US credit agency keen on Eskom
THE Export-Import Bank of the US, the state’s official credit agency, has about $1bn of exposure to Eskom and is keen to offer more, its regional director told the Energy Indaba yesterday.
THE Export-Import (Exim) Bank of the US, the government’s official credit agency, has about $1bn of exposure to Eskom and is keen to offer more, regional director Rick Angiuoni told a panel at the African Energy Indaba in Sandton yesterday.
Eskom is facing a constrained power system as well as financial difficulties. It cannot sell enough power to cover its operating costs while the capital costs of its two new coal-fired power stations, Medupi and Kusile, have ballooned. In next week’s national budget, the government is expected to reveal details of a R20bn asset sale to inject more funds into the utility.
Mr Angiuoni told the conference that over the next 20 years Africa would need about $1-trillion for power projects and SA alone would need $400bn to $1-trillion if it commissioned new nuclear power stations. The private sector did not have the capacity or risk appetite to finance nuclear power. Although Exim Bank had supported Kusile, it would no longer finance coalfired power stations.
The cheapest source of financing for long-term power projects was export credit agencies and development finance institutions, he said.
Exim’s financing is tied to opportunities for US exports. Another large and untapped source of funding was the $100-trillion private equity market, Mr Angiuoni said.
Nedbank Capital head of infrastructure Mike Peo said that after export credit agencies, bank loans were the cheapest source of finance for power projects. But when banks extended an eight- to 20-year loan they were also anxious to ensure the risk profile would not change. They were unwilling to finance power projects where the tariff being charged to end users was not cost reflective.
Independent energy consultant and former Eskom CEO Jacob Maroga told the conference that the utility’s power crisis was opening up opportunities for the private sector. The fact that the 4,800MW Medupi power station, which was approved in 2006, was not delivering power yet but the renewable energy sector, which was launched in 2010, was already delivering 1,600MW to the grid, “shows that small-scale generation is becoming by default an industry model”.
Instead of building two big power stations of six units each at Medupi and Kusile, it would have been better for SA to have commissioned 12 smaller units from different power producers, he said.
Eskom transmission GM Robbie van Heerden said renewable energy was helping Eskom. Out of 1,600MW of installed capacity, renewables were delivering up to 1,100MW a day, and this was enough to allow Eskom to replenish its pumped storage schemes to deliver peaking power in the evenings.