Eskom secures $500 million AfDB loan

13 November 2008


A major loan from the African Development Bank will help South African major utility Eskom move forward with its capital expansion programme, which has been threatened by the recent global financial crisis.

The utility has signed a 20-year loan for $500 million (R5100 million) with the AfDB as part of capital-raising plans to fund its build programme. The loan is the largest ever granted by the private sector arm of the AfDB.

Eskom is thought to have turned to the AfDB for funding due to the current financial turmoil and a recent downgrade of its credit rating by Moody’s. It is thought to be in talks with the World Bank for a large loan and says it will also seek financing on domestic financial markets and with export credit agencies.

The state-owned utility has also named 27 pre-qualified bidders in its multi-site baseload independent power producer programme. Overall, it is aiming to invest over R300 billion to increase generation capacity and strengthen the transmission and distribution grid in order to overcome recent energy shortages.

Eskom’s financial position received a boost earlier in the year when the energy regulator granted a tariff increase of around 13 per cent. The government also agreed to early disbursement of a R60 billion loan.

The funds will enhance Eskom’s ability to deliver its capital expansion programme, which will see R250 billion invested in new generation projects and a further R45 billion invested in transmission over the next five years. About R46 billion of the total capital expenditure will be invested in the 2008/9 financial year, says Eskom.

The 27 pre-qualified bidders include AES Energy Developments, Aldwych International, Huaneng Power International, Endesa, International Power, Mitsui & Co, Union Fenosa and YTL Power International. They will compete to develop new capacity on a build-own-operate basis, with contracts to be concluded in early 2010 and delivery of power to the grid within the 2012-2017 time frame.

The successful bidders will sign power purchase agreements with Eskom, which has been designated the single buyer of power from IPPs. Eskom says that up to 4500 MW will be developed under the programme.




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