South Africa’s Eskom has welcomed news that the African Development Bank has approved a EUR1.86 billion loan for the utility’s capital expansion programme.

The 20-year loan will be used in the construction of the Medupi power plant in Lephalale, a key element of Eskom’s plans to increase generating capacity in the country. It has been provided by the AfDB’s Public Sector Window and will be guaranteed by the South African government.

“The loan comes at a crucial and significant time for South Africa as we face the challenge of balancing supply of electricity with the demand of a growing economy,” said Eskom’s Acting Chairman Mpho Makwana. “We are grateful for the Bank’s commitment and pleased that we can partner with the organisation whose mission is to reduce poverty, improve living conditions for Africans and mobilise resources for the continent’s economic and social development.”

The 4800 MW Medupi coal-fired power plant will be the largest dry-cooled power station in the world when complete in 2012. It will also be the largest coal-fired power plant in South Africa and the country’s first supercritical power plant.

Eskom is planning to spend a total of R385 billion between 2005 and 2013 to build power stations and transmission lines and meet rapidly rising electricity demand. The company is aiming to double generating capacity to 80 000 MW by 2026 and wants to avoid a repeat of the energy shortages which occurred in late 2007 and early 2008.

“South Africa’s energy problem has been a major impediment to Africa’s leading economy,” said AfDB President Donald Kaberuka. “We look forward to working with South Africa towards achieving energy security. This operation should be seen in the context of the Bank ongoing efforts to help Africa bridge the infrastructure gap.”

The AfDB loan follows a $500 million loan from the Bank in 2008 for Eskom’s capacity expansion programme. Eskom has also secured funding of EUR300 million (R3900 million) from the European Investment Bank.