African Development Bank leads on $1.34bn loan for South Africa's electricity future

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The African Development Bank (AfDB) has signed off on a $1.34 billion loan to South African power utility Eskom for the further augmentation of South Africa’s electricity generation capabilities.

Agreed under the context of the New Deal on Energy for Africa, the funds will help boost new generation, plant refurbishment, transmission lines and capacity building, and will serve as a timely injection of cash to South Africa’s Renewable Energy Independent Power Producer Program (REIPPP), which is targeting the development of an additional 5 GW of clean power by 2019.

According to Eskom, monies invested in the REIPPP will be partly directed at the construction of the transmission network required to evacuate power from South Africa’s IPP programs. Thus far, the REIPPP has attracted more than $14 billion in investment, of which 30% has been direct foreign investment.

Close to $1 billion this latest loan by the AfDB has been arranged through participation with nine commercial banks, including HSBC, Citibank, JP Morgan and the Bank of China. This is the largest syndicated A/B loan arrangement to date in Africa.

For Eskom, the funds will bolster its 2016-2020 capital expenditure program, which intends to reduce load shedding domestically and boost electricity generation in the southern Africa region by 10%. The New Deal for Energy in Africa seeks to provide universal access to energy across the continent by 2025.

"South Africa has the third-most attractive renewable energy market across emerging regions (behind China and Brazil) and this program, spearheaded by the South African Department of Energy, is an example of how to approach green growth in Africa," said AfDB’s acting VP for private sector, infrastructure and regional integration Stefan Nalletamby.

This agreement is the second private-sectore operation deal between AfDB and Eskom, building on a $500 million corporate loan agreed in 2008.