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Who wants to play "Eskom business rescue practitioner" for the day?


Elbow

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So who wants to play Eskom "business rescue practitioner" and put forward what _you_ would do to change the decline in the state of Eskom?

A business rescue practitioner has wide powers and is exempt from many of the governance limits that apply in the ordinary course of business.  Here's an article: https://www.findanattorney.co.za/content_duties-business-rescue-practitioner

A person in this role has got enormous power to do what it takes.

Can we take as read that you will use these powers fully:

 

The Business Rescue Practitioner (“The Practitioner”):

(a)    has full management control of the Company in substitution for its Board and pre-existing management;

(b)    may delegate any power or function of the Practitioner to a person who was part of the Board or pre-existing management of the Company;

(c)     may remove from office any person who forms part of the pre-existing management of the Company; or

(d)    may appoint a person as part of the management of the Company, whether to fill a vacancy or not. (there are requirements however as to who may be appointed by the Practitioner).

And:

The Practitioner finds voidable transactions or reckless trading

If the Practitioner finds evidence which indicate that, before the Business Rescue proceedings began, that the Company entered into voidable transactions, or finds that the Company or any director of the company failed to perform any material obligation relating to the Company, then the Practitioner must take any necessary steps to rectify the matter and may direct the management of the Company to take appropriate steps to fix the problem.

If the Practitioner during his/her investigation finds that any of the directors traded recklessly or committed fraud, or contravened any other law relating to the Company, then the Practitioner must  forward the evidence to an appropriate authority for further investigation and possible prosecution.  Apart from this, the Practitioner must also direct the management to take any necessary steps to rectify the matter, including recovering any assets of the Company that may have been misappropriated.

 

But what do you say is the way forward for Eskom?

I guess as an business rescue practitioner for Eskom your job is to make Eskom successful again.  So market liberalisation is probably not what you are wanting.  However - generation is the problem, and not having enough electricity to sell limits the business.

So generation side market liberalisation is probably in the interests of Eskom.  But who would invest for generation when the only customer is a single SOE.

So to get people to make that investment to build generation will mean that they have to be able to sell directly (or, practically, through various "energy companies").

In such a liberalised market Eskom will stll be the major buyer for many years - 

In principle the UK has 34 "energy companies" (companies you can buy electricity and gas from).  There are 6 big players.  You can switch "suppliers", though you still get the same electricity and gas down the same wires and pipes.  

Behind these energy companies are, I assume, various commercial contracts for distribution and generation.  I am sure those contracts vary according to the varying circumstances of the businesses contracting.

For the user the result is lots of interesting options - "green" suppliers, clever time of day tariffs and etc etc.

But for the old big players - eg British Gas - their Eskom of gas - well they have 15 million customers in the UK so they are not doing so badly.

Having 20 electricity companies competing, who have contracted with generation companies on commercial terms, and who are contracting distribution through Eskom distribution partnered with municipalities - now we have a way forward.  Business efficiency will be essential.  

Into such a market you could even imaging people like us - home generators - form a business together and sell our electricity into this market together.

 

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Ok I’ll bite....

Until this cadre malarkey stops, nothing will turn them around.... I have some inside knowledge about Eksdom, been consulting to them for 10 years, every single day in their offices. Left that behind a few years ago. As long as its an SOE, nobody and nothing will have the ability to change what is happening there.

Most IT systems run on stuff that I was involved in from a design perspective, even the OT side, the systems that truley run the grid was my design. I was involved in the design and implementation at various sites and power stations. The management of that place is done on a political level, most engineers are no longer there and the few that remain are powerless and ignored. Its a business of employing cANCer voters and a means of skimming off the TAX money, hence the inefficiencies and graft and plain theft. Why do you think management there refuse to be screened for security clearance?

So it stands as a monument to the culture of no maintenance and managers caring only about their own pockets. No planning or thought are given to consequences, as its only a question of whats in it for me. After years I have seen it all and then some. Think what happened to the likes of Meyer Kahn and other experienced guys that were brought in to rescue the ship, most less than a year there if they even made 6 months.

So, with considerable experience on the inside over a very long period, I see very little hope.

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The Guvament has bullsh%tted their way through all their failures. But Eskom is like the elephant in the room - not to be missed. 

When they f#ckup everyone notices and it cannot be hidden. With their mountain of debt they will be the reason for a very high rand dollar exchange rate with all the consequences to it. 

And the traditional collieries supplying it will be gone as the reserves are finished. 

Their latest power station don't even have a colliery for supplies. They will try to supply it from a multitude of mini open pits with poor quality coal. This is another elephant which nobody wishes to discuss. 

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I actually thought about this for a bit. So one thing that is important: Business rescue doesn't mean you will actually be successful in doing the rescue. Many businesses, I hazard to say half if not more, fail anyway despite going into business rescue. The upsides to BR is:

1. You get some protection from the creditors, so it buys you time.

2. The directors/board, who are often the reason for the poor state of affairs, are stripped of their powers.

3. There is a better chance that the employees will be paid, as the process puts them first. Technically the employees are always the first "creditors" to be paid when something is liquidated, but under a formal structure like this there is someone making sure of that.

4. If the business ends up being liquidated, doing it through BR generally costs less (to the taxpayer in this case) than outright liquidation involving a bunch of lawyers. Or at least this is what the articles I read on this topic (involving SAA) said.

