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

Project narrative

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. The loan’s estimated disbursement rate was 83.62% in 2022 and 88% in 2023. 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.