South Africa’s state power utility Eskom signed a R19.6 billion ($1.5 billion) loan agreement with China Development Bank on Thursday to partly finance the Medupi coal power plant, its acting chief executive said.
“This loan will also aid us in ensuring that we complete the Medupi project and ensure security of energy supply,” Eskom’s acting CEO Johnny Dladla told reporters.
The power utility, which has in the past been forced to impose power cuts due to insufficient supply, is scrambling to revamp its ageing power plants. Once completed, Medupi is expected to be the largest dry-cooled coal-fired power station in the world and will add 4 800 megawatts to the grid. But the facility is over budget and years behind schedule.
Eskom chief financial officer Anoj Singh said the Chinese loan would be paid back over 15 years.
He expected Eskom’s debt to peak at R500 billion, up from R350 billion currently.
To date Eskom has secured 77% of this fiscal year’s funding requirement, Dladla said, and expected that it would meet the required funding for the year.
Singh also said Eskom sees significant appetite from international investors for the firm’s bonds and the utility could tap the market for between $1 billion and $1.5 billion in sales in the next six months.
However, he said governance issues at the utility had impacted the firm’s plans to secure funding.
“We’ll probably look for about $1 billion to $1.5 billion in the next six months depending on the appetite,” he told Reuters.
Eskom has been in a leadership crisis after several board members, including the chairman and chief executive, resigned in recent months amid growing concerns about governance at the country’s sole electricity provider.
“We currently are sitting in a very good situation where we have excess capacity. We are engaging with South African industry but also going into the SADC market. All of these efforts are hopefully going to assist us while generating more revenue to repay this loan.”-Eskom’s Khulu Phasiwe