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The World Bank has approved the granting of a US3.75 billion loan to electricity parastatal Eskom.
In a statement, the World Bank said its board of executive directors had approved the loan "to help South Africa achieve a reliable electricity supply while also financing some of the biggest solar and wind power plants in the developing world".
It added that the loan was the Bank's first major lending engagement with South Africa since the fall of apartheid 16 years ago.
Eskom Gets ‘Excellent’ Loan Rate of 0.5% Above Libor
By Nasreen Seria and Carli Lourens
April 9 (Bloomberg) -- Eskom Holdings Ltd., South Africa’s state-owned power company, negotiated an “excellent” interest rate on a $3.75 billion loan agreed with the World Bank yesterday, according to Investec Asset Management.
The loan is priced at 0.5 percentage points above the six- month London Interbank Offered Rate, plus an additional 0.24 percentage points that will vary depending on the cost to the World Bank of raising the funds, National Treasury Director- General Lesetja Kganyago, said in a phone interview today.
Eskom, which supplies 95 percent of South Africa’s electricity, will use the funds to build one of the world’s largest coal-fired plants. If the loan hadn’t been approved, Eskom would have been forced to sell an extra 25 billion rand ($3.5 billion) of bonds locally, putting pressure on bond prices, Andre Roux, head of fixed income at Cape Town-based Investec, said in an interview.
“It’s an excellent rate,” said Roux. “Libor is almost nothing at the moment. This is much better than they would have gotten locally. It’s important that this issue was done abroad and not in South Africa. The market wouldn’t have liked that.”
The loan needs to be repaid over 28.5 years, with Eskom given a seven-year grace period, according to the Treasury.
The 6-month Libor rate was at 0.45375 today, according to the British Bankers’ Association. By contrast, the yield on Eskom’s ES18 bond, due 2018, was trading at 9.145 percent today.
Eskom sought the loan to help close a funding gap for a 460 billion-rand, five-year expansion plan aimed at preventing a repeat of power outages in 2008 that shut mines and factories. The utility plans to borrow 45 billion rand over the next three years and has raised electricity prices by 25 percent this year.
“South Africa generally and Eskom particularly have appreciated that, simply because of the sheer weight of funding demand, the burden of cost bearing can’t just fall on consumers, but that they must explore innovative measures such as World Bank lending as well as potential private equity participation,” Goolam Ballim, chief economist of Standard Bank Group Ltd., said in a phone interview from Johannesburg today.
The World Bank hasn’t set any conditions on the government’s economic policy as part of the loan, Kganyago said. This is the first major World Bank loan to South Africa since the end of apartheid in 1994. “This isn’t a structural adjustment loan,” Kganyago said. “There is nothing that impinges on economic policy. In our engagements with international financial institutions, we aim to protect the integrity of domestic economic policy formulation.”
A) We can build nuclear plants. Why do we need coal plants?
South Africa had to cancel tenders for new nuclear power plants in 2008 because it could not obtain funding from international lending institutions for the plants. According to the World Nuclear Association, in 2007 Eskom, the state-owned electric utility that provides most of the power in South Africa, approved a plan to build 20 GWe of new nuclear capacity. The first units providing 4 GWe, roughly the same amount of power as the coal plant approved by the World Bank last week, would enter revenue service in 2016. The remainder of the reactors would be completed by 2025.
Areva and Westinghouse were short-listed in the bidding process. Both firms made promises for development of local manufacturing and supply chain facilities in South Africa to address the need for jobs. However, in December 2008, Eskom cancelled the bidding process due to lack of funds.
I also had no idea that no one has built a NPP in so long.
I have long chosen to believe nuclear power was by far the cleanest and only really pose a threat IF and only IF they go into meltdown.
But what about my question of whether we really need this coal plant? I know all to well about the effects the blackouts have on the economy, crime, industry and all that, but i'm convinced that was just a case of bad management.
WRT nuclear, the what i recall is that the only nuclear option was a Pebble Bed reactor. Now why is what i don't understand, since the PBR is not the best tech available.
Bullying and intimidation had become the style of political engagement in South Africa, with ANC Youth League leader Julius Malema its lightning rod, veteran ANC Professor Kader Asmal lamented last night.
In a hard-hitting speech at Unisa, he said political activism had become synonymous with an excuse for personal position, access and wealth.
"This is corruption of the most corrosive kind and must be tackled at root," he said.
The former cabinet minister warned that the constitution's core values, which had protected the country from calamity in the past, were being "chiselled away".
Asmal, who played a key role in drafting South Africa's democratic constitution, was speaking at a ceremony in which he received an honorary doctorate in law from Unisa.
He cited the re-militarisation of the police, with national police commissioner Bheki Cele in "military insignia"; the detention of a jogger by Zuma's bodyguards; and attacks on judges for unfavourable verdicts. Academic freedom, "the heart and life (of) an academic", had been "dangerously dismissed as the vehicle for counter-revolutionaries" - a reference to comments by Higher Education Minister Blade Nzimande. He also listed appointments to judicial and quasi-judicial offices, "that appear deliberately to change the nature of these organs" (a reference to Menzi Simelane's appointment as national prosecutions chief) and the ANC Youth League's threats against journalists who reported on Malema's business interests.
JOHANNESBURG (Reuters) - South African electricity utility Eskom has awarded two contracts worth 31.5 billion rand for its Bravo project coal-fired power station to be completed by 2017, the group said on Friday. Eskom said in a statement it had awarded the 18.5 billion rand contract for the construction of the power plant's boilers to Hitachi Power Africa, a unit of Hitachi Ltd.
A 13 billion rand contract for the turbine island works was awarded to France's Alstom.
Swiss authorities are investigating Alstom employees in cases involving allegations that bribes were paid to gain contracts in Africa and South America. Alstom disputed the SFO’s characterization that the men were arrested.