World Bank approves Eskom loan

World Bank approves Eskom loan

www.timeslive.co.za

The World Bank has approved the granting of a US3.75 billion loan to electricity parastatal Eskom.

In a statement, the World Bank said its board of executive directors had approved the loan "to help South Africa achieve a reliable electricity supply while also financing some of the biggest solar and wind power plants in the developing world".

It added that the loan was the Bank's first major lending engagement with South Africa since the fall of apartheid 16 years ago.

(visit the link for the full news article)


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"The loan is provided to South Africa's power utility, Eskom, and was brought about by unique circumstances including South Africa's energy crisis of 2007 and early 2008, and the global financial crisis that exposed the country's vulnerability to an energy shock and severe economic consequences," the Bank added.

The loan will assist Eskom with its development of a coal-fired power station at Medupi in northern Limpopo.

While US3 billion of the loan would fund the bulk of the construction of Medupi, the remainder of the funds would go toward renewable energy.

Over the past weeks, the loan proposal raised objections from both political parties and environmental groups.

However, both government and the power utility stressed that there was no alternative but to develop Medupi to "keep the lights on".

The opposition Democratic Alliance insisted that the Medupi deal would enrich the ANC by about R1 billion.

This was due to the ruling party's involvement in the building of Medupi via its 25 percent stake in Hitachi Africa, the company awarded a boiler contract for the power station.

Meanwhile environmental groups such as Earthlife Africa Jhb argued that the coal-fired Medupi power station violated World Bank policies and posed threats of air pollution and high sulphur dioxide levels to communities living nearby.

In the World Bank's statement on Thursday, Obiageli K Ezekwesili, World Bank Vice President for the Africa Region said that without an increased energy supply, South Africans would face hardship for the poor and limited economic growth.

"Access to energy is essential for fighting poverty and catalysing growth, both in South Africa and the wider sub-region.

"Our support to Eskom combines much-needed investments to boost generation capacity for growing small and large businesses, creating jobs and helping lay the foundations for a clean energy future through investments in solar and wind power," he added.

In approving the project, the World Bank's board of executive directors noted South Africa's achievement in increasing energy access from around 30 percent of citizens to more than 80 percent since the fall of apartheid in 1994 and noted its Free Basic Electricity policy that provided 50 kilowatt hours of free electricity per month to poor families.

"The Board noted South Africa's pivotal role as generator of 60 percent of all electricity consumed on the African continent and the importance of a functioning electricity sector for job creation, economic progress, human welfare and poverty reduction."

Ruth Kagia, World Bank Country Director for South Africa said the Eskom project offered a unique opportunity for the World Bank Group to strengthen its partnership with the government of South Africa, Eskom, and other financiers "and help South Africa chart a path toward meeting its commitment on climate change while meeting people's urgent energy needs".

Source



www.timeslive.co.za
(visit the link for the full news article)

Off the top of my head these thoughts occured in this order:

A) We can build nuclear plants. Why do we need coal plants?

B) MEDIA CIRCUSS. All this has occured unseen while Juilius Malema has gaced the airwaves.

C) The US, Britain and the Netherlands all abstained. (All 3 have had more involvent in SA then any other Westerm countries)

D) This occured just after the SA media finally called for a media boycott of Jukius Malema.

F) We really don't need the money.

I find it incredibly suspicious that the media made as if we were going to go into civil war (it wont happen) at the same time as this was happening. The media created Malema and now they are only trying to shut him down after hi kicked up the dustcloud enough for them to not push this story.

[edit on 8-4-2010 by da_ruse]

Eskom Gets ‘Excellent’ Loan Rate of 0.5% Above Libor

By Nasreen Seria and Carli Lourens

April 9 (Bloomberg) -- Eskom Holdings Ltd., South Africa’s state-owned power company, negotiated an “excellent” interest rate on a $3.75 billion loan agreed with the World Bank yesterday, according to Investec Asset Management.

The loan is priced at 0.5 percentage points above the six- month London Interbank Offered Rate, plus an additional 0.24 percentage points that will vary depending on the cost to the World Bank of raising the funds, National Treasury Director- General Lesetja Kganyago, said in a phone interview today.

