Eskom welcomes the decision of the World Bank

Eskom’s Acting Chairman, Mpho Makwana. Photo: Business Day

Eskom has welcomed the World Bank’s decision to grant the power utility a $3.5bn loan, it said in a statement today.

“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,” Eskom’s Acting Chairman, Mpho Makwana said.

The World Bank has approved SA’s request for a $3.75bn loan to co-finance the Medupi power plant in Lephalale, Limpopo Province, and Eskom’s proposed concentrated solar project and wind energy projects.

“Eskom is thankful to all the role-players for making this loan possible. We look forward to the mutually beneficial relationship that will result from this support,” Makwana said.

“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,” Makwana added.

Paul O’Flaherty, Eskom’s Finance Director, explained that the World Bank loan is part of a multi-year investment programme that provides the foundation for the necessary electricity expansion in South Africa. In line with our existing multilateral funding, these funds combine favourable financing rates with a structured repayment profile, thereby making it an economically attractive option to contribute to South Africa’s future economic growth.

“This approval clears the way for the full construction of Medupi Power Station and is catalytic for South Africa’s commitment to renewable energy and lower carbon technologies such as large-scale solar thermal and wind power. The funding is well aligned to jump-start progress on South Africa’s commitment to a lower carbon footprint,” said O’Flaherty.

The completion of Medupi is a matter of urgent national interest, as the energy demands have grown considerably in the past 15 years and are projected to grow further as the economy expands. In particular, as the electricity system remains critically tight between 2011 and 2012. Construction is progressing well and the first unit of Medupi is expected to come on line in 2012. Medupi will be the largest dry-cooled power plant in the world, and Africa’s first plant using “supercritical” technology; and will provide 4 800 MW of power – an addition of more than 10% to South Africa’s existing baseload.

“Our challenges are great and we have solid plans to address the needs. In addition to the capacity that this loan will help fund, we need to rise to the challenge of using energy more efficiently whilst planning responsibly for future energy infrastructure development. We are very pleased that the World Bank has agreed with our planning and granted this substantial loan,” Makwana said.

According to the statement, the loan has three important components namely:

— $3.0bn for Medupi Power Station and related infrastructure, Africa's first power station using "supercritical" technology which increases the efficiency of the plant.

— $260 million for investments in renewable energy (Wind and Concentrated Solar Power projects).

— $490 million for investment in low-carbon energy efficiency components comprising road to rail coal transportation and technical assistance for improvements in energy efficiencies of existing plants.