Eskom powers up on giant R19.6bn loan

Eskom yesterday signed a $1.5 billion (R19.6 bn) loan agreement with the China Development Bank (CDB) at its head office in a bid to finance the Medupi power plant in Limpopo.

The loan agreement was signed by Li Gang, the deputy director-general of the CDB; Yansong Rong, from the Embassy of the People’s Republic of China; and Eskom board leadership that included chairperson Zethembe Khoza, interim chief executive Johnny Dladla and chief financial officer Anoj Singh.

Singh said Eskom’s total debt was expected to peak at $50bn in the next five years.

He said the $1.5bn semi-project finance facility for Medupi was for a 15-year period and it was backed by government guarantees.

Singh denied that corporate governance issues at Eskom had made it difficult for the power utility to raise capital from the African Development Bank or the Brics Bank, and forced it to seek finance in China.

“Our debt capital markets are very transparent. I cannot see any correlation between governance issues and the cost of debt or challenges of raising capital,” Singh said.

“The loan fulfils our intent to diversify Eskom's funding sources. To date, Eskom has secured 77% of this fiscal year’s funding requirement, including cash on hand. We remain resolute that we will fully execute the required funding for the year,” Singh said.

Singh said they were confident that Eskom’s liquidity levels and financial profile would continue to improve and stabilise. But he would not be drawn on revealing the interest rates Eskom would be paying on the loan, citing a confidentiality clause.

Dladla said they were pleased to see the continuation of the journey of co-operation that they started with the Chinese partners last year.

“The conclusion of this second loan agreement continues to demonstrate financial markets’ confidence in Eskom and South Africa notwithstanding the challenging market conditions.

“We are confident that the agreement will cement Eskom’s relationship with the CDB. This loan will also aide us in ensuring that we complete the Medupi project and ensure security of energy supply.”

Prish Govender, general manager for capital assurance integration and special projects, said both Medupi and Kusile power stations were on course to be completed on time.

He said their projected budgets had not changed from R165bn and R141bn respectively.