THE head of South Africa’s troubled Eskom power monopoly said it was seeking a deal at the UN COP26 climate summit to borrow more than $30bn in concessional lending to help close its ageing coal plants and make the switch to renewables.
André de Ruyter, chief executive of the utility that generates nearly all the electricity in Africa’s most industrialised economy, said the proposed lending facility would be “multiyear, multi-lender, multi-tranche on a ‘use it or lose it’ basis”.
While he did not say who would provide the finance, European Commission president Ursula von der Leyen confirmed on Thursday that the commission, the UK, US, France and Germany would sign a “just energy transition” partnership at COP26 to help South Africa phase out of coal.
The pact is the first of its kind where richer countries would provide financial and technical support for a developing world polluter to accelerate the shift to renewables.
“This partnership could become a template in how to support the just transition around the globe with sponsoring countries and countries that have to move faster in the just transition,” said von der Leyen.
As the host of the UN meeting in Glasgow, the UK government has been pushing for plans to be unveiled at the summit that will wean major developing countries off coal in line with global pledges to end the use of the fossil fuel.
South Africa, the world’s 12th-biggest carbon emitter, is already facing the prospect of closing major parts of Eskom’s coal fleet and investing in new renewable power capacity faster than planned as the advanced age and recurrent defects of the plants lead to frequent rolling blackouts.
De Ruyter admitted that Eskom’s goal of $30bn to $35bn over 15 years to finance the decommissioning of 22 gigawatts of coal power and build up replacement renewable sources and grids was “a very large amount of money”.
Eskom had “significantly strained” finances to fund the green transition on its own, he conceded.
The utility has heavy debts of R400bn ($26.6bn) that have left it reliant on regular government bailouts after years of corruption and waste.
Recommended Martin Wolf What is the least we need from COP26? De Ruyter said he had the backing of South Africa’s president Cyril Ramaphosa to pursue the proposed loans, although senior figures in the ruling African National Congress, notably Gwede Mantashe, the energy minister, had expressed their doubts.
“There may be some apprehension and some questions on this move away from coal — that’s to be expected,” said de Ruyter.
But Ramaphosa’s cabinet has endorsed the plan, which the Eskom chief said could create thousands of jobs, including through renewables manufacturing. On the question of whether global lenders may be reluctant to commit to a long-term loan facility up front, he replied:
“We understand that, but that’s why we feel this partnership approach is the best way forward to mitigating carbon emissions”, as confidence could be built up through initial projects.
It was also much cheaper to finance developing countries such as South Africa to remove carbon emissions from their economies than in the developed world, where the fossil-fuel production that was easiest to shut down had already closed, de Ruyter added.
“Our cost of carbon mitigation is a fraction of what it is in the countries where the cheap carbon has already been removed,” he said.
“You should spend your money where you get the biggest bang for your buck.”
- Financial Times
