Reuters: South Africa’s Eskom to spend $23.5 billion on new plants

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South African power utility Eskom is not under pressure to tap international markets to help fund its 340 billion rand ($23.5 billion) five-year expansion plan, its chief executive said on Tuesday.

State-owned Eskom is building new plants and transmission lines to augment a power grid that nearly collapsed in 2008 and was forced to implement controlled blackouts, or load shedding, early last year that dented economic growth.

“Our funding for last year is complete and most of the funding for this year is done,” Eskom CEO Brian Molefe told reporters. “We never issue less than benchmark which is anything above $500 million, so it can be $750 million or $1 billion.”

He said the timing would depend on market conditions, adding that the successful pricing of a 10-year dollar bond by the National Treasury in April was a good sign.

Eskom is building three new power plants and expects to add 5,620 megawatts (MW) to the network by 2018.

Minister Lynne Brown, whose department oversees the power utility, told parliament that power supply had stabilised, adding that “for the longest of time South Africans have had their lights on and load shedding has become a distant memory”.

Brown said the rest of Africa was a key growth area, with Eskom eyeing new business opportunities this financial year in the Democratic Republic of Congo, Mozambique and Uganda.

Brown also said Eskom, which provides virtually all the electricity to Africa’s most industrialised economy from coal-powered plants, has been paying above inflation prices to secure coal, despite being the main buyer of the commodity.

“Eskom coal costs have been growing above inflation levels,” she said, adding that she hoped the cost could come down.

Eskom gets 51 percent of its coal from global miner and commodity trader Glencore, Exxaro, South32 and Anglo American.

To help reduce the cost of coal for Eskom, CEO Molefe said the utility was busy renegotiating its long-term coal contracts.

Eskom was also investigating whether it could lay claim to some of the mine assets of its coal suppliers, given the utility had helped to pay for the operations of their mines as part of historical contracts, he said.

Source: Reuters