Germany grants nearly 400 mln USD loan to S. Africa power utility

German Development Bank KfW has granted a loan worth four billion rand (about 339 million U.S. dollars) to South Africa's cash-strapped utility Eskom, it was announced on Thursday.

South Africa's plan to secure its power system by scaling up renewable energy generation and strengthening its transmission network has been boosted by the massive loan, said Donald Liphoko, Acting Director-General of the Government Communication and Information System (GCIS).

Eskom has been struggling to keep the lights on by forking out billions of rand every month in buying diesel since two of its major coal-burning power stations collapsed in November due to poor maintenance. The collapse has led to widespread rolling blackouts across the country.

The South African government pledged about 20 billion rand (about 1.7 billion dollars) to bail out the parastatal to prevent it from being broke.

The KfW loan will supplement the government funding, giving Eskom the necessary space to ensure that the country's energy security is maintained, Liphoko said.

The German loan is part of Eskom's approved funding plan and will run over 15 years with capital repayments only after the first five years.

The loan will be repaid in South African rand which frees up banking lines for other financing transactions.

"Government welcomes the four-billion-rand loan, which has been secured at favourable terms and a significantly lower interest rate as a result the sovereign guarantee that it has made available for Eskom," Liphoko said in a statement.

"The loan comes at a critical juncture in our national effort to stabilise the national grid and Eskom's finances. It allows all us the space to diversify our energy sources and ensure more sustainable power generation," he said.

The money will be used to build the Kiwano solar thermal power station in Upington, Northern Cape and the Ingula Pumped Storage Scheme in Braamhoek, KwaZulu-Natal. The completed Kiwano solar thermal power station will add 100MW to the national grid while Ingula will provide an additional 1,332MW.

The South African government is working to radically transform the country's energy sector and has developed a sustainable energy mix in which renewable energy makes up a significant portion of 11. 4 Gigawatts.

The Integrated Resource Plan (IRP) for 2010 to 2030 details South Africa's energy mix which allows for a balance between energy sources, ensures a reliable source of power to meet the country's growing needs and allows the country to reach its carbon reduction targets. Endi