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Africa

Eskom lands ZAR20bn loan from AfDB, international lenders

Eskom has secured three loan facilities with the African Development Bank (AfDB) worth ZAR20bn (US$1.4bn) in a bid to boost spending on infrastructure maintenance and skills development. The deal comes months after it secured a smaller facility from the New Development Bank.

Jul 8, 2016 // 10:43AM

The AfDB provided the South African utility company with a US$365mn unguaranteed senior unsecured loan, provided in rand equivalent to ZAR5bn, and US$10mn guaranteed A-loan.

The senior unsecured loan and the A-loan are payable over 20 years, both with a 2-year grace period from the date of signing. The principal debt on the B-loan will be settled five years from the signing date, the company said in a statement.

In addition to the US$365mn and US$10mn facilities, the AfDB also arranged a US$965mn guaranteed syndicated B-loan facility that saw participation from nine commercial lenders: Bank of China, Bank of Tokyo-Mitsubishi, Caixa Bank, Citibank, HSBC, JP Morgan Chase, KfW IPEX Bank, Siemens Bank, and Standard Chartered.

“The African Development Bank continues to be a significant partner and a key contributor to the progress achieved by Eskom in the execution of the current build programme. We are particularly grateful for the continued support in a time when Eskom has made major advancements in achieving operational and financial sustainability and expediently completing the build programme,” said Brian Molefe, Eskom’s Group Chief Executive in a press statement.

“These facilities are a demonstration of the Bank’s mandate to contribute to the economic development and social progress of African countries.”

The funds will be used to expand Eskom’s infrastructure maintenance spend, including a skills upgrading programme set up by the utility last year.

The deal comes just months after Eskom secured a US$180mn (ZAR2.6bn) facility from the New Development Bank (formerly BRICS Bank), the proceeds of which were used to construct transmission lines connecting 500 megawatts of renewable energy provided by Independent Power Producers (IPPs) to the national grid.

In an interview with Bonds & Loans earlier this year, Eskom CFO Anoj Singh said DFIs would play an increasing role in the company’s funding diversification strategy, but said that South African DFIs are already heavily exposed to the company – prompting it to look further afield, particularly to Asia.

“We have a very deep domestic market and we issue bonds in South Africa under the domestic MTN R150bn programme. Other sources include the World Bank, the African Development Bank (AfDB), and other DFIs – like the China Development Bank (CDB). They are supporting us through the BRICS initiative, and a cooperation agreement signed between the South African and Chinese government,” he said at the time.

“Through that initiative we have a US$5bn Memorandum of Understanding (MoU) with CDB which we will hopefully conclude within the next six months and convert into a facility. Since that agreement was penned, other DFIs have started coming back to the table – which is helping with our diversification strategy. ECAs also form a big component of our capital raising programme; there are significant benefits to partnering with ECAs for a credit enhancement.”

Africa Projects & Infrastructure Deals

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