South African electricity utility Eskom has secured a R2.3-billion (€150-million) long-term loan from French development financier Agence Française de Développement (AFD) to support distribution projects in Eastern Cape, KwaZulu-Natal and Limpopo.

CEO Brian Molefe said the 25-year facility had been secured on favourable terms, which would help lower the group’s average borrowing costs at a time when it was exploring various options to help it close a R280-billion funding gap.

“It is a critical component of our funding mix,” Molefe said at a function in Johannesburg, attended by French Ambassador Elisabeth Barbier.

“We are able to extend our duration with facilities such as this one . . . as well as the average cost of capital, which comes down because it is actually quite a cheap facility,” Molefe said, adding that a repayment holiday of five years would also improve cash flow.

CFO Anoj Singh added that development finance would be a critical component in the utility’s larger funding programme and that further announcements would be made as and when deals were consummated. It was highlighted that Eskom had also secured a €300-million facility from Germany’s KfW earlier in the year to support the integration of renewable-energy projects into the domestic grid.

AFD regional director Martha Stein-Sochas said the loan would specifically support electrification efforts in provinces that were lagging the overall roll-out towards universal access. South Africa had set a goal of achieving universal electricity access by 2025, with the penetration rate currently standing at around 85%.

“This programme will greatly contribute to the reduction of regional inequalities in access to electricity in South Africa,” Stein-Sochas said.

Also unveiled was a R6.8-million (€450 000) AFD grant to support a knowledge exchange programme between French utility EDF and Eskom.

EDF South Africa MD Fawzi Issa said the focus of the skills exchange would be in the areas of renewables grid integration, distribution and transmission asset management, demand-side management and smart-grid applications.

He described the grant’s focus on transmission and distribution as closing a gap in ongoing relations between EDF and Eskom, which had initially developed following Eskom’s decision to invest in the Koeberg nuclear power station, in the Western Cape.

However, Issa confirmed EDF remained interested in participating in any possible French bid for South Africa’s “ambitious” new nuclear build programme. “But this will be with more stakeholders than only Eskom, because at the moment the programme is driven by the Department of Energy.”