Eskom borrows $500m for plants

2008-11-10 16:00

Johannesburg - State-owned utility Eskom said on Monday it has signed a $500m 20-year loan with the African Development Bank to support its long-awaited power expansion programme.

Eskom, which provides 95% of the country's power, has been rationing electricity since January, when the national grid nearly collapsed, affecting major industries, including mining.

"The extent and timing of the AfDB loan reinforces the extent to which institutions based on the continent can provide support which fosters growth," Eskom's chief financial officer Bongani Nqwababa said at a press briefing.

In its bid to reverse years of underinvestment in power, and to ease chronic power shortages, Eskom plans to spend a total of about R343bn over five years on new power plants.

This task has been made more daunting by the global credit squeeze and a downgrade of Eskom by rating agency Moody's.

"This loan will make sure that infrastructure development is going on in Africa regardless of the financial crisis," Eskom's chief executive officer Jacob Maroga said at the press briefing.

The South African government has said it would loan Eskom R60bn over the next three years, while the utility would raise further funds from capital markets, higher power tariffs or loans with development agencies such as the AfDB.

Mandla Gantsho, the AfDB infrastructure head said the bank did not insist on a government guarantee for the loan because it considers Eskom to be "a smart and strong partner".

Poor infrastructure capacity and inadequate power generation is constraining economic growth in the world's poorest continent, and the AfDB is investing in projects which would help reduce poverty and stimulate economic revival.

- Reuters

- Reuters