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INTEGRATED RESULTS PRESENTATION
KING III APPLICATION
 
   



Statement of directors' responsibilities and approval

The Public Finance Management Act requires the directors to ensure that Eskom Holdings SOC Limited (Eskom) and its subsidiaries (the group) keep full and proper records of their financial affairs. The annual financial statements should fairly present the state of affairs of Eskom and the group, its financial results, its performance against predetermined objectives for the year and its financial position at the end of the year in terms of International Financial Reporting Standards and the Public Finance Management Act (PFMA).

To enable the directors to meet the above mentioned responsibilities, the Eskom board of directors sets standards and management implements systems of internal control. The controls are designed to provide cost-effective assurance that assets are safeguarded, and that liabilities and working capital are efficiently managed. Policies, procedures, structures and approval frameworks provide direction, accountability and division of responsibilities, and contain self-monitoring mechanisms. The controls throughout Eskom and the group focus on those critical risk areas identified by operational risk management and confirmed by executive management. Both management and the internal audit department closely monitor the controls, and actions are taken to correct deficiencies as they are identified.

The directors have made an assessment of the ability of Eskom and the group to continue as a going concern in the foreseeable future.

The directors reviewed Eskom’s and the group’s performance for the year ended 31 March 2014 and the cash flow forecast for the Multi-Year Price Determination (MYPD) 3 period ending 31 March 2018.

Eskom did not receive a cost reflective tariff in the National Energy Regulator of South Africa (NERSA) MYPD 3 decision which created a revenue shortfall of R225 billion over the MYPD 3 period which has placed tremendous strain on the financial and operating sustainability of the group. The board has critically examined its activities and costs in order to balance its cash flow requirements through the Business Productivity Programme to identify cost saving and efficiency opportunities to close the revenue shortfall.

Eskom submitted an application to NERSA for the MYPD 2 period during August 2013 regarding variances between costs and revenues assumed in MYPD 2 compared to the actual costs incurred and revenue received by Eskom. This is referred to as the regulatory clearing account (RCA). The NERSA electricity sub-committee has made a recommendation on the RCA to the NERSA board and a decision is awaited during the first quarter of the new financial year. The recommendation includes an RCA balance in favour of Eskom for implementation in the next financial year.

The board is pursuing alternative funding options, including potential government support.

The board will not compromise the going concern status while ensuring security of supply and has not approved any capital expenditure beyond the Kusile project.

In assessing the ability to raise funds, the current economic climate as well as Eskom’s and the sovereign’s credit ratings have been taken into account.

Based on the above, the directors are satisfied that Eskom and the group have access to adequate resources and facilities to be able to continue its operations for the foreseeable future. Accordingly the board have continued to adopt the going-concern basis in preparing the financial statements.

The preparation and fair presentation of the Eskom and group annual financial statements are the responsibility of the directors. The external auditors are responsible for independently auditing the financial statements in accordance with International Standards on Auditing and the Public Audit Act.

The annual financial statements of Eskom and the group have been prepared in terms of International Financial Reporting Standards, the requirements of the Companies Act of South Africa and the Public Finance Management Act. These annual financial statements are based on appropriate accounting policies, supported by reasonable and prudent judgements and estimates and are prepared on the going-concern basis.

Based on the information and explanations given by management, the internal audit function (audit and forensic) and discussions held with the independent external auditors, the directors are of the opinion that the internal accounting controls are adequate to ensure that the financial records may be relied upon for preparing the annual financial statements, and that accountability for assets and liabilities is maintained.

The audit and risk committee has reviewed the going-concern basis and the effectiveness of Eskom and the group’s internal controls and considers the systems appropriate for the effective operation of Eskom and the group. The committee has evaluated Eskom and the group’s annual financial statements and has recommended their approval to the board. Refer to audit and risk committee’s approval.

Nothing significant has come to the attention of the directors to indicate that any material breakdown has occurred in the functioning of these controls, procedures and systems during the year under review.

In the opinion of the directors, based on the information available to date, the annual financial statements fairly present the financial position of Eskom and the group at 31 March 2014 and the results of its operations and cash flow information for the year then ended.

The Eskom and group annual financial statements for the year ended 31 March 2014 have been prepared under the supervision of the finance director, TBL Molefe CA(SA), and approved by the board of directors and signed on 29 May 2014 by:

ZA Tsotsi
Chairman1
MC Matjila
Interim chief executive1
TBL Molefe
Finance director1
29 May 2014 29 May 2014 29 May 2014
1. Authorised directors.