Johannesburg - Eskom and the China Development Bank (CDB) signed a $500 million (R7 billion) credit facility agreement yesterday, bringing the power utility’s funding - secured for the current financial year - to R51bn, which is 75 percent of its R69bn funding requirement this year.
The CDB loan narrows Eskom’s funding requirements in the current financial year.
Eskom’s chief financial officer, Anoj Singh, said: “The successful execution of this credit facility increases the funding secured for financial year 2016/17 to R51bn, meaning we have secured 75 percent of our R69bn funding requirement. We appreciate the bank’s support and look forward to concluding further facility agreements.”
Along with export credit agencies and domestic bonds, development finance institutions such as the CDB are an important source of funding for Eskom.
The utility is among a group of state-owned companies that fixed income asset manager Futuregrowth in August suspended lending activities to.
Eskom chief executive Brian Molefe said the power utility could in future conclude loan facilities of as much as $5bn with CDB. “This is just the first $500m of this,” Molefe said.
Eskom said the facility, which is payable over three years, would contribute towards its current capital expenditure programme. The Beijing-based CDB mainly funds large infrastructure projects.
Molefe said: “We are pleased to see the conclusion of this first agreement with (CDB), and lay the platform for future co-operation with our Chinese partners.
“The conclusion of this agreement continues to demonstrate investor confidence in Eskom and South Africa; notwithstanding the recent volatility experienced in the local debt capital markets.
“We are confident that the agreement will cement Eskom’s relationship with the bank. This loan will also aid us in ensuring that we complete the current capital expansion programme and further stabilise Eskom’s liquidity position.”
The utility’s capital expansion programme includes the construction of its largest projects, Medupi power station, Kusile power station and the Ingula pumped storage scheme.
Molefe said R7bn was meant for Eskom’s general funding requirements and not meant for specific projects.
“The loan ceremony, which we celebrate today, will be the catalyst of many projects and developments, which will lead to the prosperity of the South African nation.
“It will touch millions of lives, from job creation to skills development, uplifting communities, as well as enhancing Eskom’s key role of providing electricity in an efficient and sustainable manner.
“This partnership is a direct catalyst for growth. It allows us to meet the growing demands of our nation as it is expected that electricity demand will increase by about 1 percent every year,” Molefe said.
Meanwhile, in response to a question, Molefe said the government had not taken a decision designating Eskom as the lead procurement agent for the nuclear programme.
“That is something that the government determines. There has been no determination by the Department of Energy that Eskom will be the procurement agency,” he said.
BUSINESS REPORT