Johannesburg — ESKOM could look to borrow up to $1bn a year from the World Bank over five years as it adjusts its funding strategy to cope with difficult global markets and ratings downgrades.

These loans, which would be backed by government guarantees, would be by a very long way the largest yet extended by the World Bank to SA as the government has always been reluctant to accept World Bank funding on any significant scale.

News of Eskom's talks with the World Bank emerged yesterday after rating agency Moody's downgraded Eskom's credit rating by four notches, a move likely to raise the cost of the R150bn it planned to borrow on local and international markets over the next five years to help fund its build programme.

Eskom finance director Bongani Nqwababa said Eskom was "rechecking" its funding strategy and likely to focus more on borrowing locally, from development finance agencies such as the World Bank and African Development Bank and from export credit agencies.

A World Bank spokesman said yesterday the bank was "in an ongoing dialogue" with Eskom, but that was all it could say now.

The crunch for Eskom is expected to be mainly in the next five to six years as it ramps up spending on its two new coal-fired power stations before they start generating power and earning revenue, from 2012. The World Bank could also help with short-term overdraft-type facilities Eskom could draw on if it needed cash.

Eskom had planned to borrow about 60% of the R150bn on foreign markets, but might leave that for later, borrowing only moderate amounts abroad for now and focusing more on the local bond market. Its bankers are putting together a foreign syndicated loan. It is also in talks with the German export credit agency on a € 700m deal related to boilers Hitachi Europe will supply to its new coal-fired power stations.

The Moody's downgrade came after the National Energy Regulator of SA agreed to a 27,5% tariff rise for the current year and indicated tariffs would continue to increase by about 20% a year over the next four years.

It also followed the treasury's announcement last month that it would fast-track disbursement of R60bn of fiscal support to Eskom, and would consider providing guarantees "to enable Eskom to access funding otherwise not available".