The World Bank has approved a US$3.75bn project loan to Eskom, South Africa’s state power utility.
The majority of the loan will co-fund the coal-fired Medupi power plant, while the rest will go on to clean energy projects.
The power plant development is a matter of urgent national interest, with increasing demand for energy in South Africa outstripping supply.
The loan is part of a multi-year investment programme that aims to boost the country’s electricity generating capacity.
Developing alternative energy sources is of upmost importance, says Paul O’Flaherty, Eskom’s finance director: “This approval clears the way for the full construction of the Medupi power station and is catalytic for South Africa’s commitment to renewable energy and lower carbon technologies such as large-scale solar thermal and wind power. The funding is well aligned to jump-start progress on South Africa’s commitment to a lower carbon footprint.”
The loan – approved by the World Bank’s board of directors on April 9 – has a maturity of 28.5 years, with a grace period of seven years.
The margin is 50 basis points over Libor (six months), and has a variable spread of 0.24%, which is reset semi-annually.
Specifically, US$3bn of the total amount will go towards the Medupi power station and related infrastructure; US$260mn will be used to finance investments in renewable energy, including winds and concentrated solar power (CSP) projects – the first of their kind in the country; and US$490mn will finance investment in low-carbon energy efficiency components comprising road-to-rail coal transportation and technical assistance for improvements in the energy efficiencies of existing plants.
According to Eskom, this will be a major step in terms of achieving its long-term low-emission plan.
Construction of Medupi, in Lephalale, Limpopo Province, is well underway, and the plant’s first unit is expected to come on line in 2012.
Medupi will be the largest dry-cooled power plant in the world, and Africa’s first plant using cleaner coal “supercritical” technology – the same technology used in developed countries for new coal power generation.
Once completed, it will provide 4,800 MW of power – which will add more than 10% to South Africa’s existing baseload.
“The World Bank loan significantly contributes to the provision of baseload power. Improved energy security will advance South Africa’s development agenda for economic growth and human upliftment in South Africa and the region,” says Eskom’s acting chairman, Mpho Makwana.
In December last year, Eskom closed separate ECA financing transactions for a total of €1.185bn with a consortium of five French banks.
The fixed interest rate loans, backed by French ECA Coface, will be used to fund part of the eligible foreign content of Eskom’s Medupi and Kusile power stations’ turbine contracts.
Reader Comments