Eskom signs for $500 mln loan
10 Nov 2008
Johannesburg — State-owned utility Eskom said yesterday it has signed a $500 million 20-year loan with the African Development Bank (AfDB) to support its expansion programme.

Eskom, which provides 95% of the country’s power, has been rationing electricity since January, when the national grid nearly collapsed, affecting major industries, including mining.

In its bid to reverse years of underinvestment in power, and to ease power shortages, Eskom plans to invest about R343 billion over five years on new power plants.

This task has been made more daunting by the global credit squeeze and a downgrade of Eskom by rating agency Moody’s, but Eskom says it is faring well.

“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’s chief financial officer Bongani Nqwababa said.

“This loan will make sure that infrastructure development is going on in Africa regardless of the financial crisis,” added Jacob Maroga, Eskom CEO.

The government has said it will loan Eskom R60 billion over the next three years, while Eksom would raise more funds from capital markets, higher power tariffs or loans with development agencies like the AfDB.

Mandla Gantsho, the AfDB infrastructure head, said the bank did not insist on a government guarantee for the loan because it considers Eskom to be “a smart and strong partner”.

Nqwababa said Eskom has so far raised R19 billion and is confident it can raise the R11 billion to reach its R30-billion target for 2008.

He said Eskom has secured a further €300 million from the European Investment Bank, but has yet to fully draw on this credit facility.

Nqwababa downplayed analysts’ concerns that the cost of Eskom’s expansion programme could rise by more than R100 billion due to rising cost of equipment to be imported.

“We are not running any forex exposures. On boilers and turbines, we hedged them last year when the euro was one to 10 rand. Currency exposure is not one of our significant concerns,” he said.