South African utility Eskom and German Development Bank KfW have signed a US$100 million (~R1.35 billion) loan facility that will go towards improving the transmission network to support grid integration of renewable energy projects after 27 power purchase agreements (PPAs) were signed in April.
The country’s renewable energy sector had breathed a sigh of relief earlier this year when a total of 27 Renewable Energy Independent Power Producer Projects (REIPPP) contracts were signed after months of hiatus. Eskom had consistently delayed the contracts, but once close to being signed in March this year, they were challenged by two labour unions. However, this legal bid was blocked by a South African court and the PPAs were signed.
The KfW loan facility will also support the second phase of capacity and reliability improvements across Harrismith in the Free State and the Greater East London region in the Eastern Cape.
The signing of this loan facility also goes towards Eskom’s R72 billion funding requirement for FY2018/19.
Phakamani Hadebe, Eskom’s group chief executive, said: “The successful conclusion of this agreement between Eskom and KfW validates the bank’s continued commitment towards Eskom and it is an indication of the strong partnership and coorporation between Eskom and KfW. The facility demonstrates the improved market sentiment and confidence in the ability of the Eskom’s leadership to direct the company on the correct path to recovery and sustainability. Furthermore, integrating more renewable sources of energy into the grid will go a long way in helping to reduce South Africa’s CO2 emissions, driving Eskom towards it’s targeted goals.”
KfW had already provided a loan of R3.9 billion to Eskom in March 2015, to support renewable energy grid integration as well as overall grid strengthening, following the introduction of the REIPPP programme.