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Eskom to tap into US bond market

26 October 2010

South African state company Eskom is to approach the US bond market in a bid to raise funds for its capital expansion programme, which includes two coal-fired base-load power stations – Medupi and Kusile – and the Ingula Pumped Storage Scheme.

The company has already received loans of R21-billion from the African Development Bank and R28-billion from the World Bank to fund the construction of Medupi, but still needs more funds to ensure that all three power stations are up and running by 2017.

Speaking to journalists in Johannesburg on Monday, Eskom CEO Brian Dames said that while it was expected to take substantial efforts from all stakeholders to overcome the country's rapidly growing electricity demands, Eskom needed to take a leading role to prevent another gloomy picture of blackouts in the country.

Medupi, situated outside Lephalale in the Limpopo province, is expected to be up and running by the end of 2012, while operations at Kusile, being built outside Delmas in Mpumalanga province, may follow four years later. Ingula, currently under construction on the border of the Free State and KwaZulu-Natal provinces, will be fully operational in 2014.

"The next seven years will be very tight beginning next year, and this will mean we have to maintain and maximise the efficiency of our existing assets as well as ensuring delivery of build programme," Dames said.

Tariff increases 'not enough'

Even though the National Energy Regulator granted Eskom a tariff increase of 24.8% earlier this year, Dames said the tariffs were insufficient to build up reserves to fund the necessary capital expansion to meet the projected growth of the South African economy.

Dames said that the sustainability of Eskom, as well as national security of electricity supply over the next seven years, depended on effective management of the funding supply for the current and future build programme.

"To this end, we have developed a cash flow, income statements and balance sheet forecast that considers the implication of the build programme and capacity additions to the business over the next seven years," he said.

Dames said it was a relief that the government, as a major shareholder, was also embarking on plans to address the challenges faced by the country's energy sector.

This after President Jacob Zuma said on Sunday that the government would spend over R800-billion (including R385-billion for Eskom expansion) on energy infrastructure over the next few years.

Source: BuaNews