$11b green-energy initiative taking shape in South Africa

Bloomberg

A plan to establish the world’s largest green-energy financing initiative is being threshed out in South Africa, which needs to reduce its environmental footprint and find innovative ways to fund debt-stricken state power utility Eskom Holdings SOC Ltd.
The plan being formulated by Meridian Economics, a Cape Town-based think tank, is under consideration by the government. It envisions the establishment of an $11 billion facility backed by development finance institutions and private funders. The new entity would lend money to Eskom at slightly below commercial rates on condition it accelerates the closure of polluting coal plants to make way for renewable energy.
South Africa is the world’s 14th-largest producer of greenhouse gases and the government is under pressure to deliver on a commitment it made in 2009 to reduce emissions by 42% by 2025. Under the new plan, the country would add an additional 10 gigawatts of renewable-energy production capacity over a decade, thereby reducing its potential carbon dioxide emissions by 715 million metric tons by 2050.
“This would be the largest and most significant global climate finance transaction to date,” Emily Tyler, a climate economist at Meridian, said in an interview. “It would propel South Africa to a cleaner and more resilient energy future.”
Eskom supplies about 95% of South Africa’s power and has turned to the government for aid to remain solvent after amassing 450 billion rand ($31 billion) of debt. Under the plan, it would secure loans in tranches from the new facility over five years and have to repay them over 20 years. The money would be used to wean Eskom off bailouts and cover its future financing needs, rather than fund new and already self-sustaining green energy projects.
Implementation of the plan would be contingent on the government following through on a commitment to break up Eskom into generation, transmission and distribution units under a state holding company and reorganizing its debt to place it on a more sustainable footing.
The new entity would utilise most of the difference between the cost of the concessional funding it secures and the price it charges Eskom to finance a so-called transition fund. It would focus on creating jobs and promoting development mainly in the eastern Mpumalanga province, where most of Eskom’s plants are located. It would also contribute to state coffers in the form of a carbon payment.
The establishment of the transition fund could help win backing for the plan from labour unions, which oppose coal-plant closures and Eskom’s breakup on the grounds there will be job losses. The unions played a key role in helping President Cyril Ramaphosa win control of South Africa’s
ruling party in late 2017.
Several large development finance institutions, climate funds and philanthropic organisations have expressed initial interest in participating in the initiative, Tyler said, without identifying them.
Discussions on the green funding proposals are at an early stage and it would be premature to comment on them at this stage, said Ismail Momoniat, a deputy director-general at the Treasury, which is assessing the plan.
Meridian is headed by Grove Steyn, a member of a government task team set up to advise on a resource plan for Eskom. The green energy initiative was included in the team’s report submitted earlier this year, but the details have since been refined.

Zambia May Double Electricity Prices
Zambia, Africa’s second-biggest copper producer, may double power tariffs as the government seeks more costly imports to offset a shortfall from its drought-stricken hydropower dams.
The southern African nation has an electricity deficit of more than 700 megawatts, about a quarter of total capacity, and wants to buy 300MWs from South Africa, Energy Minister Matthew Nkhuwa told reporters in Lusaka, the capital.
“I think it will be maybe double the amount, because we are paying half the amount that we are supposed to pay for electricity in Zambia,” Nkhuwa said when asked about the price increase. Zesco Ltd. the state-owned utility, is still determining the proposed new tariffs for consideration by the cabinet and a final announcement will be made “soon.”
The increase will fuel inflation, which in August rose for a fifth straight month to the highest level since 2016. A fall in farm output, which is also due to the worst drought in almost four decades in parts of the country, has already stoked consumer prices. And the spike in oil prices after the weekend attack on Saudi Arabia’s biggest oil plant will prompt a fuel price increase in Zambia, Nkhuwa said.
Zesco in March asked the energy regulator to more than triple tariffs, but the government rejected this. The last increase was 75% in 2017.