Eskom, Transnet to get China funding
• Power utility secures R33.2bn loan • Commercial loans guaranteed by the government
Two of SA’s largest state-owned companies have announced they have new funding from Chinese state banks, with Eskom securing $2.5bn (R33.2bn) and Transnet R4bn.
The funding, announced at the start of the 10th Brics summit in Johannesburg on Tuesday, comes at a time when stateowned companies are facing difficulties raising finance from local banks and investors.
Both are normal commercial loans that are guaranteed by the government.
In Eskom’s case, the $2.5bn loan from the China Development Bank is part of an initial $5bn credit facility it received from the Chinese bank in 2016 and will be used to fund the construction of the Kusile coal-fired power station. It has already drawn down $1.5bn for the Medupi power project.
Eskom must raise R72bn in 2019 to fund its capital build programme and repay a R20bn syndicated bank loan secured in February. The Chinese loan brings the funding it has secured so far to R49bn, more than 60% of its funding requirement for the year.
Andre Pillay, head of treasury at Eskom, said the loan was repayable over 15 years, with a five-year grace period and 10 years for the capital repayment.
National Treasury spokesman Jabulani Sikhakhane said the guarantees would have been provided within the existing guarantee framework.
Eskom has R79bn of unutilised guarantees.
Transnet’s loan, from the Industrial and Commercial Bank of China, will be applied to general corporate use and is for a 5.5-year period.
At the summit, President Cyril Ramaphosa also announced an investment injection of $14.2bn from China.
This follows bilateral talks held on Monday during a state visit by Chinese President Xi Jinping, ahead of the summit.
While few details were given, the investments are in both the public and private sector and include infrastructure, science and technology, agriculture, the environment, green economy and finance.
Agreements were concluded to further trade relations, improve the visa framework between the countries and pro-
mote co-operation on the development of small, micro and medium enterprises.
Ramaphosa said: “President Xi has indicated that China is ready to invest and to work with SA in various sectors.
“We also recognise that although trade figures have grown steadily over the past two years, bilateral trade has not yet reached its full potential.”
Ramaphosa will visit China in September on a reciprocal state visit.
When completed, the Kusile and Medupi power stations will be among the biggest coalfired power stations in the world, both with a capacity of 4,800MW. However, there have been huge overruns in costs and construction time.
Eskom CEO Phakamani Hadebe said the finance would help in pushing forward the completion of the construction of Medupi.
“We were expecting that Medupi would be completed in 2020, so are left with one year. Probably we can move it to 2019 and Kusile is 2023. This funding talks to all the plans that we have as we move forward.”
The 2018 Budget Review published in February shows that of the R350bn guarantee framework available to Eskom an unallocated R96bn was rolled over to 2023. Transnet’s guarantee allocation in the 201718 year was R3.5bn, but it had exceeded this and its exposure was R3.8bn.