The risk of South Africa’s struggling state power utility going bust doesn’t appear to faze one of its biggest creditors – the World Bank.
The Washington-based lender agreed to lend Eskom Holdings $4-billion almost a decade ago to boost its generation capacity and avoid a repetition of rolling blackouts. Mismanagement and construction cost overruns have seen the state of the utility’s finances going from bad to worse since then, forcing the government to bail it out. Details of a R230-billion rescue package are due to be unveiled soon.
“We are encouraged by efforts of the government of South Africa to support Eskom and assurances that it will not to allow it to fail,” the World Bank said in an emailed reply to questions.
Under its Eskom Investment Support Project, the World Bank agreed to lend the utility $3.75-billion, including $3.1-billion to help it complete its new Medupi coal-fired plant, $260-million for wind and solar power projects and $485-million to develop a railway to transport coal and other projects. Eskom has drawn down 82% of that funding, and 21% of a separate $250-million loan to boost green energy production.
While construction of the 4 764 MW Medupi project is running years behind schedule and way over budget, the World Bank said it was “assured by Eskom’s commitment to complete the project,” and that it continued to work closely with the utility on its implementation.