Eskom is in talks to raise about R33 billion

Eskom is in talks to raise about R33 billion from at least five development finance institutions to help fund its partial exit from coal-fired power generation.

The money would be used to help the company re-purpose coal power plants into sites that could produce renewable energy, gas-fired electricity and host battery storage, according to a presentation made to government, business and labor-union leaders, and confirmed by Eskom.

The utility will ultimately need to raise more than $10 billion over the next decade for the program, Mandy Rambharos, the head of Eskom’s Just Energy Transition program, said Thursday in an interview.

Eskom already has debt of about 400 billion rand, mainly from an overrun in the cost of construction of two coal-fired power plants. Debt from development finance institutions is generally cheaper than borrowings from commercial lenders.

The yield on Eskom dollar bonds maturing in 2025 was little moved at 5.54% by 1:12 p.m. in Johannesburg, according to Bloomberg pricing.

Eskom and South Africa are under pressure to cut emissions of greenhouse gases and other pollutants as parts of the country are among the world’s most polluted and the utility accounts for about two-fifths of the emissions. South Africa is the world’s 12th biggest emitter of climate-warming gases and almost all of its power comes from Eskom’s fleet of 16 coal-fired plants.

So far, 200 million rand has been secured to conduct studies into the closing and conversion of the sites, which will affect local communities that depend on them to drive the economy in these areas, the presentation showed.

A further 16.1 billion rand will form an initial facility to start the program, while another 17 billion rand has been pledged, Eskom said. The financiers include the African Development Bank, the New Development Bank, Germany’s KFW Development Bank, the World Bank and Agence Francaise de Developpement of France.

Part of the funding may be allocated as follows:

The African Development Bank has proposed a $300 million facility to fund the re-purposing of plants to produce power from wind, solar or gas as well as 1 billion rand toward battery storage. New Development Bank has offered 6 billion rands of concessional funding for battery storage and is interested in supporting gas projects.
KFW has offered money for renewable energy, batteries and transmission lines.
The World Bank has approved funding for batteries and a grant for the closing and re-purposing of four coal-fired power plants.
The AFD has offered corporate financing to Eskom and a grant for social impact studies.