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The financial agreement is valid for a 25-year period and will be used to facilitate developments in grid strengthening, refurbishment, reliability improvements, minor reticulations, split metering and upstream grid reinforcement for renewable energy.

On Monday, South African state-owned power utility Eskom and the Agence Française de Développement (AFD), a public financial institution that implements the policy defined by the French Government, signed a €150 million ($159 million) credit facility agreement, which will be used towards financing the utility’s distribution projects in the KwaZulu-Natal, Eastern Cape and Limpopo provinces.

Power utility: Conditions of contract

The financial agreement is valid for a 25-year period, which includes a five-year grace period and 20 years of capital repayment, the utility highlighted in a statement.

The funds will be used to facilitate developments in grid strengthening, refurbishment, reliability improvements, minor reticulations, split metering and upstream grid reinforcement for renewable energy.

Developing long-term partnerships

With efforts to bolster industry partnerships to strengthen the country’s power situation, Eskom has entered into a tripartite financial partnership agreement with Électricité de France (EDF), an integrated electricity company, and AFD. The funds are amounted to €450,000 ($478, 219).

According to the power utility, the portion provided by the AFD is in the form of a grant, which the utility highlighted as being the first grant for which Eskom is the key beneficiary.

The utility said in a statement that because they are one of AFD’s largest partners in Africa, they are eligible for grant funding from the Technical Expertise Fund, which was established by the French Ministry of Finance.

“The grant will finance a knowledge exchange and expertise from EDF on various areas specific to power utilities ranging from distribution to renewable energy integration, and key recommendations to improve its performance in terms of system efficiency and reliability,” the power company said.

The key objective of this partnership is knowledge, experience and expertise sharing between the two utilities.

EDF South Africa Managing Director Fawzi Issa said: “Over the last 30 years, EDF and Eskom have progressively built fruitful partnership relations in [a] number of areas, ranging from nuclear operation and thermal energy generation.

“Today, Electricité de France is proud to extend this partnership to electricity distribution and grid performance. EDF is deeply convinced that this collaboration based on know-how sharing and providing specific technical support will benefit both companies and the reliability of South African electricity distribution networks.”

Continued investment

In past financial agreements, the AFD invested €100 million ($106 million) for the construction of Eskom’s 100MW Sere Wind Farm, and €100 million ($106 million) for a concentrating solar power (CSP) plant.

Eskom’s Group Chief Executive Brian Molefe said: “Eskom has enjoyed a fruitful relationship with the Agence Francaise de Developpement and the agreements further cement this relationship. And we look forward to sharing knowledge and good practices with our peer, Électricité de France.

“Both agreements will contribute towards areas of development and the strengthening of our distribution networks in some of the most remote and impoverished parts of our country.”

Eskom’s Chief Financial Officer Anoj Singh said: “We are very pleased that the AFD is making this kind of investment in Eskom. The loan also enables us to improve Eskom’s diversification of its funding sources given its terms, long tenor and low interest rate, when comparing it to other available sources.”

The utility added that the loan agreement and the grant funding form part of the Eskom borrowing plan 2015/16 to 2019/20.

AFD Regional Director Martha Stein-Sochas said: “After supporting Eskom in the development of its renewable energy generation capacity, AFD is very pleased to expand its cooperation in the field of distribution.

“This programme will greatly contribute to the reduction of the regional inequalities in access to electricity in South Africa, and contribute to the objective of the government towards universal electricity access by 2025.

“We are also very proud to finance the partnership between Eskom and EDF, in areas where French expertise can help Eskom meet some of the challenges it is facing today.”