South African power utility, Eskom, signed loan facilities with the African Development Bank (AfDB) last week for the sum of $1.34 billion towards the utility’s capital expenditure programme. According to the Bank, this agreement falls within it’s New Deal on Energy for Africa, to achieve universal access to energy by 2025.
Capital expenditure programme
The AfDB explains that the the power company’s 2016-2020 capital expenditure programme includes investments in new generation, plant refurbishment, transmission lines, and capacity building in excess of $17 billion, which will assist in mitigating the need for load shedding.
The Bank claims that this will help boost electricity generation in Africa by nearly 10%.
“Leveraging its AAA-rating, AfDB has arranged $965 million through participation arrangements with nine commercial banks, which include: Bank of China, Bank of Tokyo-Mitsubishi, CaixaBank, Citibank, HSBC, JP Morgan Chase, KfW IPEX Bank, Siemens Bank, and Standard Chartered,” the Bank said in a statement.
It added: “The operation represents the largest syndicated A/B Loan arranged to-date in Africa and an important milestone for AfDB’s cross-border mobilisation efforts. By 2020, Eskom’s capital expenditure programme is expected to increase South Africa’s electricity generation by nearly 11,000MW and expand its transmission network by over 9,500km.”
Investing in transmission
“Following the success of South Africa’s Renewable Energy Independent Power Producer Procurement (REIPPP) programme, which is expected to increase electricity generation by a further 5,000MW by 2019, AfDB’s investment will be partly directed at the construction of the transmission network required to evacuate power from South Africa’s IPP programmes,” the Bank said.
Stefan Nalletamby, acting vice-president for private sector, infrastructure and regional integration at the AfDB, commented: “South Africa has the third most attractive renewable energy market across emerging markets (behind China and Brazil) and this programme, spearheaded by the South African Department of Energy, is an example of how to approach green growth in Africa.”
South Africa trades approximately 5% of its energy capacity with neighbouring countries in the Southern Africa region. While the country imports electricity from Mozambique, South Africa is a net exporter of energy to Zambia, Lesotho, Swaziland, Zimbabwe, Botswana and Namibia. Moreover, Eskom is considered to be a major ‘anchor’ to upcoming regional energy projects, including Inga III.
AfDB President Akinwumi Adesina said: “By expanding electricity generation, AfDB seeks to support industrialisation and job creation, with the principal objective of improving the quality of life for the people of South Africa and the larger region.”
According to the Bank, this agreement represents AfDB’s second private-sector operation with the South African parastatal, which builds on its $500 million non-sovereign corporate loan approved in 2008. The Bank added that since 2008, it has also extended three public sector loans to Eskom with funds in excess of $1.35 billion, including funding from its Clean Technology Fund.
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