CRO Advisors declares state of emergency in the energy sector in South Africa

CRO advisors’ assessment of Eskom’s liabilities of R1.7 trillion (insolvent)

South Africa is facing a catastrophic collapse of Electricity Utility Eskom and the national energy sector, industrial production and the economy in general.

South Africa will never recover until ALL citizens cast off corrupt government and criminal cartels”

—KW Miller, President CRO Advisors

ABU DHABI, ABU DHABI, UNITED ARAB EMIRATES, Oct. 31, 2022 / — CRO Advisors declares a ‘state of emergency’ in the energy sector in South Africa. South Africa is facing a catastrophic collapse of Electricity Utility Eskom and the national energy sector, industrial production and the economy in general. Stage 8 load shedding or worse and the potential collapse of the transmission system seems inevitable.

Eskom has become an operationally dysfunctional, financially insolvent, unreliable and corrupt entity. Eskom’s base load generation fleet, transmission and distribution systems are “severely damaged” and are sunk into the ground.

Eskom’s balance sheet debt of around 500 billion (Rand), off-balance sheet debt of around 128 billion and unavoidable capital requirements of 1,072 billion over the next 5 years represent a staggering 76% of the South Africa’s total debt.

Eskom’s management and operations staff are not competent to deal with the impending power disaster. Eskom must be immediately “limited”, sorted out and placed under the control of a new “hands-on” senior energy CRO and a new management team independent of senior energy management.

Eskom’s operation and maintenance contracts are linked to fraud, incompetence and outright theft of critical equipment. Eskom’s contracts and coal and diesel fuel purchases are linked to fraud, bribery and outright theft. Substandard coal has been fed into Eskom’s coal fleet for years, ‘virtually’ destroying coal plant boilers and other equipment;

CRO Advisors concludes that the South African Treasury “does not” have the credit capacity or ability to borrow the capital necessary to fund Eskom’s significant day-to-day operational expenditures, rebuild and maintain generation, transmission and of the company’s distribution, nor pay the significant off-balance sheet commitments.

CRO advisors see little to no asset salvage value in Eskom’s debt securities/contractual obligations under any scenario, and most are in technical default in one form or another. South African government guarantees are subject to cross-default clauses on sovereign debt.

CRO Advisors concludes that a full independent “forensic audit” of Eskom should be carried out immediately for the benefit of all creditors, suppliers, unions and other stakeholders, including the detailed creation of detailed audit trails.

About CRO Advisors:

CRO Advisors works privately with sovereign governments, institutional investors and other stakeholders exposed to the global energy and infrastructure sector. The Firm works with sovereign wealth funds, private equity funds and specialist loan funds to mobilize large pools of capital for our clients in connection with our restructuring and turnaround mandates. CRO advisors are specialists in the most complex restructuring and recapitalization of distressed sovereign government assets, as well as corporate and infrastructure assets globally. Bankruptcy, debtor-in-possession (DIP) financing, rescue and business recovery. Focus is on very large and complex debt and operational restructuring in the energy and infrastructure sectors, including power generation, transmission, distribution, gas pipelines, fuel storage terminals and other critical infrastructure assets.

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