Johannesburg - Eskom’s plans to invest in transmission infrastructure received a major boost after the World Bank announced that its risk insurance and credit enhancement division would back the utility’s loans with Deutsche Bank and Mizuho Bank to the tune of e698.9 million (R11.9 billion).
The World Bank said yesterday that the Multilateral Investment Guarantee Agency’s (Miga) backing of the loans would reduce electricity blackouts and facilitate the integration of renewable energy into the country’s electricity system. The bank said the loan would add approximately 255km of new power lines, resulting in about 4 665MW of electricity transmitted every year.
Read: World Bank gives Eskom R12bn guarantee
“Given Eskom’s role as the dominant vertically integrated power utility in South Africa, I cannot overstate the impact of this financing on the lives of South Africans and their businesses,” Ana Afonso Dias Lourenço, the executive director for the constituency of Angola, Nigeria, and South Africa at the board of the World Bank Group, said.
Miga guarantees provided coverage against the risk of non-payment for a period of up to 15 years, the bank said.
Recent multibillion-rand investments in power generation by Eskom and independent power producers (IPPs) have put pressure on the country’s transmission infrastructure. So far, government has procured a total of 6 377MW of renewable energy from IPPs.
In addition to that, Eskom has three major electricity generation projects in the pipeline – Medupi and Kusile power stations, which would both produce 4 800MW, as well as Ingula, which will generate 1 332MW.
Eskom plans to spend approximately R213bn on grid development, R30bn of which will connect renewable energy, gas, coal and co-generation IPPs to the electricity system.
In this year’s budget review, the Treasury said, in conjunction with municipalities and the Department of Energy, Eskom would spend R17.6bn on the Integrated National Electrification Programme between 2016/17 and 2018/19 to provide 840 000 households with access to on-grid electricity.
The government has set aside a R23bn equity allocation for Eskom and R15bn of that has already been transferred to the utility. Last year Eskom and French funding agency Agence Française de Développement signed a R2.3bn credit facility agreement to finance Eskom’s distribution projects in the Eastern Cape, KwaZulu-Natal and Limpopo.
Eskom said the credit enhancement would allow the utility to secure euro-denominated funding for longer tenors and on more favourable terms for South Africa.
Debt to reach R350bn
Spokesman Khulu Phasiwe said the loans from Deutsche Bank and Mizuho Bank were part of the utility’s capital raising efforts.
Phasiwe said it expected its debt to reach R350bn in the next five years, with the bulk of the money going towards Medupi, Kusile and Ingula, while the rest would be invested in distribution and transmission. “Some of the institutions we approach are specific in terms of how we invest, like in the case of Deutsche Bank and Mizuho Bank.”
He said development finance institutions, such as the Development Bank of Southern Africa, African Development Bank and the World Bank would continue to be an important source of funding for Eskom. “At some point we will issue bonds and consider credit agencies when the market conditions are conducive.”
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