Unpicking why the lights went dim at Ellies

It has been a torrid year for Ellies — a share-price slump, a mid-year cash crunch, an expected first-half loss, a rights offer and a restructuring. CEO Wayne Samson finally breaks his silence

Your share is down 76% since January. Has that knocked your confidence?

It did. Listen, it was a perfect storm. Eskom's residential mass roll-out [a rebate programme to reduce electricity consumption in suburban households] didn't come through [so] we sat with the [mass roll-out] stock.

Also, [the government's] digital terrestrial television plan didn't come through. At the same time, we had this surge in orders in infrastructure - which is a good thing, but it needs funding.

Would we have done things differently? It's a hard question to answer.

Looking at the power crisis now, would you say that Eskom ought to have stuck with its residential mass roll-out programme?

That's my feeling ... In four months, we took 170MW off the grid. So if you had done another three of those programmes, you would have been nearly at the same amount as the new Medupi is going to bring on line in April.

My calculations might be off, but let's say you spent R20-billion on changing everyone's lights in the country, you'd be taking 2GW off the grid ... So you have to ask the question: if last year [Eskom] spent R11-billion on diesel and R1.3-billion on diesel in November, would they not have been better served taking [inefficient products] off the grid, rather than trying to build up capacity for [an] inefficient product that's on the grid at the moment?

Do you see this latest crisis reflecting in a surge in demand for your generators?

We've seen a surge, but we've been very conservative on our stocking since the last time.

The South African public is very reactionary, so while you've got load shedding everyone's running after generators and the like, but as soon as you've got one or two weeks with no load shedding, everyone forgets about it.

How much does it cost for a large company to buy a generator?

It depends on how much they're running it. Diesel bills are about 10% of the capacity that you're running, so if you've got a 20 KVA generator - that's 2000 watts - you'd probably be running 200 litres an hour. So it's a big cost.

What about wealthy households?

You've got the guys with bigger houses who can afford them, but they're in suburbs with neighbours that don't necessarily want the large Gensets there.

The larger clusters, you definitely can't put one in, so guys are going to a thing we call the "inverter trolley" - a 1000- or 2000-watter, which will run a few lights and your TV.

The new plan is to split the old Ellies consumer business from the industrial business under Megatron, unbundling these shares to investors. Does this plan address fears that you were going under?

Sure. It was also confusing for investors: you can appreciate that [some investors] prefer investing in infrastructure, some in the consumer and the mix is a little confusing.

You'll probably find once you have the unbundling that those who want to go with "consumer" will go that way, so it makes it less confusing and investors have a more focused ear for where they want to invest

You've been very reticent to talk recently - is it fair to say you've been ducking media and investors?

No. No I don't think that's fair. We were in a closed period. You know we were under cautionary, so you can't go and say anything.

You are about to report a loss ...

I would have preferred not to have a loss. Obviously, our interest bill is very high, which is a large contributor [and] the consumer market has been really bad in the past couple of months.