August 14, 2008

SA's Eskom 'wants billions from World Bank'

State-owned power utility Eskom could look to borrow up to US$1-billion (about R7,7-billion) a year from the World Bank over five years as it adjusted its funding strategy to cope with ratings downgrades, Business Day reported on Wednesday.

These loans, backed by government guarantees, would be "by a very long way the largest yet extended by the World Bank to South Africa", as the government had always been reluctant to accept World Bank funding on any significant scale, the report read.

News of Eskom's talks with the World Bank emerged on Tuesday after rating agency Moody's downgraded Eskom's credit rating by four notches.

Eskom finance director Bongani Nqwababa told Business Day that Eskom was "rechecking" its funding strategy. It was likely to focus more on borrowing locally, from development finance agencies such as the World Bank and African Development Bank and from export credit agencies.

A World Bank spokesperson said the bank was "in an ongoing dialogue" with Eskom.

The crunch for Eskom was expected to be mainly in the next five to six years as it ramped up spending on its two new coal-fired power stations before they began to generate power and earn revenue from 2012, the report read.

Eskom had planned to borrow about 60 percent of the R150-billion it needed on foreign markets, but might leave that for later, borrowing only moderate amounts abroad for now and focusing more on the local bond market, Business Day reported. - Sapa