The International Finance Corporation (IFC) says it is ready to help accelerate financing for private-sector transmission grid projects in South Africa.
The IFC's regional vice-president for Africa, Sérgio Pimenta, was in the country last week to further talks on the development of financing models that will accelerate private sector investment in transmission without negatively affecting Eskom’s balance sheet and the fiscus.
However, he said, the IFC was not only in a position to offer expertise on the development of financing models, it was also ready to come on board as a financier for some projects.
Pimenta told Business Day he got “comfort” from discussions with the government that it was ready to move from research and study to implementing the models so projects could start and transmission lines could be built.
The 2024 renewable energy grid survey released last week showed there was a pipeline of about 60GW of projects that would be ready to connect to the grid within the next five years.
However, a lack of available grid capacity, specially in the Cape provinces, risked delaying the projects.
Eskom’s 10-year transmission development plan has set a target of building 14,000km of new transmission lines, but progress has been slow, partly due to a lack of funding. Implementing the plan will require about R390bn in funding.
Treasury said in July it was moving forward with plans to launch a pilot project that would enable private investment in electricity grid infrastructure in 2024.
According to Pimenta it has been supporting government to determine options to bring in private sector investment. Government has been clear it does not want the transmission grid to become privatised, but acknowledges the need for private sector investment.
“The [transmission grid] is one of the biggest infrastructure bottlenecks SA is facing. Bringing in private sector financing will have big impact [on the pace at which new transmission infrastructure can be built].
“We are pushing funding models that will minimise the impact of the public finances,” he said.
Pimenta said SA also needed a model that would “maximise the chances of the private sector coming in at a large scale with the financing and technology needed”.
The IFC, a member of the World Bank Group, can help “accelerate the financing phase” for new grid projects.
“As a financing institution focused on the private sector, we can and we are ready to finance a number of the projects. This will not only be with our funding. We can also mobilise funding from other entities,” Pimenta said.
“The investments need to start quickly. We are in a position to maximise the amount of financing we can bring by leveraging our own balance sheet and bringing other investors with us. By being financier of the projects, we also bring a level of comfort for other investors to come in and bring the funding needed,” he said.
At a conference on the just energy transition at the municipal level on Monday and Tuesday, local government representatives heard estimates in the Just Energy Transition Investment Plan showed about R320bn was needed to upgrade municipal electricity distribution infrastructure, address the infrastructure backlog and to plan and develop capacity within municipalities for the transition.
Pimenta said part of their discussion with government was around examining the types of support the IFC could give municipalities to help them contribute to the development of the energy sector.
The IFC has provided finance for infrastructure development in municipalities including Cape Town, Johannesburg and Buffalo City, and it was “open to do more”, he said.
Last week the IFC announced it had invested $150m in the City of Cape Town’s infrastructure development programme through a senior loan to the municipality.
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