Eskom tender crushes company

Stefanutti Stocks is in financial distress, which is partly to blame on an Eskom tender to work on the Kusile power plant.

The details of the ill-fated tender were contained in Stefanutti Stocks’ results for the year ending 29 February 2024.

The group reported a 17% increase in revenue from continued operations to R7.1 billion. However, its profit fell by 47.2% to R12.5 million.

Although revenue growth for continued operations might appear strong, the group has been on a downward trend since 2018, when it generated over R10 billion in annual revenue.

The company highlighted that its financial difficulty in the past few years stemmed from a 2008 Eskom tender.

The tender was a joint venture with other private construction companies working on the Kusile power plant.

The original contract was for six years, with a completion date of November 2016. The planned construction duration was 19,000 days.

However, there were consistent delays in completing the Kusile project due to site access and construction problems.

Independent experts, in conjunction with the Dispute Adjudication Board (DAB), found that the project experienced more than 75,000 days of delays.

Stefanutti claimed that Eskom interfered with its work in a way that was in breach of its original contract. This caused the project to progress much slower than expected.

Due to the delays, the company incurred significant prolongation costs and approached the DAB to assess Eskom’s claims.

Stefanutti submitted a claim amount payable by Eskom for at least R1.6 billion, excluding interest, to be calculated and added.

The impact of the Eskom Kusile project took its toll on Stefanutti Stocks’ finances, clearly seen in its solvency.

It is under significant debt pressure, with its total liabilities exceeding its total assets for the first time in 2022, deeming the group technically insolvent.

It also has significant liquidity issues, with its current liabilities exceeding its current assets by R1.13 billion. This means its liquid assets aren’t nearly enough to cover its short-term liabilities.

The company has negotiated an extension of a loan with an outstanding amount of R997 million with its lender to 30 June 2025.

Stefanutti’s interest-bearing liabilities increased sharply from 2019 to 2020, jumping from R637 million to R1.51 billion.

The group has gradually reduced this debt burden to R1.2 billion, but interest expense has become a significant line item on its income statement.

However, despite the debt burden and liquidity hurdles, Stefanutti was still profitable in the past two financial years.

Stefanutti Stocks equity and debt repayments