/ 9 April 2010

World Bank loan to Eskom welcomed

South Africa on Friday welcomed a decision by the World Bank to grant Africa’s biggest economy a controversial $3,75-billion loan to develop a coal-fired power plant to boost flagging power supply.

The loan — the first World Bank loan for South Africa since the end of apartheid in 1994 — was approved despite the lack of support from the United States, The Netherlands and Britain, which abstained mainly due to environmental concerns.

South Africa, which is battling a chronic power shortage, said it would address the concerns raised over emissions. The country is reliant on coal for 95% of its electricity supply, and is the worst emitter on the continent.

South Africa’s national grid suffered a near collapse in early 2008, costing the country billions of dollars in lost output across all sectors as Eskom enforced rolling blackouts.

The loan will finance the Medupi power station — Eskom’s first such plant in more than two decades — and the country’s first large wind and concentrated solar power projects.

Medupi is part of several new power stations planned to boost generation capacity to satisfy fast-rising power demand.

“This [loan] will ensure the country’s economic development objectives remain on track and that security of electricity supply is restored,” the National Treasury said in a statement.

Ageing infrastructure
Analysts said without the loan, South Africa would have faced a far steeper climb towards energy security.

“Since the country has not constructed any new base-load power stations since the mid-1980s and hence is faced with ageing infrastructure, it is critical for energy security that Medupi is completed as soon as possible,” Frost & Sullivan’s energy analyst, Cornelis van der Waal, said .

State-owned power utility Eskom has said it plans to invest R461-billion to boost generating capacity and diversify away from coal-fired power station.

Eskom has defended the 4 800MW Medupi plant in Limpopo, saying there is no immediate alternative to easing the country’s chronic power shortages and ensuring power supplies to neighboring states.

The utility said the approval of the loan cleared the way for the full construction of the Medupi power station, which is expected to produce its first power by April 2012 when the first of six 800MW units will be commissioned.

“We are very pleased that the World Bank has agreed with our planning and granted this substantial loan,” Eskom acting chairperson Mpho Makwana, said.

He reiterated the electricity system would be “critically tight” between 2011 and 2012, until new generation capacity kicks in.

The South African Chamber of Commerce and Industry (SACCI) on Friday also welcomed the decision of the World Bank to grant the loan. –Reuters, I-Net Bridge