Eskom, which supplies 95 percent of South Africa’s electricity, will use the funds to build one of the world’s largest coal-fired plants. If the loan hadn’t been approved, Eskom would have been forced to sell an extra 25 billion rand ($3.5 billion) of bonds locally, putting pressure on bond prices, Andre Roux, head of fixed income at Cape Town-based Investec, said in an interview.

“It’s an excellent rate,” said Roux. “Libor is almost nothing at the moment. This is much better than they would have gotten locally. It’s important that this issue was done abroad and not in South Africa. The market wouldn’t have liked that.”

The loan needs to be repaid over 28.5 years, with Eskom given a seven-year grace period, according to the Treasury.

The 6-month Libor rate was at 0.45375 today, according to the British Bankers’ Association. By contrast, the yield on Eskom’s ES18 bond, due 2018, was trading at 9.145 percent today.

Funding Gap

Eskom sought the loan to help close a funding gap for a 460 billion-rand, five-year expansion plan aimed at preventing a repeat of power outages in 2008 that shut mines and factories. The utility plans to borrow 45 billion rand over the next three years and has raised electricity prices by 25 percent this year.

“South Africa generally and Eskom particularly have appreciated that, simply because of the sheer weight of funding demand, the burden of cost bearing can’t just fall on consumers, but that they must explore innovative measures such as World Bank lending as well as potential private equity participation,” Goolam Ballim, chief economist of Standard Bank Group Ltd., said in a phone interview from Johannesburg today.

The World Bank hasn’t set any conditions on the government’s economic policy as part of the loan, Kganyago said. This is the first major World Bank loan to South Africa since the end of apartheid in 1994. “This isn’t a structural adjustment loan,” Kganyago said. “There is nothing that impinges on economic policy. In our engagements with international financial institutions, we aim to protect the integrity of domestic economic policy formulation.”

Source

Related story Second Take: Climate politics and the World Banks loan

I'm not one for numbers, hard finance and economics. But this sounds very optimistic.

A) We can build nuclear plants. Why do we need coal plants?

We don't. The World Bank claims to not provide loans for nuclear power projects anywhere in the world, I presume that's why. They would rather have people die from coal. Eskom have shelved nuclear ambitions due to the investment required.

[edit on 9/4/2010 by C0bzz]

reply to post by C0bzz


It's still odd don't you think? I mean if they had brought Eskom to book years we would not have energy problems now and they should have been able to finance either a nuke generator or a coal plant through other means.

As for the Libor and all that can somebody with a better grasp of finance explain to me why they are trying to convince us we scored.

This coal plant they are going to build is 4,800 megawatt, 15% larger than the current largest coal powerplant, Kendal Power Station, also in South Africa. The Medupi coal plant started construction in 2007 - so it's not as if this is only happening now. The thing with Nuclear is that it is extremely capital intensive, and many previous reactors world-wide ended up significantly over-budget mainly due to NIMBYism and changing regulations. NPP's during the 1970's quadrupled in costs and as a result financing a nuclear project is extremely difficult.

South Africa had to cancel tenders for new nuclear power plants in 2008 because it could not obtain funding from international lending institutions for the plants. According to the World Nuclear Association, in 2007 Eskom, the state-owned electric utility that provides most of the power in South Africa, approved a plan to build 20 GWe of new nuclear capacity. The first units providing 4 GWe, roughly the same amount of power as the coal plant approved by the World Bank last week, would enter revenue service in 2016. The remainder of the reactors would be completed by 2025.

Areva and Westinghouse were short-listed in the bidding process. Both firms made promises for development of local manufacturing and supply chain facilities in South Africa to address the need for jobs. However, in December 2008, Eskom cancelled the bidding process due to lack of funds.

theenergycollective.com...

[edit on 12/4/2010 by C0bzz]

Great video. i must admit I sometimes forget that people totally freak at the very word nuclear.

I have long chosen to believe nuclear power was by far the cleanest and only really pose a threat IF and only IF they go into meltdown. I also had no idea that no one has built a NPP in so long.

