South Africa's Eskom signs $1.5 billion loan agreement with China

[July 06, 2017]  JOHANNESBURG (Reuters) - South Africa's state power utility Eskom signed a $1.5 billion (19.6 billion rand) loan agreement with China Development Bank on Thursday to partly finance its Medupi coal power plant, its acting chief executive said on Thursday.

The loan is the second tranche of a $5 billion funding facility Eskom is seeking, after signing a $500 million credit facility with China Development Bank in 2016.

"This loan will also aid us in ensuring that we complete the Medupi project and ensure security of energy supply," Eskom's acting CEO Johnny Dladla told reporters.

The power utility, which has in the past been forced to impose power cuts due to insufficient supply, is scrambling to revamp its aging power plants. Once completed, Medupi is expected to be the largest dry-cooled coal-fired power station in the world and will add 4,800 megawatts to the grid. But the facility is over budget and years behind schedule.

Eskom Chief Financial Officer Anoj Singh said the Chinese loan would be paid back over 15 years.

He expected Eskom's debt to peak at 500 billion rand, up from 350 billion rand currently.

To date Eskom has secured 77 percent of this fiscal year's funding requirement, Dladla said, and expected that it would meet the required funding for the year.

Electricity pylons are seen in front of the cooling towers at the Lethabo Thermal Power Station,an Eskom coal-burning power station near Sasolburg in the northern Free State province, March 2, 2016. REUTERS/Siphiwe Sibeko/File Photo

Singh also said Eskom sees significant appetite from international investors for the firm's bonds and the utility could tap the market for between $1 billion and $1.5 billion in sales in the next six months.

However, he said governance issues at the utility had impacted the firm's plans to secure funding.

"We'll probably look for about $1 billion to $1.5 billion in the next six months depending on the appetite," he told Reuters.

Eskom has been in a leadership crisis after several board members, including the chairman and chief executive, resigned in recent months amid growing concerns about governance at the country's sole electricity provider.

(Reporting by TJ Strydom; Writing by Nqobile Dludla; Editing by James Macharia and Susan Thomas)

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