Govt raises funds for Eskom

Thursday, November 11, 2010

Pretoria - Government is to make a R20 billion equity investment over three years to Eskom as part of its 'hybrid solution' to support the state utility.

"The move is set to strengthen Eskom's balance sheet and enhance its ability to raise finance for the R142 billion Kusile power station," government spokesperson Themba Maseko said on Thursday, following Cabinet's regular meeting.

Described as a hybrid solution, government's total investment consists of increasing the guarantee framework from R176 billion to R350 billion to enable the utility to continue with its committed Build Programme up to Kusile Power Station and an equity injection of R20 billion over three years, starting in the 2011/12 financial year.

The equity injection will be funded through the Minister's Committee on the Budget as part of the budgeting process, he said.

Maseko said the National Treasury will identify such assets in due course and in consultation with the Department of Public Enterprises and other relevant departments.

Explaining the move, Maseko said securing energy supply was the major issue facing the country and the economy, referring to the load shedding which plunged the country into darkness in 2007 and 2008.

He said energy was key in growing the economy especially now that government has adopted the new economic growth path which seeks to place the economy on a production led trajectory.

Through the new economic growth path, government aims to increase mining of precious minerals and to create 300 000 jobs in the "green economy" by 2020, among others.

Last week, the power utility signed a R15 billion loan with the Development Bank of Southern Africa to go towards the build programme. The DBSA loan, which will go towards building new Eskom power stations, will be drawn over a period of five years and does not make use of guarantees from government.

The build programme, will add 12 300 megawatts of additional generating and transmission capacity to South Africa's grid by 2017. It is essential to provide the security of supply the country needs to grow the economy as well as improve the quality of life of its people.

Earlier this year, Eskom raised a $3.75 billion loan from the World Bank. It also has a $500 million loan from the African Development Bank and a EUR186 million loan from the European Investment Bank.