But it makes you think. No one is terribly scared of the huge energy levels being pushed out by the Large Hadron Colider.

Also one would think Nuclear submarines pose a bigger threat than powerstations as the can be destroyed, or crashed easier.

Ok so you've definitely answereed my question as to why we can't build NPP's

But what about my question of whether we really need this coal plant? I know all to well about the effects the blackouts have on the economy, crime, industry and all that, but i'm convinced that was just a case of bad management.

I mean we could have just sent less power to our neighbours.
But I suppose that would have cut into profits.

Well, that's another vital facility in another country now owned by the global elite. Well done South Africa!


Seriously, when will they stop and think.

"In a statement, the World Bank said its board of executive directors had approved the loan "to help ANC achieve a reliable cash supply while also financing some of the biggest idiots & dictators in the developing world"."

this is how i red that article

I also had no idea that no one has built a NPP in so long.

Many have been built fairly recently, but the amount in construction is not even close to where it was a few decades ago. Newest reactors are Volgodonsk 2 (950 MW(e), PWR-VVER, Russia) - first grid connection on 18 March, and Rajasthan 6 (202 MW(e), PHWR, India) - first grid connection on 28 March. China wants 70 gigawatt by 2020 and has about 21 reactors under construction. Last year two reactors were closed, two entered service, but 11 started construction. That number increasing, but at the moment very little of reactor construction is in the west - it's all in Asia (with derivatives of Western reactors).

I have long chosen to believe nuclear power was by far the cleanest and only really pose a threat IF and only IF they go into meltdown.

Three Mile Island was pretty much the worst possible event with a western reactor, it was a meltdown. Radiation was released but it dispersed into the environment rather quickly, and caused no deaths. This is according to every single study except for one, which had its claims thrown out of court.

But what about my question of whether we really need this coal plant? I know all to well about the effects the blackouts have on the economy, crime, industry and all that, but i'm convinced that was just a case of bad management.

Reserve margin has gone down significantly and when plants go offline for maintenance load shedding occurs. Apparently if the SA grid were to go down it would take weeks to restart. These problems still exist even after they stopped exporting. It seems abundantly clear SA needs more capacity. It's obvious. Should it be coal? Coal is cheap. There is plenty of it. That's the problem with coal, it's environmentally destructive but so damned useful. Since Nuclear can't be financed, coal seems like one of the better options. I don't have any objections to the world bank financing projects like this, (I have objections to their views on Nuclear) because these projects have to get financed somehow. Where would they get the financing?

[edit on 13/4/2010 by C0bzz]

reply to post by da_ruse

I don't trust the World Bank to make smart decisions for the long-term survival of the planet. Many researchers have implicated their people in the current economic crisis, and many before this. Remember: Though touted as an agent for change in the developing world, it is basically a bank. It is there to increase the financial influence of its stakeholders, not solve the survival problems of the planet or its "sovereign" nations. Though is members are nominally national governments, who actually owns and controls its funds?

Excellent thread.

WRT nuclear, the what i recall is that the only nuclear option was a Pebble Bed reactor. Now why is what i don't understand, since the PBR is not the best tech available.

Giving us more coal stations is stupid. When you trace back, through road haulage and coal management, we've failed in every sense. The roads in that entire area are BROKEN. You cannot drive there, you need a 4x4 or a truck. They may have repaired some of the roads already since i was last there, but i guarentee that next rain season they'll break again, those roads were never designed for 24/7 heavy transport.

Despite having ample coal supplies, was it 2 years ago that wet coal was the reason for load shedding? Unacceptable.

Again the power issue is closely related to roads. Right now they have rebuilt JHB's main highways, but this is the thing: it was also done on loan. The tolling systems will initially pay back the loan. Critical infrastructure that the government is keen to highlight as a success, but did not ave the oney to pay for. This is after 15 years in office, raking in VAST sums of money through rates taxes etc. They spent almost nothing on maintenance (it's allvery badly decayed) and of which there is nothing left in the kitty?

