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Africa Energy: AfDB optimistic about Eskom’s turnaround

The African Development Bank (AfDB), which has extended billions of rands in loans to Eskom, says it is optimistic the actions being taken to turn around the embattled South African power utility will bear fruit.

Power, energy, climate and green growth complex VP Amadou Hott told Engineering News Online on Tuesday that the bank was not concerned about its exposure to Eskom, despite revelations that the State-owned company would required a capital injection by April to remain a going concern.

“We believe in the turnaround taking place at Eskom,” Hott said in an interview on the sidelines of the Africa Energy Indaba in Johannesburg.

He indicated, however, that the bank would be watching Finance Minister Tito Mboweni’s Budget address with interest to see what further support would be extended to Eskom. “For us, as a lender, any further support announced can only be positive news.”

Eskom has requested the National Treasury to consider transferring R100-billion of its R420-billion debt across to government’s balance sheet. However, concerns have been expressed that such an action could trigger a ratings downgrade by Moody’s; the only agency to have sustained South Africa’s investment grade credit rating.

AfDB, Hott said, was particularly pleased with the actions initiated by President Cyril Ramaphosa’s administration to change the board and management, as well as to seek advice with regard to the utility’s structure.

Ramaphosa announced in his State of the Nation Address that the utility would be split into three separate State-owned businesses under Eskom Holdings to bring greater transparency to the financial and operational issues confronting generation, transmission and distribution.

“We are very confident that that will yield positive results, because it shows political will. Once the political will is there, usually these utilities can achieve a lot. We have seen that in other countries.”

In 2018, AfDB approved a R2.9-billion loan to Eskom for the upgrading and expansion of Eskom’s transmission network and Hott reports that further loans are being considered for battery energy storage projects, as well as an emission control solution for the Medupi power station.

GRAND INGA?

Hott was also keen for the South African utility to commit to an even larger offtake from the proposed 11 000 MW to 13 000 MW expansion of the Inga hydro power plant in the Democratic Republic of Congo (DRC).

A draft version of South Africa’s draft Integrated Resource Plan (IRP), which Energy Minister Jeff Radebe indicated would be finalised in March, included a 2 500 MW allocation for imports from the DRC, in line with a 2013 treaty between the two countries. However, it has been reported that South Africa might double its offtake to 5 000 MW.

Radebe said on Tuesday that, following the granting of a concession to a Sino-Spanish consortium to develop the hydropower project, commercial negotiations would commence to procure power from Phase 1 of the Grand Inga hydropower project. He did not mention any increase in South Africa’s offtake, though.

The plan to include imports from Inga in the draft IRP has already been criticised on the basis that electricity imports would add unnecessary foreign exchange and political risk to South Africa’s electricity system. It would also be expensive when compared with building new wind and solar photovoltaic capacity in South Africa.

Hott argued, however, that Inga would deliver electricity at a competitive tariff of about $0.05c/KWh even after transmission costs were included. Inga’s competitiveness would be improved, he added, in the event that the project was upscaled and if South Africa commited to increasing its offtake to 5 000 MW.

He also stressed, though, that several feasibility and environmental studies would have to be concluded before a final investment decision could be made and no decision was likely during 2019

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