Eskom turns to private sector and foreign investors for R390 billion grid expansion

South Africa’s state-owned power utility Eskom said it’s in talks with government ministries over private and foreign options to fund a R390 billion expansion of its transmission network as more renewable generation comes online.

Eskom supplies more than 80% of electricity to the continent’s most industrialized nation and has failed to meet demand, resulting in blackouts that have crippled the economy.

The utility also owns, manages and maintains the transmission system and plans to build 14,218 km of power lines over the next decade, more than three times what it has installed over the past 10 years. 

The company is holding “ongoing discussions with key government ministries on the funding of South Africa’s transmission capital-expenditure requirements” that include the potential use of money pledged by rich nations toward an energy transition and another option to tap private sources, the utility said in an emailed response to questions.

Foreign nations have pledged more than $9 billion in climate financing to South Africa through the so-called Just Energy Transition Partnership in 2021.

France, Germany, the US, UK and European Union offered the money to help South Africa move away from coal, which is currently the source of more than 80% of the nation’s power. 

Political infighting and lobbying from businesses that profit from the use of coal have beset the JETP, a prototype for similar agreements with Indonesia, Vietnam and Senegal.

Eskom needs permission from the National Treasury to take on new debt as a condition of the latest bailout provided to the utility.

The government will transfer R76 billion in this fiscal year and R64.2 billion in the next to the utility, the Treasury said in its February budget review. 

Eskom declined to indicate whether it intends to seek that permission. The utility “will update the market as and when definitive decisions are made” over the options, it said.

Electricity Minister Kgosientsho Ramokgopa said in February that a process to establish an independent transmission project office to bring in private-sector participation and fast-track the procurement, planning and financing of the grid is underway. 


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