AfDB, Eskom sign $365m in loan pacts
Electricity utility Eskom and the African Development Bank (AfDB) have signed two loan agreements for a total value of US$365 million that will enable the first large-scale implementation of renewable wind and solar generation in Eskom's history.
The loan signing ceremony took place in Washington, DC on the sidelines of the 2011 World Bank/IMF Annual Meetings at the weekend.
The loans consist of $265 million from the AfDB's own resources and $100 million from the resources of the Clean Technology Fund, a climate investment fund that promotes the transfer of low carbon technologies.
The loans are guaranteed by the South African Government, consistent with the AfDB's procedures.
South Africa's Minister of Public Enterprises, Malusi Gigaba, and Minister of Finance, Pravin Gordhan, signed the guarantee agreements.
Approved by the AfDB board in May, the loans will further Eskom's commitment to reduce its carbon footprint. The company hopes to begin construction of its planned Sere 100 megawatt wind project at Vredendal, in South Africa's Western Cape, early next year.
The AfDB financing is part of a broader funding plan for Eskom's renewable projects, which includes sourcing from other development finance agencies.
Eskom has enjoyed a long relationship with the African Development Bank. In 2008, the AfDB approved and signed a first loan with Eskom of USD500 million. In December 2009 the AfDB signed a further EUR 1.86 billion-equivalent loan with Eskom for the Medupi Power Project. These
AfDB loans to Eskom have reinforced the extent to which institutions based on the African continent can provide support, which fosters regional growth.
Eskom CEO Brian Dames said: “We are committed to a cleaner energy future and we now have the capability to implement our large-scale wind and solar generation projects. We appreciate the roles the African Development Bank and the South African government have played in making this possible.”
AfDB President Donald Kaberuka, who signed the current loan agreements on behalf of his institution, said: “The AfDB is committed to supporting South Africa's long-term plans for moving to a lower carbon growth path. Leveraging and accelerating the disbursement of concessional climate Financing is essential to achieve economic viability of some of the clean technology solutions. This is a priority action area for the AfDB.
“These groundbreaking renewable investments by Eskom are quite timely, in the run-up to climate change meetings (COP17) soon to be held in Durban under South Africa's presidency. They show that Africa can make a meaningful contribution to the global response to climate change, when given the financial incentives to do so.”
Finance Minister Pravin Gordhan said: “We are pleased at the confidence that the AfDB has shown in South Africa and in Eskom, and we thank the AFDB for its funding. This is an important step in securing funding which will enable Eskom to contribute to the realisation of South Africa's commitment to diversify in its energy mix and reduce its carbon emissions over time.”
Public Enterprises Minister Malusi Gigaba said: “This loan will help to mobilise resources for the development of the Southern African region. It is consistent with the AFDB's mission to promote economic growth and improve the living conditions of many. It is also true to Eskom's purpose, which is to provide sustainable electricity solutions to improve the quality of life of the people of South Africa and of the region.” - I-Net Bridge