KfW finances "green" electricity network in South Africa to the tune of EUR 300 million
8 April 2015
On behalf of the Federal Ministry for Economic Cooperation and Development, KfW Development Bank has committed to granting an FC promotional loan to ESKOM, the state-owned public utility in South Africa, totalling just under ZAR 4 billion (EUR 300 million).
The financing is to help connect solar and wind power plants in particular and also make a substantial contribution to modernising and strengthening the interconnected grid in South Africa. The network integration of renewable energy sources will facilitate an annual reduction of CO2 emissions of up to 5.5 million tonnes.
One of the key projects supported is the grid connection of two power plants, for which KfW had already pledged funding. These are the Kiwano Solar Tower power plant (100 MW) in Upington (FC development loan: USD 100 million) and the Ingula Pumped Storage Scheme in Braamhoek, co-financed by KfW IPEX-Bank (EUR 75 million). "This realignment of the energy supply structure is a key milestone for South Africa in moving away from the dependence on coal-fired power plants towards sustainable power generation. By connecting climate-friendly energy production alternatives, the country – as the biggest CO2 emitter in Africa – is able to make a significant contribution to international climate protection," said Dr Norbert Kloppenburg, Member of the Board of Management of KfW Group.
The reliability of energy supply and sustainability are of paramount importance to the people of South Africa. While the demand for environmentally friendly electricity is increasing in South Africa, the expansion and maintenance of the power grid have lagged behind in recent years. This results in power failures and fluctuations in supply. Thanks to a new investment programme, not only the nationwide transmission and distribution network but also the integration of renewable energy sources operated by private electricity providers will be achieved.
A total of USD 15 billion is to be invested in network expansion until 2022, including USD 3 billion alone on connecting renewable energy sources to the interconnected grid.
The loan was provided to ESKOM in the South African currency (rand) and represents the largest local currency financing facility of KfW Group in a developing or emerging country so far.
On behalf of the German Federal Government, KfW Development Bank has provided around EUR 850 million to South Africa for projects since 1994 (budget funds of around EUR 180 million, KfW funds of around EUR 670 million), especially in the focal areas of climate and energy, preventing violence and healthcare.
Commenting on the funding German Ambassador Freitag said, "The announcement by KfW of its support for connecting renewable energy into South Africa's power grid is good news and reflects the very heart of the South African – German Energy partnership. It complements the efforts of both our governments through the partnership towards greater energy efficiency and an increase in renewable energy projects in the country."
Embassy of Germany, Pretoria, South Africa