Eskom told the Mail & Guardian it had only received a R9 billion World Bank loan to decommission its coal-fired Komati power station. (Waldo Swiegers/Bloomberg via Getty Images)
Eskom is yet to receive the money pledged by the International Partners Group (IPG) — the United States, Germany, France, the United Kingdom and the European Union — at the climate change conference in 2021 to fund South Africa’s transition to cleaner energy sources.
The original $8.5 billion pledged at COP26 — most of it loans but a small fraction being grants — has increased to $11.596 billion (R220 billion) with additional commitments from countries such as Denmark and the Netherlands.
This week Eskom told the Mail & Guardian it had only received a R9 billion World Bank loan to decommission its coal-fired Komati power station in 2022.
“Eskom’s JET [just energy transition] projects at Komati are funded through a combination of debt and grants from the World Bank. The national treasury was instrumental in securing this loan and provided sovereign guarantees required to conclude the process,” the state-owned utility said.
It said some of the money had arrived in South Africa but “there have been no direct transfers from the national treasury for any of Eskom’s JET projects”.
The money is also intended to help South Africa expand its grid capacity to allow for the connection of new renewable energy. The shortage of grid capacity is a major hurdle to ending load-shedding.
The Integrated Resource Plan, the country’s energy blueprint, suggests that South Africa needs R390 billion to extend transmission lines to 14 000km by 2032 from the 4 300km Eskom currently has.
But the utility’s weak balance sheet means it cannot afford the grid expansion. Eskom’s financial statements show that its debt ballooned to R423 billion in 2023 from R396 billion the previous year.
The utility has also been bound by debt relief conditions imposed by Finance Minister Enoch Godongwana last year that prohibit it from taking on more loans for three years unless given written permission by him. This may explain the treasury’s reluctance to release the just transition funds.
Acting chief executive Calib Cassim previously told the M&G that Eskom could not afford to take any more loans and would rely on investments to service its debt.
In a statement last December the UK said the treasury’s decision meant the Just Energy Transition Partnership (JETP) loan agreement transfer methods needed to be reconsidered.
“2023 also saw the minister of finance introduce important debt relief measures for Eskom, which include a borrowing moratorium on the power utility for three years, requiring reconsideration of deployment mechanisms for a number of JETP loan facilities,” it said.
A source close to the negotiations with IPG partners said this had led to their hesitancy to release more money to Eskom before the end of the three-year period.
Electricity Minister Kgosientsho Ramokgopa has approached other countries, including China, to come to South Africa’s aid on grid expansion through skills and equipment.
The slow progress of the just energy transition has highlighted the difficulties in shifting to cleaner energy and the need to support people who will be affected by this. A case in point is the Komati community, which has suffered many job losses.
The uncertainty of the money coming has intensified calls for private investment, Eskom said.
In his budget speech on Wednesday, Godongwana said the government had raised $3.3 billion in loans from multilateral development banks and international finance institutions to support climate change, energy and just transition objectives.
Another source close to the negotiations with the IPG partners said the reluctance by Eskom to take in more debt meant that South Africa risked not getting more funding while Vietnam, Indonesia and China were making headway with their own transitions.
“Unfortunately, we get to watch those countries progress and receive the money faster than South Africa because they communicate with the funding partners. The reality is that we risk losing out on the funding because all the countries are pulling from the same hat,” the source said.
Eskom said it was planning for the closure of power stations such as Grootvlei, Camden and Hendrina, learning from the effect on people after Komati’s closure.
While waiting for funds, the utility said it planned to help local residents through activities that promoted economic growth, job creation and skills development. To date, it has completed a facility at Komati that will train people and incubate new businesses centred on agricultural activities such as aquaponics and mushroom farming under photovoltaic (PV) panels.
“There are many other initiatives in the advanced stages of development, including the 100 megawatts PV plant with 600 MWh battery energy storage system where we will engage the market on a commercial basis within the next few months for the construction of this facility,” Eskom told the M&G. The construction is expected to employ about 3 000 people living in Komati.
Eskom has recently completed a factory to manufacture and assemble 200 microgrids — a self-contained power system that generates, stores, and distributes electricity locally — through the World Bank.