South Africa - International Franchise Association

In addition to raising debt on the domestic capital markets, Eskom is pursuing funding on
the domestic and global debt markets through a bond issuance program. The utility is
also tapping into funds available from development finance institutions, including the
Development Bank of Southern Africa (DBSA), the African Development Bank (AfDB)
and the World Bank. The AfDB approved a $2.79 billion (R20-billion) loan to Eskom in
2009, to assist in financing the Medupi project, as well as signing a 20-year $690 million
(R5-billion) loan to fund the utility’s capex program in 2008. Further, in 2011, the AfDB
approved a loan of $365-million for renewable energy projects, including $265-million
from its own resources and $100-million from a Clean Technology Fund. Eskom has
also secured a $3.91 billion (R28-billion) loan from the World Bank.
Eskom is also making use of export credit agency finance associated with capital
equipment and services imports from Asia, Europe and the US.
Eskom’s ability to borrow funds for its investment program has been supported by a
package of government guarantees. Initially, government offered to guarantee $24.58
billion (R176-billion) worth of the utility’s debt, but expanded this to $48.88 billion (R350billion)
in late 2010.
Eskom’s funding gap has been closed, for now. However, the IRP2010 includes a
category of projects known as ‘new build options’ – projects that are not, as yet, clearly
defined – in which Eskom is expected to be a significant participant, and for which the
utility will require substantial additional funding.
Best Prospects/Services Return to top
Products and services with immediate need or potential in South Africa include:
• Construction of New Power Stations
• Independent Power Producers (IPPs)
• Energy Efficiency Technologies
• Transmission and Distribution Equipment
• New Plant Equipment and Related Systems
• Systems Control Equipment
Independent Power Producers (IPP)
The additional capacity that Eskom will introduce to the national grid in the coming years
will need to be supplemented with power from independent operators, if South Africa is
to avoid future power shortages. The SAG has announced that 30% of all new build
capacity be supplied by IPPs.
One challenge that has delayed the introduction of IPPs to the South African market has
been the designation of Eskom as the only buyer of the electricity produced by
independent operators. This situation resulted in a perceived conflict of interest for
Eskom as power producer and purchaser of independent power.
However, legislation has been proposed to create an independent system and market
operator (ISMO) that would buy the power produced by both Eskom and the private
operators.