Eskom and AFD today signed a R 6 billion (€400 million) multi-tranche framework agreement to support Eskom investments in the extension and reinforcement of its power transmission grid.

Eskom’s Chief Financial Officer Anoj Singh said: “This multi-tranche loan facility will contribute towards Eskom plans to strengthen and refurbish the transmission infrastructure while diversifying our funding structures.”

AFD’s funding will 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% of its funding to development projects that have a climate change co-benefit.

AFD’s Chief Executive Officer, Rémy Rioux, said: “This new funding to Eskom reiterates the willingness of AFD to be a key financial partner of the South-African utility. Since the beginning of our engagement with Eskom, almost 10 years ago, we have made the choice to focus our support on targeted areas where we believe a development finance institution like AFD can provide the most value-added, i.e. renewable energy production, renewable energy related grid reinforcement and expansion, as well as technical knowledge sharing.”

This funding represents the first multi-tranche facility approved by AFD in the African continent. This new instrument recently developed by AFD opens a 3-year window during which the funding is made available to Eskom to finance projects that are compliant with eligibility criteria that have been agreed upon between AFD and Eskom, namely: be part of Eskom’s Transmission Development Plan, contribute to the evacuation of the renewable energy (existing or future) and/or facilitate the development of cross-border transmission networks.

This multi-tranche facility provides Eskom with mid-term visibility on the availability of funding for its Transmission Development Plan. It also reinforces AFD’s position as a long-term partner of the South-African power utility – since its first €100 million financing approved in 2007 for the Sere wind farm, and the recent signing a €150 million (R2.3 billion) facility to support Eskom investments in the distribution network.

The multi-tranche facility has been approved while the partnership between Eskom and Électricité de France (EDF) – that was entered into in November 2015 – is completed. The partnership grant provided by AFD and the French Ministry of Finance focused on knowledge, experience and expertise sharing between the two utilities, on various areas, including smart grids. The partnership has produced recommendations that will improve performance in terms of system efficiency and reliability. The multi-tranche facility will build on the results of this partnership to develop projects.

“We appreciate AFD’s long-standing commitment and support and are pleased that we can continue the valuable partnership with this organisation whose mission is to improve and support Africa’s energy development goals and mobilise resources for the continent’s economic and social development”, said Eskom’s Interim Group Chief Executive Matshela Koko.