Eskom official sees World Bank loan decision in H1 2010

JOHANNESBURG (Reuters) - South Africa's power utility Eskom expects the World Bank to make a decision on a loan programme of up to $5 billion in the first half of next year, a senior company official said on Monday.

The utility has embarked on a 385 billion rand power supply expansion programme, to enable it to meet fast-rising demand in Africa's biggest economy.

In December last year a senior IFC official said the World Bank had agreed in principle to lend Eskom up to $5 billion for the expansion programme.

Earlier this month the World Bank said on its website Eskom had applied for the initial 3 tranches of the loan, amounting to $3.75 billion, to fund projects at its Medupi power station as well as renewable energy and low-carbon energy efficiency programmes.

"The target is still $5 billion but at this stage our loan application thus far is $3.75 billion. The steps that we are in at the moment is that the World Bank has published the loan application and they invite comments from stakeholders," a senior Eskom official said on Monday.

"We would expect that the decision would be coming through, we hope in the first half of next year, but it still is a long time to go."

Eskom has been rationing electricity since early 2008 when the national grid nearly collapsed, forcing mines and smelters to shut and costing South Africa billions of dollars.

The government says it is looking at ways to help the utility bridge its funding gap without resorting to annual tariff increases of 45 percent over the next 3 years which Eskom applied for in September.

Critics say increases of that magnitude would stoke inflation and force key industrial companies to shut parts of their operations.