Questions have been raised on how parastatal Eskom plans to use a short-term loan to fund the company's long-term capital projects.

Energy analyst and publisher Chris Yelland said it sounded very strange that Eskom would use an overdraft facility to fund capital projects with a lifespan of between 30 and 50 years.

"It is like using your overdraft facility to buy a house. This does not make sense because an overdraft facility could be called by a bank at any time," he said.

Yelland spoke after Eskom and China Development Bank (CDB) yesterday signed an inaugural credit facility worth R7-billion.

Eskom chief executive Brian Molefe told Sowetan the credit facility would be like an overdraft, which the parastatal will tap into when needed.

Eskom will receive the US-dollar dominated credit facility while the rand has been fluctuating against the US currency.

"This loan will also aid us in ensuring that we complete the current capital expansion programme and further stabilise Eskom's liquidity position," said Molefe.

He declined to reveal the interest rate of the three-year loan, saying it was competitive and market related.

Yelland said: "It appears that the loan does not help Eskom's long-term funding requirement, but the facility could help Eskom with its working day capital. The fundamental principles of finance state that long-term projects should be funded by long-term debt."

Describing South Africa as the leader of Africa, CDB chairman Hu Huaibang said the bank would intensify financial support to domestic companies.

"CDB is the largest policy bank and largest infrastructure financier in China and I hope both Eskom and CDB will work together to strengthen relations between China and Africa," he said.

Eskom chief financial officer Anoj Singh said the conclusion of the credit facility brought funding secured for the current financial year to R51-billion, "meaning we have secured 75% of our R69-billion funding requirement".

sibanyonim@sowetan.co.za