China Development Bank provides $1.5 billion loan to Eskom for 4800MW Medupi Power Plant Project (Linked to Project ID#52560)

On July 6, 2017, China Development Bank and the Electricity Supply Commission (Eskom) — South Africa's state-owned electric power company — signed a $1.5 billion (ZAR 20 billion) loan agreement. The loan is payable over a 15-year period and it has a five-year drawdown period. Its estimated interest rate is 3.7149%. The Government of South Africa issued a sovereign guarantee in support of loan. By the end of 2022, the loan’s estimated disbursement rate was 83.62%. The purpose of the project was to construction Medupi Power Plant (Medupi 发电厂项目) in Lephalale, Limpopo Province. The plant consists of six units (boilers) with a total capacity of 4800 MW. The project also involved the construction of the Ngwedi substation. The project’s total estimated cost is $11.31 billion. Hitachi, Alstrom, and WSP Global were the contractors responsible for project implementation and management. The first structural concrete was poured on July 18, 2008. The Ngwedi substation transformer was officially commissioned in December 2016. By July 2017, Unit 1 was at full production capacity and Unit 2 was close to full capacity. In June 2019, Eskom reported that Unit 3 had reached full load on May 16, 2018 (796MW) and was first synchronized to the national grid on April 8, 2018. Unit 3 followed Units 6, 5 and 4, which have been commercially contributing electricity to the national grid since August 23, 2015 (U6), April 3, 2017 (U5) and November 28, 2017 (U4). The power plant achieved commercial operation status on July 31, 2021. There are some indications that the CDB loan for the 4800MW Medupi Power Plant Project may have underperformed vis-a-vis the original expectations of the lender. In February 2019, the CEO of Eskom was asked the following question by a reporter: 'Can you indicate and comment in general terms on the World Bank, DBSA, China Development Bank and other DFI loan covenants, and what may be considered a breach, such as failure to meet required going concern status, debt service coverage ratio and/or other metrics?' He responded that 'I am cautious not to breach the confidentiality of the lenders, but generally speaking, the going-concern status of Eskom is informed by normal credit metrics — interest cover, debt service cover, and so on. When we do find ourselves in a situation where we will not meet these requirements, many of the terms do allow us to put forward an action plan on how it’s going to be resolved.' Then, in February 2023, South Africa’s National Treasury announced that it would would take on ZAR 254 billion ($14 billion) of Eskom's ZAR 423 billion debt that was at risk of default, to enable the state-owned power utility to pay down its principal and interest obligations.

Additional details

1. This project is also known as the 6X794MW Medupi Coal Power Plant Expansion Project. 2. The annual financial statements of Eskom demonstrate that the China Development Bank disbursed $3,763,000,000 to Eskom between 2017 and 2022 (under the $1.5 billion loan agreement captured via Project ID#58385, the $2.5 billion loan agreement captured via Project ID#58379, and the $500 million loan agreement captured via Project ID#52560): a $500 million disbursement in 2017, a $650 million disbursement in 2018, a $900 million disbursement in 2019, a $938 disbursement in 2020, a $455 million disbursement in 2021, and $320 million disbursement in 2022. These figures imply an average loan disbursement rate across the three CDB loans of 83.62%. 3. The loan's interest rate (3.7149%) is recorded in the World Bank's Debtor Reporting System (DRS). See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 and https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0

Number of official sources

20

Number of total sources

32