Electricity pylons carry power from Cape Town's Koeberg nuclear power plant. REUTERS/Mike Hutchings (SOUTH AFRICA ENERGY BUSINESS)

Cape Town - The political risk insurance and credit enhancement arm of the World Bank Group said on Wednesday that it was providing guarantees of almost 700 million euros (R11.9 billion) for loans by international commercial banks to shore up Eskom's power transmission infrastructure in South Africa.

A statement from the bank's Multilateral Investment Guarantee Agency (Miga) said the financing would help reduce load-shedding and pave the way for the integration of renewable energy into the country's grid. Miga said the guarantees of of 698.9 million euros provide coverage for Deutsche Bank and Mizuho Bank against the risk of non-honouring of sovereign financial obligations for up to 15 years.

Eskom CEO Brian Molefe said: “Miga's credit enhancement has allowed us to secure euro-denominated funding for longer tenors and on more favourable terms.

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

The World Bank statement added: “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 remove bottlenecks in the execution of the government's electrification agenda, including procurement of new independent power producers for renewable projects.”

Miga's executive vice president and chief executive Keiko Honda said: “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.”

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The executive director for the constituency of Angola, Nigeria and South Africa at the World Bank Group, Ana Afonso Dias Lourenco, added: “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.”