Germany’s KFW Offers €200 Million Loan for Eskom’s Transmission Grid

(Bloomberg) -- KFW, the German development bank, has offered a €200 million ($214 million) loan to South African power utility Eskom Holdings SOC Ltd. so that it can boost its transmission grid in the Northern Cape and Western Cape provinces.

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The sovereign loan, part of an $8.5 billion energy transition pact between South Africa and some of the world’s richest countries, would allow Eskom to add 2,200 megawatts of renewable energy to the national grid, the German embassy to South Africa said Thursday.

The advance requires approval from Eskom and the National Treasury. South Africa needs to build about 1,400 kilometers (870 miles) of transmission lines each year until 2030 to meet its energy needs, the embassy said in a statement released on behalf of the investment partners in the so-called Just Energy Transition Partnership — the UK, US, Germany, France and the European Union.

“The UK is willing to provide significant funds for transmission through African Development Bank lending enabled through its JETP guarantee, and more facilities could be available from the European Investment Bank,” the partnership said in the statement.

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South Africa is facing a crippling power crisis, which at times necessitates power cuts of more than 10 hours a day. Attempts to tackle it have been hampered by the weakness of its transmission grid, which has limited the amount of renewable energy that can be added.

The grid is strongest in Mpumalanga in the east, where the country’s coal-fired power plants are sited, and weakest in areas with strong wind and power potential such as the Northern Cape, Eastern Cape and Western Cape.

“We’ve got to sort out the transmission network so that we can get more renewables onto the grid,” Barbara Creecy, South Africa’s environment minister, said in an interview earlier this week.

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