Since Eskom is one of those things that really shouldn't fail unless we're masochists who loves lots of pain... items 1 and 2 above is what we're after. Time... and kicking out the people responsible for the mess.

After that, you still have to come up with some sort of solution. The solution involves, as it does in all such cases including your normal household budget, cutting expenses and increasing your income.

One of the largest expenses is the salary bill. Eskom is reported to be top-heavy. So one of the first things to cut would be some of the non-essential senior management staff.

Other ways to plug leaks would be to find the high worth individuals in the organisation and actually give them a raise, so that they stay. Then get out of their way.

The next level is usually getting rid of the dead weight. Selling off things that are not profitable. Here there isn't much room to work with: Nobody is going to buy an old coal station. Eskom would have to pay IN to get generation profitable. Another option is to split off distribution as a separate entity, then downsize generation, and buy power from IPPs. Unions are not going to like that.

One final item: I'd say you have to do something counter-intuitive and pull the unions in right in the beginning. Force them to be part of the fireworks, and be brutally transparent when they are unwilling. Hold your friends close and your enemies closer as they say. When things go down, you want the union man in the room already... not out there where he can stage a protest about stuff he knows nothing about.

With all that said... I suspect the government will have to take over some of the debt to get things viable again. Move it over to their balance state. Which will cause a downgrade from Moodies no doubt, but I'm beginning to think that's inevitable, it is happening anyway.

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After the property crash in 2007, the Irish government adopted a good bank/bad bank solution.

Basically, the good loans were kept and the bad loans went to a new financial institution.

History will tell if this was the right thing to do, but the basic thinking was the whole lot would've collapsed if they had spread the desease.

That aside, ESKOM is a monopoly, a single entity.

It is over-full of non-performing dead wood staff and aging plant.

I wonder if a similar grain/chaff split could be made, so that a phoenix could rises from the ashes.

Obviously not, we have unions, but I do like the idea of having them in the room.

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One thing the CancER do not want is competition. That will mean that they themselves will see just how bad they are, especially at running infrastructure. So no private sector allowed, no buyback of Solar PV, especially not from Joe. That will reduce the budgets, reduce the irregular spending, theft,  and will reduce the almost 50 000 staff, no more easy votes. On top of that the unions will go bezerk. When Sean was running Eskom, the unions went mad, for the few months. They are all Socialist, so no logic or efficiency, as that means less staff and real work.

Cities do not want SolarPV either as it reduces their income, less money in the kitty. That in turn means less to spend irregularly, as I said theft, so no lining of the pockets, less staff to employ and lower salaries. Who would want to cut off their own income? At Medupi I was told, the subcontractor welders deliberately did bad welding and bribed testers to not test all welds properly. This so that the welder could go back later and cut out the faulty weld and redo the work for longer employment, tis but one example. So they delay the build, pocket more mone and that is where some of the cost overruns came from. Some of this is well documented and available online.

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12 hours ago, Sarel said:

One thing the CancER do not want is competition. That will mean that they themselves will see just how bad they are, especially at running infrastructure. So no private sector allowed, no buyback of Solar PV, especially not from Joe.

One thing I learned over the years is to never cry malice when incompetence adequately explains the mess. Even the rampant corruption is in my view a kind of incompetence rather than outright malice. This is by no means an excuse and it doesn't make things better... it makes them worse.

What I mean by incompetence is that you're dealing with a special kind of person who may not even think about the sustainability of it all. Corruption is a problem everywhere in the world, the difference is that in richer countries they have functional corruption: They have learned to steal within the limits of sustainability, so to speak. The corrupt officials actually want to keep the organisation alive so that they may continue to steal from it.

Our bunch however has not learned that balancing trick, hence my claim that this is more to do with incompetence than outright malice.

I would however also argue, perhaps by Dolus Eventualis, that it amounts to malice on the scale that it's been happening around here.

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1 hour ago, plonkster said:

One thing I learned over the years is to never cry malice when incompetence adequately explains the mess. Even the rampant corruption is in my view a kind of incompetence rather than outright malice. This is by no means an excuse and it doesn't make things better... it makes them worse.

Let's call a spade a spade here. Its political ideology, Socialist Ideology to be precise. If someone profits form something its exploitation and therefore very very bad and you can do ANYTHING thinkable or unthinkable to correct for that. In turn, it's build on the premise that everybody is equal in all respects, so exploitation is in their eyes the only explanation. This in my opinion, having been inside for a decade, it's not incompetence but calculated to get back at the previously perceived exploiters to benefit themselves.

Alas that is my opinion and yours may differ.

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51 minutes ago, Sarel said:

ideology

It is wider than that, it is culture. Some cultures have what you can almost call a turn-based view of right and wrong (and this isn't restricted to just Western vs African cultures, you get it in the east as well). In a turn based system, the guy who rises to the top is "getting his turn", and to question this is frowned upon. When your turn comes around, then again you get to benefit and nobody else has the right to complain. In such cultures people are quite confused when you criticise the president of the country for whatever liberties he might be taking.

During the Zuma years you would see a lot of that on social media. People would say: He is our elected president... how dare you question him?

(Us Westerners consider this "tribalist" thinking. And yes, there are some Trump supporters that act very similarly at this moment).

This again to me is a kind of incompetence, but I use the word in a non-pejorative sense here. When you attempt to run something built by Western standards using a different kind of thinking, you are in a sense unqualified to do it properly.

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