Future Energy Central Africa
South African parastatal Eskom, discusses optimistic turnaround strategy spurred by findings of Dentons' report.

Having been appointed in December 2014, the Eskom Board inherited a company that was in crisis, faced with many challenges that had macro-economic impacts; subsequently the parastatal appointed Dentons to conduct an inquiry into the status of the business challenges faced by the utility.

The Board was presented with the preliminary findings from the review conducted by Dentons, at a special Board meeting held on 25 June 2015. A draft report was thereafter delivered to the Board on 3 July 2015.

After reviewing the report, the Board found that there were no new issues that were revealed by the inquiry. This confirmed the Board’s assessment of the areas of improvement that was required to turn the business around.

Dentons sparks implementation plan

This was invariably prompted to question the value of a continuous review, given the time constraints as well as costs involved. Consequently, the Board decided to start a rigorous implementation process of the recommendations immediately.

Having been delegated the responsibility of oversight of the recommended improvements, the final report was received by the Audit and Risk Committee (ARC) from Dentons on 21 July 2015.

Driven by management, under ARC’s strict oversight, a full implementation plan was then developed, with clear targets and tightly-monitored milestones that were incorporated into the turnaround strategy presented to the minister of public enterprises and minister of finance, as this formed part of the conditions relating to the equity injection provided by government to Eskom.

By November 2016, the majority of the recommendations had been fully implemented. It was the Board’s considered view that releasing the report, at the time, would have an adverse impact on the employee morale.

The Board’s decision to swiftly implement the recommendations of the review rather than suffer from analysis paralysis as well as not impacting employee morale negatively has been vindicated by the significant achievements of the turnaround strategy.

Turnaround strategy

These include no load shedding in excess of 18 months, EAF of 78% compared to 69%, excess capacity of 5,600MW, new build delivering ahead of schedule – contributing in excess of 2,000MW, significant improvement in profitability of the Company as measured by EBIDTA performance, 86% of the funding for 2016/17 financial year has been secured, which allowed the auditors to remove the emphasis of matter qualification from their audit report relating to going concern.

Eskom is on a positive trajectory with its energy availability sitting at 77.3% (from 70.3%) as well as its new operational surplus capacity of 5,600MW.