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Johannesburg – The R7bn credit facility agreement signed between Eskom and the China Development Bank (CDB) is meant for the power utility’s capital expenditure programme, which does not include government’s nuclear build programme.
This is according to Eskom CEO Brian Molefe, who was speaking at the signing ceremony at Megawatt Park in Sunninghill on Monday. This follows the signing of a Memorandum of Agreement between President Jacob Zuma and China’s President Xi Jinping last year, pledging R94bn to support the South African economy.
READ: China's Xi pledges R94bn to support SA economy
“There is no determination by the Minister of Energy that Eskom would be the procurement agent of nuclear,” Molefe reiterated. He said that the procurement of the nuclear build programme was up to the government and not Eskom and that the nuclear build programme was not in Eskom’s capital expenditure programme. “Government is still procuring for the nuclear programme.”
Eskom’s current borrowing requirement for its capital expenditure programme - which includes power plants Medupi, Kusile and Ingula - for the next five years is R360bn. The credit facility has provided R7bn for the programme and will also fund the maintenance of these plants. Molefe explained that the funding was not for a specific project.
The borrowing programme for the year is 75% complete at R51bn. The year’s requirement is R63bn.
ALSO READ: China loans Eskom R7.2bn for power stations
The total credit facilities under negotiation come to $5bn, said Molefe. The inaugural credit facility signed on Monday only covers $500m. “We hope to conclude the rest of the facilities in the near future to $5bn,” he said.
“The total facilities that CDB is prepared to give South Africa for energy is $20bn, (and) we are only negotiating $5bn currently,” he added.
Eskom chief financial officer Anoj Singh said that the repayment period was three years and that interest rates were competitive and market related.
The signing of the R7bn credit facility between Eskom and China Development Bank on Monday. (Photo: Lameez Omarjee)
Strengthening bilateral relations
In his address, Molefe said that the agreement would lead to the prosperity of the South African nation through job creation, skills development and the upliftment of communities. He also said the credit facility would help Eskom provide electricity in an “efficient and sustainable” manner.
He added that the agreement would help strengthen relations with China. “The gesture by the CDB to make available to us $500m is quite important for relationship building. It means that we can demonstrate Eskom can still raise capital in international capital markets,” he told Fin24.
When asked why it was important for the power utility to draw funding from other BRIC countries, as opposed to other sources, Molefe said: “As opposed to being held hostage by (Futuregrowth Asset Management CEO) Mr (Andrew) Canter.” The dig at Futuregrowth Asset Management follows its decision to withdraw capital investment from a number of state-owned enterprises, including Eskom, pending a review of their governance structures and independence.
READ: Futuregrowth standoff with state firms thaws
Zhang Weining, vice Governor of Henan Provincial People’s Government said that the agreement was a start to a “bright future”. He added that it would contribute to the bilateral cooperation between China and Africa in future.
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