Picture: SUNDAY TIMES
Picture: SUNDAY TIMES

PetroSA says it has an adequate cash balance to carry on with its normal trading activities, denying the existence of any plans to place the state-owned company in business rescue.

PetroSA has suffered huge losses over the past three years and has a projected loss of R2.2bn for the year to March 2017. This follows its record R14.6bn net operating loss in the 2014-15 financial year.

Last week, Business Day reported that the PetroSA board had approached its holding company, the Central Energy Fund (CEF), in January and asked it to place the company in business rescue.

A senior official confirmed the request to Business Day and that the CEF had rejected it.

At the time PetroSA said it did not want to comment on internal matters. However, on Friday the company sent out a statement denying media reports that it was in financial distress.

"Current assets and cash flow projections show that the company will have adequate cash resources for the business to carry on with its normal trading activity and meet its financial obligations for the foreseeable future," the PetroSA board said.

"The present position of the company is that it is not in financial distress," it said.

The company said that it had been transparent about the challenges it faced.

This included the fact that PetroSA’s gas reserves from its wells had reached the end of their life and that efforts to find alternative gas fields had been unsuccessful. The board said in response to this challenge PetroSA had embarked on a turnaround plan.

This is in contrast to a letter, seen by Business Day from CEF chairman Luvo Makasi to PetroSA board members, asking them to resign with immediate effect. In the letter, he said the CEF had been concerned for some time about the strategic direction, financial standing and management of PetroSA and questioned whether a turnaround strategy had been put in place.

City Press on Sunday reported that according to a confidential audit report, obtained by its sister newspaper, Rapport, PetroSA wanted to cut its staff of 1,763 by as much as 15% to save R128.2m (14%) and to keep it from being placed in business rescue.

Despite the losses, PetroSA paid out large performance bonuses to its executives at the end of 2016, linked to Project Ikhwezi, responsible for a near R15bn impairment in the 2014-15 financial year. Ikhwezi was about searching for gas reserves off the coast of Mossel Bay.

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