations when making a decision on whether to suspend. The JSE is engaging with Eskom on this matter in accordance with the procedures and processes outlined in the DSS Requirements,” he said.

The JSE said that such disclosures are crucial for maintaining investor confidence and assessing the issuer’s financial integrity.

“Without transparent disclosure of how these individuals are treated and involved in the Issuer’s affairs, there is a risk of conflicts of interest that can undermine investor confidence,” it said.

“Similarly, disclosing loans and procurement involving related parties is crucial. Transparent reporting allows noteholders to assess the fairness and integrity of these transactions.”

It said that failure to disclose such information deprives noteholders of crucial insights into potential risks and the Issuer’s true financial health.

“For these reasons and with reference to the JSE’s findings of breach, the JSE has decided to impose on Eskom a public censure and a fine of R3 million,” it said.

However, it said the R3 million fine is suspended for three years, provided Eskom avoids further breaches of similar requirements during this period.

Eskom acknowledged that it failed to submit the necessary documents but emphasised that the JSE sanction is for not timeously publishing the policies and registers and in no way suggests any breach of the policies themselves.

Eskom said it recognises the importance of effective governance and transparent disclosure for noteholder confidence.

It said it has taken significant steps to rectify the non-compliance and to ensure that the utility remains compliant going forward.

“The outstanding policies and registers are now largely finalised and were published on the Eskom website on Friday, 12 April 2024 (policies) and Friday, 28 June 2024 (registers).”

A version of this article was first published by Daily Investor and is reproduced with permission.