Eskom thrown IPP lifeline by German bank

EMBATTLED power utility Eskom scored a major victory on putting independent power producers (IPPs) on the grid on Friday when German government-owned bank KfW gave it a$100 million (R1.37 billion) loan facility to fund the process.

Eskom said the money would be used to integrate renewable energy projects in the Eastern Cape and Free State into the national grid.

The facility comes as Eskom faces a major fallout from unions and coal suppliers who claimed that IPPs would lead to job losses in the industry.

But analysts said that the facility would not alleviate the power utility’s liquidity problems.

Econometrix economist Azar Jammine said the $100m facility was equal to the amount Eskom would pay its staff if unions accept the latest wage proposal.

“The loan facility would allow them to get by without having to go bankrupt or borrow money from the government,” he said.

Energy Minister Jeff Radebe signed a R56bn contract with 27 IPPs in April, expected to add 2 300MW of electricity to the national grid over the next five years.

Eskom chief executive Phakamani Hadebe said the loan facility validated KfW’s continued commitment towards Eskom, whose credit rating was downgraded to junk by rating agencies Moody’s and S&P Global, which flagged probabilities of defaults on its loans.

Hadebe said the funding was a positive execution of Eskom’s R72bn funding requirement for the 2018/19 financial year, and formed part of the first new funding Eskom intended signing with development finance institutions this financial year.