South Africa’s national energy company Eskom has sealed €300mn in financing from European banks.
The finance comes in two tranches and will be used to construct underground works, related to the Ingula storage power plant. The first tranche of €165mn comes from a syndicate comprised of KfW-Ipex, HSBC, UniCredit and BNP Paribas, who also acted as agent bank.
Cassa Depositi e Prestiti (CDP), an Italian bank which is 70% owned by the government, has provided the remaining €135mn. Both loans have been guaranteed by Sace, the Italian export credit agency, with the construction to be completed by CMC, a joint venture between Impreglio (of Italy) and Mavundia (a South African company).
Luca Lunari, head of export finance Italy at BNP Paribas, tells GTR: “Both facilities have an availability period of two years and shall be repaid in 10 years, by 20 equal semi-annual instalments – so door-to-door tenor is 12 years. The interest rate is based on prevailing commercial interest reference rates (CIRR) plus margin.” The exact margin, however, is undisclosed.
Speaking of Sace’s work in South Africa, the head of the agency’s Johannesburg office Riccardo Faneli tells GTR: “In the context of Sub-Saharan Africa, South Africa plays a leading role. Although some critical factors remain, as evidenced by the Sace risk index (with medium to high levels for both the political risks for the risk of non-payment) the country has many areas of opportunity for Italian companies, a potential reflected by the intensive activity of Sace, with a total exposure of €420mn.
“The leading sectors are infrastructure, transport and energy. Among key public initiatives, the South African government has also established a National Trade and Investment Agency, which has set up incentives and various industrial development zones, alongside coastal and port areas where no duties are requested to exporters. In recent years there have been several initiatives to internationalise medium-sized Italian companies in South Africa, in the steel, mechanical and agro-industrial sectors.”
Eskom has been extremely active in the lending market of late, mostly as a result of the South African government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPP), which seeks to address frequent power shortages.
But after power rates in the country were raised by below the level Eskom expected, the company has found itself with a capital gap of around US$22bn (over the next five years). For the coming 18 months, it expects to be able to raise sufficient capital through export credit agencies, development finance and domestic and international bonds.
However, in an attempt to plug the longer-term funding gap, it has recently floated the idea of funding its operations through Islamic bonds. It says, in a statement: “New opportunities from alternative funding sources and products such as Islamic funding (sukuk), preference share-type funding and project-based funding will also be explored.”