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Cape Town - Eskom has received a loan boost of almost R20bn from the African Development Bank (AfDB) to fund its expansion programme, including the Medupi and Kusile new build programme.
The R20bn loan is broken down into a $365m (R5.36bn) unguaranteed senior unsecured loan and $10m (R246m) guaranteed A-loan, Eskom said in a statement on Thursday.
AfDB has also been appointed the arranger for another $965m (R14.1bn) guaranteed syndicated B-loan facility from lenders like Bank of China, Bank of Tokyo-Mitsubishi, CaixaBank, Citibank, HSBC, JP Morgan Chase, KfW IPEX Bank, Siemens Bank, and Standard Chartered, Eskom said.
The announcement comes after Eskom CEO Brian Molefe said the power utility had secured 57% of funding for 2016/2017.
READ: Nersa grants Eskom extension to apply for new tariff increase
"Through our robust improvement plan, we have risen to the challenge of completing necessary maintenance of our ageing power stations, while delivering on our new build projects, which will add capacity to the grid in the future,” Molefe said during the utility’s presentation of its 2016 integrated results on Tuesday.
“The signed facilities will fund the general capital expansion programme, which include new build; maintenance and refurbishment of generation, transmission and distribution infrastructure; and skills upgrading programme,” Eskom said on Thursday.
“The African Development Bank continues to be a significant partner and a key contributor to the progress achieved by Eskom in the execution of the current build programme,” said Eskom CEO Brian Molefe.
“We are particularly grateful for the continued support in a time when Eskom has made major advancements in achieving operational and financial sustainability and expediently completing the build programme.
“These facilities are a demonstration of the Bank’s mandate to contribute to the economic development and social progress of African countries,” he said.
READ: Why Medupi and Kusile are Eskom's Achilles heel
The senior unsecured loan and the A-loan are payable over 20 years, both with a two-year grace period from the date of signing, Eskom explained in a statement. The principal debt on the B-loan will be settled five years from the signing date. Other terms of the loans were negotiated at competitive Development Finance Institutions market-related rates.
Eskom requires additional funding as its new build costs have spiralled out of control between 2007 to 2016: Medupi’s cost to complete went up from R70bn to R135bn while Kusile’s cost to complete went up from R80bn to R160bn. This excludes flue gas desulphurisation plant and interest during construction.
On Thursday, two days after Eskom reported R4.6bn in profit for the year, the National Energy Regulator (Nersa) also said it approved Eskom’s application for an extension to submit the new Multi-Year Price Determination (MYPD) application until 1 April 2017.
The new application comes after Nersa approved a 9.4% electricity tariff hike on 1 March, which kicked in on 1 April this year.
READ: Molefe leads load shedding free Eskom to new heights
In 2015, Eskom received an R83bn boost to cover excessive diesel costs stemming from load shedding as well as its expansion programme.
Government had to sell its 13.91% stake – valued at about R28.7bn - in Vodacom to the Public Investment Corporation to help fund the R23bn allocation to Eskom.
It also converted its R60bn subordinated loan into equity.
The condition attached to the conversion was that Eskom had to save R60bn in costs up to March 2018.
Government said at the time that it recognised that electricity tariffs needed to be adjusted to achieve cost-reflective levels.
