What happened to the BRICS Bank's R8.5bn Medupi loan?
Questions linger
The loan, worth about R8.5 billion, has been cancelled.
The New Development Bank's (NDB) US$480 million - about R8.5 billion - loan to help Eskom reduce environmental impacts at Medupi has been cancelled.The bank, established by the founding BRICS nations in 2015, confirmed this in a set of documents issued to journalists at its ninth annual meeting, held in Cape Town last week. It last week also approved an R18 billion loan to improve water and sanitation in South Africa, as well as a R5 billion loan to assist Transnet in its recovery programme.
According to vice-president and chief operations officer of the bank, Vladimir Kazbekov, the total South African portfolio amounts to US$6.8 billion (about R120 billion). The bank funds 140 projects across developing nations – totalling US$33.8 billion or about R600 billion.
Asked why the loan was cancelled, Kazbekov said that it was part of "standard procedure" of the NDB. "If not started, it is easier to be cancelled. Simple answer."
Kazbekov added that the bank's South African portfolio was "robust", covering areas such as renewable energy and water. It also extended the country a US$1 billion loan to help manage the impacts of the Covid-19 pandemic in 2021.
Approval lapsed
In separate responses to News24, it appears Eskom was delayed in executing the project, which meant the approval lapsed. "This was due to challenges experienced in advancing the project, which went beyond the period allowed for the NDB to keep the commitment ongoing," Eskom said.
"NDB processes are such that funds must be reallocated to other investment(s) if implementation of the [flue-gas desulphurisation] project is stalled," it added.
Eskom said delays were caused by the fact that the project was to be funded off its balance sheet. The processes to plan and provide the capital expenditure required, as well as internal discussions, due diligences and approvals, took longer than anticipated, it explained.
The Medupi loan was approved by the NDB in March 2019 and was aimed at financing flue-gas desulphurisation (FGD) technology at the plant, which is needed to reduce harmful sulphur dioxide emissions from entering the atmosphere.
Project documents indicate that the six FGD units were to be fitted to Medupi and would reduce sulphur dioxide emissions from 3 500mg/m3 to below 500mg/m3 from 2026 onwards.
Significant delays
Eskom, over the years, has applied to the department of forestry, fsheries and environment (DFFE) for postponements to comply with minimum emission standards (MES) and sought alternative limits for various plants that are to continue operating beyond 2030, including Medupi.
This year, former environment minister Barbara Creecy upheld the national air quality officer's decision to reject this. "In relation to Lethabo, Matimba and Medupi, the alternative limits applied for in respect of certain pollutants exceed existing plant standards which is not permissible," Creecy noted in her decision report issued in May.
In its application, Eskom stated it would be required to comply with the MES of 1 000mg/Nm for sulphur dioxide from 1 April 2025. This was based on previous planning that Medupi would have FGD installed at each unit by 2026.
"Unfortunately, there have been significant delays in the implementation of the project and in confirming funding," Eskom said in the application. The power utility added that it was considering an alternative approach, which involved its just energy transition strategy, and that it is also investigating "less costly" sulphur dioxide reduction technologies.
Ultimately, in her decision, the minister directed Eskom to submit exemption applications for Medupi and the other stations (Matimba, Lethabo, Majuba, Matla, Duvha and Kendal). "These exemption applications would include requests for limits different from those defined in the MES where necessary. Eskom has been given until 10 December to submit these exemption applications," Eskom said in response to questions.
"For the stations operating post-2030, the minister has provided Eskom with a way forward, which Eskom is pursuing," it added.
Looking ahead
Looking ahead, Eskom said the FGD would be retrofitted to Medupi's completed units.
"Construction is projected to commence from the fourth quarter of 2026 and planned for construction completion by the third quarter of 2030, followed by commissioning," it said.
The NDB was to provide US$480 million, or 17% of the total cost, which was previously estimated to be US$2.7 billion. But Eskom said the final amount has yet to be determined after the completion of an enquiry process from the market.
It added that the NDB and other financial institutions have still expressed interest, once the project is ready for execution.
-FIN24-