By Colleta Dewa
Johannesburg – A German bank has thrown the debt-ridden South African power utility, Eskom, a lifeline by extending a US$100m loan facility.
The Kreditanstalt fur Wiederaufbaw (KfW) bank’s investment has been viewed as a sign of improved investor confidence.
Sentiment and money have begun to flow back into the troubled state-owned enterprise.
Upon securing the US$100 million loan facility a week ago, the utility has also confirmed that it has raised 20% of its R72 billion funding requirement for the current financial year.
The US$100m loan facility (equivalent to R1.37b) will go towards the integration of renewable energy projects into the national power grid.
To date, Eskom has raised almost R15b since the financial year began in April.
The power utility has faced a liquidity crisis since 2017 when financiers ceased loaning it money over concerns of corruption.
Khulu Phasiwe, the Eskom spokesperson, confirmed to the media that the company had suffered a dry season since investors lost confidence in the organisation’s operations.
“In 2015, the development bank extended R3.9b in funding to the utility, but from July last year until January this year, even the companies we have partnerships with didn’t want to do business with us because of the dark cloud of corruption hanging over Eskom. The KfW loan is an indicator we are on the right trajectory,” said Phasiwe.
Eskom said the KfW funds would go towards further investments in the transmission network in the Northern Cape to integrate renewable energy independent power producer projects into the national grid.
The organisation says the funding will also assist in the second phase of improvements in Harrismith and the greater East London region.
Tension is, however, high between government and unions, including the National Union of Mineworkers and the National Union of Metalworkers of SA that have argued that power purchase agreements between Eskom and renewable energy producers will cause job losses in energy, mining, transport sectors.
Labour estimated the latest power purchase agreements signed in March would cost 30,000 jobs.
They also claimed such purchase agreements have contributed to Eskom’s weak financial position.
Chairman of the South African Photovoltaic Industry Association, Davin Chown, hailed the KfW loan development saying it should be used for grid integration of renewables and facilitating the transition to a low-carbon economy, as recently outlined by Energy Minister, Jeff Radebe.
KfW’s previous loan to Eskom in March 2015 was used to facilitate renewable energy grid integration as well as overall grid strengthening.Eskom is, however, still entangled in negotiations with unions on salary hikes and the situation seems to have intensified at this point, with staged power outages affecting communities on a nationwide scale.
Last week, Eskom tabled its final offer of 6.2% increment for 2018 and a further 6% for 2019 and 2020.
The unions responded saying that they still have to consult their clients. However, the general feeling is that they do not agree with the offer