Financing Investments in the Energy Sector

Energy Plant
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Energy Plant

This report considers trends and developments in the financing of coal-fired power in South Africa in the context of the South African government’s policy framework for a transition to a low-carbon economy. The purpose of the report is to explore the investment trends around coal to improve understanding of the policy interventions that are required to assist South Africa transition to a low carbon economy.

The power sector in South Africa is dominated by state-owned power utility Eskom, which generates around 95% of South Africa’s electricity. As a result, energy finance is inextricably linked to Eskom’s financing. Shareholder equity and revenue are important contributors to Eskom’s overall financial sustainability, but Eskom’s R350bn capital expenditure programme is largely being funded through debt finance from local and international bondholders, development finance institutions (DFIs) and export credit agencies. While there has been a significant shift away from domestic and international bonds to funding from DFIs and financing from export credit agencies in recent years, institutional investors such as pension funds and insurance companies still hold significant positions in Eskom bonds.