The New Development Bank plans to lend as much as R11.2 billion ($780 million) at current exchange rates to Eskom for infrastructure projects this year as the ailing South African power utility battles to keep power supply steady.
Eskom, which on Wednesday entered a seventh day of controlled power cuts, is contending with operational and financial challenges, threatening the productivity of Africa’s most-industrialised economy.
The government is considering various interventions to turn the company around, including a $4.8 billion bailout over three years and splitting the organisation into three parts to help contain costs.
The NDB, backed by the so-called BRICS nations of Brazil, Russia, India, China and South Africa, is in talks with the government about loans that could alleviate some of the pressure on the country’s electricity grid, the lender’s president, KV Kamath, said by phone.
The development institution is rolling out a $180 million loan to Eskom to build transmission lines and is considering two further projects in 2019, he said. The first is a $480 million loan that will pay for retrofitting flue-gas desulfurisation equipment to make the Medupi power plant compliant with new environmental standards. The second is a further $300 million facility to improve the country’s battery-storage capacity, Kamath said.
“Power is now a critical element in South Africa’s infrastructure and at this point in time it is imperative that we work with the government in alleviating this problem,” Kamath said. Medupi will have about 4 800 megawatts of installed capacity once completed.
The plan to split Eskom into generation, transmission and distribution units is heartening, Kamath said. “We are equally clear that this won’t happen overnight, so there is always a need to extend a hand during the transitioning process and that’s what we are doing.”
The funding planned for Eskom will make up most of the $900 million the NDB will extend in South Africa in 2019. By the end of the year, the lender will have roughly $2.4 billion of loans in the country, Kamath said. Eskom didn’t respond to requests for comment.
The NDB was started in 2015 to support sustainable infrastructure projects across its emerging-market members. The Shanghai-based bank will have extended $7.5 billion to $8 billion across its members by the end of year, bringing its total to assistance to BRICS nations to about $15 billion.