Eskom in trouble

Eskom may be suspended from the JSE for repeatedly missing the deadline to submit its annual financial statements.

In November 2024, the JSE announced that Eskom failed to submit its annual financial statements for the year ending March 2024 by its deadline.

On 1 November, the JSE issued a statement to warn holders of Eskom’s debt securities that the utility has 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.

This is not the first time Eskom has landed in hot water with the JSE for missing publication deadlines.

In August 2024, the JSE imposed a public censure and a R3 million fine on Eskom for breaching the stock exchange’s debt listing requirements.

Despite multiple extensions and commitments, Eskom failed to publish required policies and registers related to domestic prominent, influential persons (DPIPs) and related-party transactions as mandated by rules introduced in 2020 for state-owned entities.

These rules require issuers to disclose and maintain policies and registers detailing dealings with DPIPs, loans, and procurement with related parties to ensure transparency and prevent conflicts of interest. 

In its announcement of the fine, the JSE said Eskom failed to comply with the provisions of the Debt Listings Requirements after its promulgation in 2020. 

In September 2021, Eskom applied to the JSE for an extension to finalise the relevant policies and registers. The JSE granted Eskom an extension to 28 February 2022. 

Thereafter, Eskom notified the market in a SENS announcement published on 29 November 2021 that the policies and registers would be available on its website by 28 February 2022.

However, Eskom also missed this deadline and submitted a further extension request until 31 July 2023 to publish the outstanding policies and registers.

However, by 31 July 2023, Eskom had not fulfilled its commitment to publish the relevant policies and registers.

Therefore, Eskom repeatedly missed deadlines, including its self-requested extensions, and failed to publish timely updates on its website.

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).”