The Multilateral Investment Guarantee Agency (MIGA), a subsidiary of the World Bank Group has announced its pledge to support South Africa’s power utility, Eskom, with loans to avoid load-shedding.

On Wednesday eNCA reported that the international financial institution, which offers political risk insurance and credit enhancement guarantees, stated that the funds would also pave the way for the integration of renewable energy into the country’s grid.

New transmission lines

“This financing will add approximately 255km of new transmission lines resulting in around 4,665 megawatts per year of power transmitted.

“These enhancements are needed [as they] remove bottlenecks in the execution of the government’s electrification agenda, including procurement of new independent power producers for renewable projects,” the bank said.

The executive vice president and chief executive of MIGA, Keiko Honda, commented: “The reality is that South Africa’s power system will remain constrained until new generation fleets and transmission lines come online. MIGA is doing its part to contribute to this massive and urgent effort.”

MIGA financing deal

According to the media, MIGA highlighted that the pledges of €698.9 million ($7.9 billion) will provide coverage for Deutsche Bank and Mizuho Bank against the risk of non-honouring of sovereign financial obligations for up to 15 years.

[quote]Commenting on the deal, Eskom’s CEO, Brian Molefe, said: “MIGA’s credit enhancement has allowed us to secure euro-denominated funding for longer tenors and on more favourable terms.

“We’re very pleased to have MIGA’s support for this complex financing that is so crucial to the country’s development.”

Ana Afonso Dias Lourenço, the executive director for the constituency of Angola, Nigeria and South Africa at the World Bank Group, reiterated the importance of the deal: “Given Eskom’s role as the dominant vertically integrated power utility in South Africa, I cannot overstate the impact of this financing on the lives of South Africans and their businesses.”