Eskom gets $500m for upgrade

Eskom’s Kendal power station in
Mpumalanga province. The power utility
plans to spend some R1.3-trillion on
doubling the size of its power system to
about 80 000 megawatts by 2026.
(Image: Graeme Williams,
MediaClubSouthAfrica.com. For more free
photos, visit the image library.)

Mary Alexander

In the face of the global credit crunch, South African power utility Eskom has secured a US$500-million (R4.9-billion) loan from the African Development Bank (AfDB) for its electricity-generation expansion programme, a sign of increased African independence in economic development.

“The extent and timing of the AfDB loan reinforces the extent to which institutions based on the continent can provide support which fosters growth,” Eskom finance director Bongani Nqwababa said at the signing of the loan agreement yesterday.

“The foundation for this relationship is all the more entrenched due to the two institutions’ critical mandate both in South Africa and the region.”

The 20-year loan is the largest ever granted by the AfDB’s private-sector division. It contributes to the R343-million Eskom requires for its investment programme. In total, the power utility plans to spend some R1.3-trillion on doubling the size of its power system to about 80 000 megawatts by 2026.

Eskom’s massive investment in generation infrastructure comes out of South Africa’s ongoing power crisis, which reached its peak in late 2007 and early 2008 as rolling blackouts hit both industry and individuals across the country. The crisis is largely seen as a result of demand from unprecedented economic growth, and ageing infrastructure.

Eskom supplies electricity not only to South Africa, but to a number of other countries in the region.

“By supporting the Eskom expansion programme the AfDB will seek to address not only … the energy problem in South Africa but also the whole sub-region, as Eskom is expected to play an important role … in key regional programmes,” the AfDB’s Dr Mandla Gantsho said yesterday.

African development funded by Africa

Established in 1964 and with its headquarters in Abidjan, Côte d’Ivoire, the AfDB is a development bank with shareholders from 53 African countries and 24 countries from the Americas, Asia, and Europe. The bank’s aim is to promote economic and social development through loans, equity investments, and technical assistance.

In the month of October 2008 alone, the AfDB group approved $924.3-million (R9.4-billion) worth of loans to development and economic projects across Africa.

This amount included $32-million (R325.5-million) for Ghana’s Tema Power Project; $18.7-million (R190-million) for an electricity project in Coakry, Guinea; $150-million (R1.5-billion) for the Hasdrubal Oil and Gas Field Development Project in Tunisia; and US33-million (R336-million) for the Ethiopia-Djibouti Power Interconnections Project.

In South Africa, the bank has to date approved nine private-sector operations amounting to some $1.2-billion (R12.2-billion).

‘Greatest challenge yet’

The loan comes at a crucial time for Eskom, with the utility’s plans for expansion coinciding with the new global credit drought.

“The signing of the loan agreement comes at a time when Eskom needs to meet its most significant challenge yet,” Nqwababa told Engineering News.

“The next five years remain critical for Eskom through our capital expansion programme to contribute and provide a broader platform for a striving South African economy. We are likely to be in this expansion phase for the next two decades.”

Gantsho added that his bank was confident Eskom was good for the loan.

“Eskom is, without a doubt, the most credit-worthy utility in Africa, with its investment credit ratings,” he told Engineering News.

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