Business

Eskom World Bank loan 'critical'

15 March 2010

If power utility Eskom does not secure the US$3.75-billion loan it has applied for from the World Bank, the consequences for South Africa's economy could be dire, Public Enterprises Minister Barbara Hogan warned on Friday.

These included future power shortages and black-outs, she said.

Eskom needs the money to complete work on its giant Medupi power station, under construction in Limpopo, by 2013.

Hogan said the coal-fired power station's 4 800MW baseload was "an essential requirement for our economy going forward".

"If we do not have that power in our system, then we can say goodbye to our economy and to our country. This is how serious this thing is," she told journalists at a media briefing in Pretoria, linked via video to Cape Town.

Last week, it was reported that the United States and the United Kingdom were among countries opposed to the loan because it is to be used for coal-fired and not so-called clean technology.

Hogan said the loan was needed to finish off the final 25% of the Medupi power station, the biggest "build" of its kind in the southern hemisphere.

US, UK opposition, French support

A decision by the World Bank on the loan was expected early next month, around 8 April.

"The consequences of not getting this loan would be very, very serious for us," said Hogan. The country was at a point where if it did not invest in and build significant power-generating infrastructure, it would face power black-outs in the future, she said.

On the widely reported opposition to Eskom securing the loan, Hogan said that while there was not "significant opposition" from the UK, the US was under more pressure.

"The Americans are under more pressure and they have indicated to us they're not going to vote against, but they'll abstain from voting. They're under particular pressures from their own lobbies."

France had indicated it would support the loan.

"Let me just say, if there is a vote against it, it will be the most unfortunate thing that has happened to this country in terms of its economy and in terms of developmental needs."

Low-carbon economy

Hogan defended South Africa's commitment to a low-carbon economy and what she called its "commitment to the introduction of cleaner-energy technology". She said these issues, related to the loan, had "not been properly understood".

South Africa's long-term mitigation strategy would see the country's greenhouse gas emission peak by 2025, stabilise for a decade, and start declining around 2035.

Hogan said it should be noted that Medupi and the planned Kusile power stations were factored into this strategy.

'Nuclear future'

Speaking at the briefing, Energy Minister Dipuo Peters indicated these would be the last coal-fired built in South Africa.

"The future is going to be nuclear," she declared.

The government was preparing a nuclear plan for presentation to the Cabinet.

"We need, definitely, a massive baseload ... and the next consideration will be nuclear," she said, adding that a "fleet" of nuclear power plants would be required.

Turning to the loan, she said if Eskom did not secure the $3.75-billion it needed for Medupi, South Africa would not be able to meet its power needs. While there were alternative loan options, these would be costly and cause delays in completing the power station by 2013.

Not getting the loan could also burden electricity consumers.

"If we don't get this loan, we will have to burden the consumers with the responsibility to pay for this massive financial requirement that we need," she said.

Responding to a question, Hogan said government was "absolutely determined" Eskom would secure the loan.

She also said the World Bank itself was "fully behind" it.

Sapa