Eskom has signed a $2.5-billion government-backed loan with the China Development Bank, which will be used for construction of Kusile power station.
The loan agreement was signed on Tuesday following bilateral talks between the Chinese President Xi Jinping and President Cyril Ramaphosa.
During the address by the two heads of state, Ramaphosa announced that China and South Africa countries also signed a number of trade agreements totalling $14.7-billion (about R196-billion at current exchange rates).
Eskom Chief Executive Phakamani Hadebe said the loan was part of the cash-trapped power utility’s funding requirement for the financial year, which is currently at 62%.
He said the loan demonstrated confidence in Eskom’s new leadership since the appointment of a new board in January.
“This is a normal loan, effective as from the day of the signing … the loan would help us ease some of the liquidity challenges we are facing,” said Hadebe.
“What has been happening is that as up until last year, Eskom was under a lot of pressure when it comes to funding.
From the beginning of January when a new a new board was created, we began to see an increasing appetite in investors.
This loan is just in line with that,” he added.
Once complete, the coal-powered Kusile power station — which has been under construction since 2008 — will have an output of 4 800MW.
The loan comes as global financiers such as the World Bank had said they would no longer be funding coal power projects, as they have shifted their focus to renewable energy.
Hadebe said he was comfortable that the power utility would in two months’ time be able to reach up 80 to 90% of its funding requirement.
“We are in a better position than before.”
On Monday, Eskom announced a net loss of R2.3-billion for the financial year ended March 31, with R19-billion in irregular spending since 2012.
Xi’s visit to South Africa came ahead of the Brics summit, which starts in Johannesburg on Wednesday.
Prior to coming to Pretoria, Xi visited Senegal and Rwanda, as part of a whistle-stop tour to cement relations with African allies. — Fin 24