How much money has the ANC taken out of the SA economy in 15 years? Only to take out world bank loans to prop up a current mirage of industry?
The single biest electricty user is that smelter (can't recall which, i think it's in Richards Bay), which pays les than a 10th of what we pay for power.

International corporates who are getting rich off SA's misery. I'm not even going to START about work quality. See Malemas engineering co.

WRT nuclear, the what i recall is that the only nuclear option was a Pebble Bed reactor. Now why is what i don't understand, since the PBR is not the best tech available.

Areva and Westinghouse submitted bids to Eskom for the EPR and AP1000 respectively. The PBMR is more advanced than both, but it was some years away and not in the same class as the EPR or AP1000. The EPR for example, has 12 times the thermal power of the PBMR. Currently the PBMR is having funding difficulties and the project might be taken over by Westinghouse. It's not even close to the best tech possible, but if it were completed today it would be one of the best nuclear technologies available. Best reactor possible is probably the Liquid Fluoride Reactor. A tennis ball sized piece of Thorium, Uranium, or Plutonium could give enough energy to supply 1100 Americans (including industry) for one year.

[edit on 13/4/2010 by C0bzz]

Thank you C0bzz, that makes it fairy clear.



Slightly Off topic:

Kader Asmal is one of the "grand old men" of the ANC. Impeccable struggle credentials etc.

From IOL:

Bullying and intimidation had become the style of political engagement in South Africa, with ANC Youth League leader Julius Malema its lightning rod, veteran ANC Professor Kader Asmal lamented last night.
In a hard-hitting speech at Unisa, he said political activism had become synonymous with an excuse for personal position, access and wealth.
"This is corruption of the most corrosive kind and must be tackled at root," he said.
The former cabinet minister warned that the constitution's core values, which had protected the country from calamity in the past, were being "chiselled away".
Asmal, who played a key role in drafting South Africa's democratic constitution, was speaking at a ceremony in which he received an honorary doctorate in law from Unisa.

He cited the re-militarisation of the police, with national police commissioner Bheki Cele in "military insignia"; the detention of a jogger by Zuma's bodyguards; and attacks on judges for unfavourable verdicts. Academic freedom, "the heart and life (of) an academic", had been "dangerously dismissed as the vehicle for counter-revolutionaries" - a reference to comments by Higher Education Minister Blade Nzimande. He also listed appointments to judicial and quasi-judicial offices, "that appear deliberately to change the nature of these organs" (a reference to Menzi Simelane's appointment as national prosecutions chief) and the ANC Youth League's threats against journalists who reported on Malema's business interests.

There's more. But i guess after you've read "After The Party" by Andrew Feinstein, wlel the writing is on the wall.

Thanks C0bzz really informed material from you here. You have most definitely made me realise how little I know of the subject.

So we do need the extra power. However I am still incredibly suspicious as to the world banks involvement and like harryhaler says I'm sure we wouldn't have needed intervention from the world bank had everybody refrained from lining there own pockets at every step of the process.

Does anybody know who the biggest stakeholders in the world bank are?
And what company is getting the contract for the construction of this plant?

From Moneyweb

JOHANNESBURG (Reuters) - South African electricity utility Eskom has awarded two contracts worth 31.5 billion rand for its Bravo project coal-fired power station to be completed by 2017, the group said on Friday. Eskom said in a statement it had awarded the 18.5 billion rand contract for the construction of the power plant's boilers to Hitachi Power Africa, a unit of Hitachi Ltd.
A 13 billion rand contract for the turbine island works was awarded to France's Alstom.

Hitachi SA is th company that Chancellor house (ANC) has if i recall a 25% stake in.
Alstom has been around for years. big offices out Boksburg way. I recall some funny business a while back with them, also related to govt contracts. Let me dig.

Bingo, courtesy of the Business Week: from March 24, 2010, 2:58 PM EDT

Swiss authorities are investigating Alstom employees in cases involving allegations that bribes were paid to gain contracts in Africa and South America. Alstom disputed the SFO’s characterization that the men were arrested.

Everybody is corrupt here.