Cape Town seals R2.9 billion electricity deal

Cape Town is set to accelerate its switch to green energy and limit reliance on erratic supply from the state power utility after winning a €150 million (R2.9 billion) loan from Germany’s KFW Development Bank.

The loan, which was agreed in December and will be announced this week at a ceremonial signing, will be used to bolster the power grid of South Africa’s second-biggest city to allow the transmission of more renewable energy, the bank said.

It could also be used to help the municipality generate more of its own power, it added. 

“The purpose of the investment is to improve the grid infrastructure of Cape Town to allow for the future integration of more renewable energy and an increase of grid-connected households,” KFW said in an emailed response to questions.

The loan comes as cities in South Africa are pushing to reduce their reliance on the state-owned utility, Eskom Holdings SOC Ltd., because of surging electricity prices and power cuts.

This week, the country was hit with its worst rolling blackouts in almost a year after units at some of Eskom’s coal-fired power plants tripped.

While feasibility studies are needed to determine how the money will be used, some of it could be earmarked for projects including revamping a hydro-power facility and building a solar plant, said Kadri Nassiep, Cape Town’s executive director of energy and climate change.

KFW declined to reveal the duration of the loan or the interest rate that will be charged. 

Nassiep has previously said that Cape Town, a city of four million people, could double the size of its 180 MW Steenbras hydropower plant. The city has held tenders for the provision of power from private producers. 

KFW has previously lent money to Cape Town. In 2018, it provided an €80 million loan and €6 million grant to help the city refurbish and expand waste-water treatment plants.

The bank has also lent South Africa’s National Treasury €800 million to help finance a reduction of the country’s reliance on coal for power generation.