The South African state-owned power utility Eskom has secured an untied loan of up to ¥7.5bn from the Japan Bank of International Cooperation (JBIC), and co-financiers Bank of Tokyo Mitsubishi (lead arranger), SMBC, Mizuho Corporate Bank, The Ibaraki Bank, Higashi-Nippon Bank and The Hiroshima Bank. JBIC also provided a guarantee for the commercial portion of the financing.
The loan will finance Eskom’s northern grid transmission projects which aim to strengthen the existing transmission network and further expand it. The projects will also ensure that the growth within the Limpopo region, the most Northern province bordering Mozambique, Zimbabwe and Botswana, is sustained. Much of the electricity in this region is to support the mining and rural development projects.
Japanese companies, including automobile firms, have become increasingly interested in South Africa as an export hub for Africa, Europe and the Middle East. The country is exporting large volumes of rare metals to Japan, such as platinum, nickel and chrome ore. Japanese companies are also involved in resource development.
Following this loan, Eskom has also secured further investment from the South African government. On July 18, the government decided to bring forward the disbursement of a R60bn loan. The treasury said it would spread the loan over three years rather than five years. The loan will be disbursed in three stages, with R10bn provided in 2008/09, R30bn in 2009/10 and R20bn in 2010/11. The terms and conditions of this loan have been designed to be a deeply subordinated loan to ensure that senior unsecured lenders are not prejudiced. The government is also considering providing guarantees to enable Eskom to access funding otherwise not available.
Eskom is said to be pleased with the government decision, reporting that it would help maintain the company’s strong investment grade credit rating.
However, Eskom is still struggling to meet the growing demand for electricity, and power outages has led to some large-scale users of electricity such as mines and aluminium smelters having to cut back consumption.
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