HomeIndustry SectorsFinance and PolicyEskom Holding Limited has secured a $3.75 billion loan from the World...

Eskom Holding Limited has secured a $3.75 billion loan from the World Bank

15 April 2010 – Eskom Holding Limited (Eskom), state-owned power monopoly that produces approximately 95 per cent of electricity used in South Africa, has secured a $3.75 billion loan from the World Bank to set up power plants to increase the country’s generation capacity.

On approving the loan, the Washington-based lender said that the loan, which is the bank’s first major lending engagement with South Africa since the fall of apartheid 16 years ago, aims to benefit the poor directly, through jobs created as the economy bounces back from the global financial crisis and through additional power capacity to expand access to electricity.

World Bank vice president for the Africa region, Obiageli K Ezekwesili said: ”Without an increased energy supply, South Africans will face hardship for the poor and limited economic growth,”

”Our support to Eskom combines much-needed investments to boost generation capacity for growing small and large businesses, creating jobs, and helping lay the foundations for a clean energy future through investments in solar and wind power,” he further said.

Johannesburg-based Eskom is Africa’s largest power utility accounting for around 45 per cent of the total electricity generation. The utility produces over 44,000 megawatts (MW) of power from its coal-fired, nuclear and hydro-electric power plants.

A major chunk of the $3.75 billion loan under the Eskom Investment Support Project (EISP), amounting $3.05 billion is allocated for completion of the advanced 4800 megawatt (MW) Medupi coal-fired power station in the northern province of Limpopo.

An investment of $260 million is planned for clean energy generation, which includes setting up of a 100 MW wind power project in Sere and a 100 MW concentrated solar power plant in Upington. In addition, $485 million is earmarked for improving the energy efficiency of the power plants.

Welcoming the decision of the World Bank, Eskom’s chairman Mpho Makwana said, ”This loan is a vote of confidence in South Africa and Eskom. On behalf of the board of directors, I welcome this commitment to South Africa and to the regions’ future development.”

‘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,” added Makwana.

Eskom said that the completion of Medupi plant is a matter of urgency due to the country’s growing energy needs. The plant will be the largest dry-cooled power plant in the world and African’s first plant using ”supercritical” technology.

The first unit of Medupi is expected to go on stream in 2012 and when fully completed, the plant will add more than 10 per cent to the country’s existing baseload.

The US, the largest contributor of the World Bank, abstained from the voting for the approval of the loan on concerns about climate impact of the project and its incompatibility with the bank’s commitment to be a leader in climate change mitigation and adaptation, the Treasury said in a separate statement.

Although the Treasury acknowledged the energy needs of South Africa to promote economic growth and to address critical challenges such as poverty, education and health and the country has only limited options that could provide the required energy base, it said that the project would produce significant greenhouse gas emissions.

Nevertheless, the Treasury welcomed the renewable energy and efficiency components of the EISP and recognized the bank’s and the South African government’s commitment to pursue lower carbon path in future.

Eskom envisages a massive investment of approximately $53 billion over the five years to 2013 in its effort to meet the growing demand for electricity in the country.

The nation faced widespread blackouts in 2008 due to widening demand-supply gap. Production from the platinum and palladium mines dropped drastically due to power cuts and restrictions, driving the prices for the metals sky-high globally.

South Africa produces around 85 per cent of the world’s platinum and 30 per cent of palladium.