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World Bank advises utilities against borrowing

Senior energy specialist at the World Bank, Chris Trimble warns power utilities against increasing their debt to cover costs.

Trimble was speaking at the annual African Utility Week in Cape Town, to deliver the Bank’s report on ways to make power utilities more financially viable.

In an earlier statement and interview on the report, the World Bank singled South Africa out as the most developed in terms of its electricity sector in sub-Saharan Africa and Eskom as one of the best performing utilities in the region.

However, recent media reports have noted Eskom’s interim results published in November last year which showed increased costs and declining profits. Read more…

This was followed by a credit downgrading by ratings agency Standard & Poor with significant implications for Eskom’s borrowing ability.

Last year, the Mail & Guardian reported Eskom’s debt obligations then already stood at ZAR317 billion ($24 billion).

World Bank report findings

Meanwhile Trimble in his presentation shared the findings and recommendations of the World Bank report on how power utilities in African countries can become more financially viable.

Data of power utilities in 39 African countries were used. It showed many of these African countries are unable to cover their operating expenditure leading to deficits.

These findings highlight a significant revenue gap in most African countries with only two exceptions – Uganda and the Seychelles who recover all their costs. Read more…

“It’s quite a bleak picture,” Trimble state.

Among the steps to solving these issues, the report suggests starting with eradicating operational inefficiencies and gradually increasing tariffs in small amounts.

He also pointed out that operating costs in some countries like Liberia is still “unbelievably high”. The cost drivers for this, Trimble told delegates, include the source of energy that is critical and geography that is important as landlocked countries’ costs are usually higher.

Babalwa Bungane
Babalwa Bungane is the content producer for ESI Africa - Clarion Events Africa. Babalwa has been writing for the publication for over five years. She also contributes to sister publications; Smart Energy International and Power Engineering International. Babalwa is a social media enthusiast.