Barbed-wire security fencing surrounds an Eskom electricity substation in Ekurhuleni, Gauteng. The utility has signed a R6 billion loan deal with French company Agence Francaise de Développement. Picture: Bloomberg
Johannesburg - Eskom on Friday signed a R6 billion loan facility from French development finance company, Agence Française de Développement (AFD) for the power utility’s investments in the extension and reinforcement of its power transmission grid.

Eskom has been raising money to strengthen its transmission network as it is required to accommodate additional capacity from renewable energy technologies. Last year it received a $1.34 billion loan from the African Development Bank for investment in renewable energy projects, among others.

Eskom has connected to the national 62 IPP projects, with a cumulative capacity of 4200MW. The projects are part of the Department of Energy’s Renewable Energy Independent Power Producer (Reipp) and Peaker programmes. Eskom has previously said that a further 620MW was expected to be added to the grid in the 2017/2018 financial year as more projects from the Reipp programme are integrated into the national grid.

“This multi-tranche loan facility will contribute towards Eskom plans to strengthen and refurbish the transmission infrastructure while diversifying our funding structures,” said Eskom chief financial officer, Anoj Singh.

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Eskom said AFD’s funding would focus on transmission lines and substations that support grid strengthening in areas where the development of future renewable energy sources are envisaged as well as to support the facilitation of cross-border transmission projects. “As such, the funding will contribute to AFD’s global objective of dedicating 50 percent of its funding to development projects that have a climate change co-benefit,” Eskom said.

AFD’s chief executive, Rémy Rioux, said the institution’s focus was on renewable energy production, renewable energy related grid reinforcement and expansion.

AFD has previously made funds available for Eskom’s Sere wind farm (100 million euros; R1.36 billion). In November 2015, Eskom and AFD signed a 150 million euros credit facility agreement for the financing of Eskom’s distribution projects in the KwaZulu-Natal, Eastern Cape and Limpopo. That facility was meant for investments in grid strengthening, refurbishment, reliability improvements, minor reticulations, split metering and upstream grid reinforcement to cater for renewable energy.

Meanwhile, AFD signed a $100 million (R1.27 billion) loan facility with the Development Bank of Southern Africa (DBSA) to support the Bank’s infrastructure financing activity across Africa. AFD said the loan would focus energy, water, transport and information and communications technology.

“This new credit line and expanded partnership with DBSA in favour of sustainable infrastructure financing is at the crux of our strategy in Africa,” said Rioux.