27 November 2009

Johannesburg — IN A move that eases Eskom's financial woes, the African Development Bank yesterday announced that it had approved a R20bn (€1.86 billion) loan for the utility to finance the Medupi power station in Lephalale, Limpopo.

Finding money for its R385bn capital expansion programme is Eskom's single biggest problem as it races against time to bring on line additional electricity capacity. But the global slowdown and the resultant unfavourable lending conditions have frustrated Eskom's ambitions.

This prompted the utility to look to development financiers such as the World Bank and African Development Bank for funds. The export credit agencies are another important source of funding for the power supplier.

Uncertainty over the source of funding for its expansion programme has forced Eskom to put on hold placement of new contracts at the utility's Kusile coal- fired power plant in Emalahleni, Mpumalanga.

African Development Bank president Donald Kaberuka yesterday said: "SA's energy problem has been a major impediment to Africa's leading economy.

"The bank is pleased to be associated with this project. We look forward to working with SA towards achieving energy security. This operation should be seen in the context of the b ank's ongoing efforts to help Africa bridge the infrastructure gap."

The loan confirmation comes days after Eskom concluded a contract worth more than €100m with a French energy multinational to provide the instrumentation and control system for the Medupi power station.

This is the second multi billion- rand loan Eskom has secured from the African Development Bank within a year.

In November last year, the utility and the bank signed a 20- year R5bn loan to fund a capital expansion programme.

Eskom will know early next year if the World Bank has approved a loan of up to 5bn, the bank said this week.

The loan is for the Medupi power station and renewable energy and low-carbon energy efficiency programmes.

In a project fact sheet, the World Bank said 3bn of the loan would be spent on the 4800MW Medupi power station, while 260m would go towards wind and concentrated solar power projects. The bank said 490m would fund initiatives to reduce carbon dioxide emissions .

Medupi power station is due for commissioning by 2012, while the first unit of Kusile is expected to come on stream in 2013.

Eskom's funding plans have come under the spotlight after it applied for a 45% tariff increase in each of the next three financial years. The utility is expected to submit its final tariff application by Monday.

allafrica