European Investment Bank (EIB), the European Union’s long-term finance institution, today signed a EUR 88 million (ZAR 830 million) loan agreement with Eskom, South Africa’s state-owned electricity utility, to part-finance the construction of a  new high voltage transmission interconnection between Johannesburg and Cape Town. The loan is the second tranche of a EUR 300 million (ZAR 2.8 billion) facility for the project approved by EIB’s Board of Directors in November last year; a first tranche of EUR 80 million was signed in December 2006. Both loans were signed for a term of 25 years.

The main objective of the 765 kV transmission backbone link is to secure the electricity supply of the Western Cape region, to meet growing electricity demand and reduce transmission losses. The project will also contribute to reducing transmission constraints in the Southern African Power Pool by providing additional capacity that will support electricity transactions in an emerging competitive power market.

The two finance contracts between the EIB and ESKOM were concluded within the framework of the EU-RSA co-operation agreement whereby the EIB provides long-term finance for public and private investment supporting economic development in South Africa.

This second loan agreement was signed on behalf of ESKOM by Mr Bongani Nqwababa, Finance Director and by EIB Vice President Torsten Gersfelt. Mr Gersfelt commented on the importance of the project for the co-operation objectives of the EU in South Africa and said that “a reliable supply of electricity at competitive cost is a key factor for sustainable economic development”.

Mr Nqwababa highlighted the significance of this loan and said that “Eskom values its long established relationship with the EIB and this continued support for our investment program will be felt by our customers as we expand and strengthen our transmission network across the country.”


Note to the Editor

The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects that further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy with third countries that have co-operation or association agreements with the Union.

European Investment Bank support for RSA is being provided following an invitation from the Council of the European Union to the Bank to participate in project financing in South Africa, in support of the economic development of the country after the establishment of democratic government. In June 1995 the Bank was authorised to grant long-term loans for a total amount of up to 300 million EUR for a period of two years. In April 1997 the mandate was extended to mid - 2000 for a further EUR 375 million and in June 2000 for a further period (2000-2006) for an amount of EUR 825 million, bringing the total facilities for South Africa over the period to EUR 1.5 billion. In December 2006 a new mandate for the period 2007-2013 was granted to the Bank for a further EUR 900 million.