4 November 2010
State power utility Eskom has secured a R15-billion loan from the Development Bank of Southern Africa (DBSA) to fund its capital expansion programme. The loan, which is a structured facility that will be drawn over five years, does not utilise guarantees from the South African government.
Eskom’s capacity expansion projects will add 12 300 megawatts of additional generating and transmission capacity to South Africa’s national grid by 2017, enabling it to keep up with growing demand.
The projects include the Medupi and Kusile coal-fired power stations as well as the Ingula Pump Storage scheme and associated transmission infrastructure.
Securing future energy supply
Speaking at the media briefing in Johannesburg this week, DBSA chief executive Paul Baloyi said: “This deal signifies a major step change aimed at ensuring that South Africa’s long term electricity supply meets demand to ensure the economy can thrive.”
Baloyi added that the municipal sector currently constitutes 50% of the DBSA’s loan book. “Electricity is a major component of municipal revenue, and it is only logical for the Bank to contribute to the funding of projects that will help to ensure a secure supply of energy for South Africa,” he said.
Supporting growth and development
Eskom CEO Brian Dames welcomed the recognition by the DBSA of the critical role that Eskom and its capacity expansion programme have to play in supporting South Africa’s growth and development.
Eskom’s capacity expansion programme is expected to have large spin-off effects, creating 40 000 new jobs, stimulating the creation of new industries and new suppliers, and adding almost 1% a year to the economic growth rate.
It will also have a significant impact on the economies and communities of the towns in which the new power stations are located.
“Our new build programme is essential to provide the security of supply that South Africa needs if it is to grow its economy and improve the quality of life for all of its people,” Dames said. “The loan is a vote of confidence by the DBSA in Eskom.
“It will help us to provide South Africa with the power stations and transmission infrastructure it needs while ensuring that Eskom remains financially sustainable.”
Reducing environmental impact
Like any other transaction, the Eskom loan was subjected to the DBSA’s environmental appraisal guidelines, which found that Eskom has the institutional capacity to address current and future climate change related risks.
After a thorough environmental analysis, the bank’s environmental appraisal report concluded that fossil fuels would remain dominant in South Africa’s energy mix for some time, but technologies to reduce greenhouse gas emissions are being developed globally and Eskom’s projects will use some of these technologies to reduce emissions.
“Building a sustainable and secure energy supply is one of many priority areas that the DBSA will aggressively pursue to complement the government development agenda to address key development and socio- economic issues faced by the country,” Baloyi said.
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