Eskom seeks to break terms of $3.75 billion World Bank loan to avoid spending on emission cuts

Eskom is seeking to have the terms of a $3.75 billion World Bank loan changed to avoid spending money to cut emissions from one of its largest power plants.

The 2010 loan is being used to partly fund the construction of the 4 764 megawatt Medupi coal-fired power plant. It contains a "legal covenant" that Eskom must install so-called flue-gas desulfurisation, or FGD, equipment at the plant by 2025 to curb emissions of sulfur dioxide, according to the World Bank.

"These are internal considerations that are being discussed with our stakeholders and partners, chief of which are the World Bank and the government," Eskom said in a response to queries. "Eskom has had informal discussions with the World Bank, but no commitment or decision was made."

Eskom, which is owned by the government and produces almost all of South Africa’s power, is struggling to service R454 billion of debt and says the equipment would cost R42 billion. Still, the pollution the utility emits is the subject of a lawsuit that has been filed against the government and accounts for between 300 and just over 2 000 deaths a year, according to studies carried out by Eskom and independent experts.

"Any changes to FGD on Medupi would require consent with the World Bank," the lender said in a reply to questions. "We understand that Eskom may be investigating alternative solutions, however the World Bank has not received a proposal."

Sulfur dioxide pollution causes respiratory illnesses and acid rain.

Eskom argues that in addition to being expensive, the equipment would increase water consumption, necessitate the use of large quantities of limestone and produce additional carbon dioxide, a greenhouse gas. Some of the money saved could be used to adapt some older, coal-fired plants to use other fuel, it said.

"Installing FGD at Medupi may reduce the impact on health by a small margin, but it will result in other negative environmental impacts," Eskom said. Switching older plants away from coal would reduce emissions of “sulfur dioxide, nitrous oxide, particulates and carbon dioxide emissions.”

The utility would also need permission from the government to change its plans.

Eskom has had some “initial informal engagement with the Department of Environment, Forestry and Fisheries” and will approach it formally if it decides to make a proposal, the utility said. The department didn’t immediately respond to a request for comment.

* Update: This article was amended at 14:00 on Friday 15 May. It previously reflected Medupi's location incorrectly.