Eskom loan proves investor confidence

World Bank invest in Eskom

World Bank invest in Eskom

Pretoria – The World Bank’s $250 million (about R1.9 billion) loan to Eskom indicates good investor confidence in South Africa, Public Enterprises Minister Malusi Gigaba said on Monday.

“This loan we are receiving today shows great investor confidence in South Africa and Eskom in particular,” said Gigaba of the loan that will pay for the power utility’s renewable energy projects.

The loan, which comes from the World Bank’s Clean Technology Fund, will be used for the building of the Wind Power Plant in Sere (Western Cape) and the Concentrated Solar Power Plant in Upington ( Northern Cape). Each of the plants will generate 100 MW of power.

Although it might seem relatively small, the plants are the largest in the region at the moment.

“It is the largest investment of its kind on the continent,” said Gigaba.

Repayment on the 40-year loan is expected to begin in 10 years’ time at a 0.25% service charge per annum on disbursed amounts.

Signing the loan agreement, Gigaba said it was a catalyst for private sector participation in renewable energy, while it also serves as a catalyst for the local supply chain industry in renewables.

“We are taking the risk associated with pioneering technologies from which the private sector can draw upon,” he said of South Africa’s intention to participate in the green economy.

“We believe that the green economy plays an important role in stimulating the economy and the creation of jobs and skills, the loan will contribute a great deal. It is important to demonstrate the link with the green economy and job creation,” Gigaba said, adding that this would improve the lives of South Africans.

According to the minister, the loan would also define Eskom’s role in the Integrated Resource Plan (IRP 2010). The IRP is a 20-year projection on electricity supply and demand. According to the document, about 42% of electricity generated in South Africa is required to come from renewable resources.

The loan was approved on 27 October. The power parastatal had also already received $100 million from the African Development Bank for the two plants.

Finance Minister Pravin Gordhan said the loan was a “very important step forward to South Africa’s commitment to renewable energy”. He cautioned that renewable energy technology should not become bargaining chips of economic competition.

According to Eskom chief executive Brain Dames, the wind farm is expected to be completed by 2013.

Gigaba said the signing of the loan happened at the right time as South Africa would host the 17th Conference of Parties (COP 17) to the United Nations Framework Convention on Climate Change from 28 November to 9 December in Durban.

“It comes at the right time so as to support government’s efforts in reducing emissions.”

World Bank country director for South Africa Ruth Kagia said the project would contribute to reducing emissions by 5 million tonnes annually.

Last week, rating agency Moody’s Investor Services revised the country’s credit outlook from stable to negative.

“As anticipated, as a direct result of the amendment by Moody’s of the South African Sovereign credit outlook from stable to negative, Moody’s has changed the outlook on Eskom’s rating from stable to negative,” said the power parastal on Friday. – BuaNews