Bongani-Nqwababa

29 October 2008 – Eskom is close to finalising funding for US$500 million with the African Development Bank, a news report published today disclosed.  Eskom has decided to consider other local funding institutions given the current international market turmoil and credit crunch.

According to Bongani Nqwababa, Eskom will also be able to access a €300-million loan from the European Investment Bank.  He also revealed the utility was in discussions with the World Bank for a far larger package.  According to Nqwababa, the facility will be “large and chunky” if and when it is concluded.

Eskom will raise capital through domestic bond issues and other foreign sources such as private placement with US and Japanese funders and export credit schemes.  It will also re-approach banks for funding during 2009.

On the bright side, with other utilities currently reconsidering capital expenditure, Eskom could emerge as a preferred supplier, making any cancellations elsewhere available to Eskom.  In addition, the price of key equipment could moderate, given that Eskom has signed contracts with cost adjustment clauses built in.

Challenges facing the utility however include the falling value of the rand, but Nqwababa says “This slowdown is not positive for South Africa, but for Eskom it could offer some breathing space.”