South Africa's cash-strapped state power utility Eskom has uncovered R19-billion in irregular expenditure going as far back as 2012, its chairperson Jabu Mabuza said on Monday in a statement accompanying the company's results for the year ended March 31.
The entity also reported a net loss after tax of R2.3-billion for the year, companred with a R900-million profit for 2017.
Mabuza said the company, grappling with the fallout after several senior executives were implicated in corruption, remained focused on finalising investigations into suspended officials while also improving corporate governance.
"I believe that the action taken within a relatively short space of time against those who played a key role in some of the critical governance lapses over the past few years demonstrates how serious we are about rooting out corruption and irregular practices," said Mabuza, part of a new board appointed in January 2018 to stabilise and restore the troubled firm.
"We will continue to pursue those engaged in wrongdoing and take corrective action within the South African legal framework. We are determined to clear the company of corruption in all its forms, with about 250 cases reported through Eskom’s whistle-blowing channels currently under investigation."
He said while Eskom had experienced a tumultuous year, this was not due to operational issues, with its generation plant and network producing solid performance, and the new build programme delivering another three units at Medupi and Kusile. Another two units were expected "in the near future", while electrification of households continued at a brisk pace.
Eskom needed to also focus on addressing executive vacancies, although this was partly dependent on the final structure of the organisation, after completing a strategy review.
"We need to have the right people in the right places doing the right things, to stabilise Eskom and set it up for sustained success, while fulfilling both its commercial and developmental mandate," Mabuza said.
"Over our three-year term, we intend focusing on ... improving liquidity and solidifying Eskom’s status as going concern, which will require a focus mainly on costs, given the recent price increases."
Group chief executive Phakamani Hadebe said revenue levels remained inadequate and tariff increases awarded by the national energy regulator were not expected to improve the situation.
Despite progress being maintained on Eskom's new build programme, as well as solid operational performance for the current financial year, the company continued to face significant challenges in the short to medium term, he said.
"Revenue levels remain unsatisfactory, and the 5.23% increase for the 2018/19 financial year further compounds the impact of the 2.2% tariff increase awarded in the 2017/18 financial year, and is therefore not expected to lead to much improvement," he said.
"Levels of arrear debt, especially from municipalities, remain unacceptably high," Hadebe added, saying Eskom's focus in the short term would remain on cost efficiencies to support financial sustainability.
Acting chief financial officer Calib Cassim said the company’s financial health, which had deteriorated in recent years due to lower electricity demand, low tariff increases, and above-inflation cost increases, was expected to further worsen before improving.
"Cost containment alone will unfortunately not solve Eskom's financial position. It is therefore important that the price of electricity should migrate towards cost reflectivity," said Cassim.
The utility said it was undertaking a strategy review, expected to be completed by September 2018, to ensure that it had an integrated strategy that addressed its current challenges and also ensured that future direction "is clear and focuses on stabilising the organisation by cleaning up governance issues and stopping the bleeding, and thereafter re-energising and growing the business".
Its turnaround plan included improving the earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to at least 35% by growing revenue and reducing costs, managing liquidity, including the recovery of arrear debt , investing in cost-plus mines to benefit from cheaper coal, restricting capital expenditure to R45-billion per year for at least the next three years and reducing reliance on debt financing through optimisation of the balance sheet.