Business

Eskom to push low-carbon technologies

8 March 2010

State power company Eskom has welcomed Business Unity South Africa's (Busa's) recent declaration of support for its application for a World Bank loan.

"The loan of US$3.75-billion is already factored into the funding plan as submitted to [the National Energy Regulator of SA] in the [multi-year price determination] application and is critical for South Africa and the region," Eskom finance director Paul O'Flaherty said in a statement on Thursday.

He said Eskom relied on funding from a combination of existing shareholder equity, borrowings from domestic and international markets and tariffs.

The World Bank transaction would fund specific components of Eskom's capital expansion programme, such as the Medupi coal-fired power station.

"It is recognised that as a developing country, South Africa needs to capitalise responsibly on its natural resources whilst honouring its greater commitment to reduce carbon emissions over time," O'Flaherty said.

The loan would catalyse new and lower carbon technologies, such as large-scale solar-thermal and wind power.

"The funding is well-aligned to jump-start progress on South Africa's commitment to a lower carbon footprint," he said. "The proposed funding will combine favourable financing rates with a structured repayment profile, thereby making it an economically attractive option to contribute to South Africa's future economic growth."

Busa said earlier this week that it had consistently emphasised the need for a new "mix" of tariff rises, borrowing and equity financing from the government to ensure the future security of the electricity supply on an affordable basis.

In a statement, it said the prospect of a World Bank loan came at an opportune time, as a key component in addressing financial stability issues at Eskom. The proposed loan would strengthen Eskom's financial viability, following the R20.7-billion loan it was granted by the African Development Bank in November.

"In Busa's view, accessing a World Bank loan is appropriate for a developing country like South Africa, which is both under-borrowed internationally and anxious to build necessary infrastructural capacity.

"Failure to borrow sensibly for Eskom's needs will either mean yet higher electricity tariffs or the risk of load shedding if Medupi is not completed in time."

Busa believed concerns about the loan could be addressed in negotiations with the World Bank to ensure that the loan conditions were in line with South Africa's national economic interests.

Sapa