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European bank funds renewable energy in South Africa

The European Investment Bank (EIB) will lend €40m to promote renewable energy and energy efficiency projects across South Africa.

The loan package to FirstRand Bank is the first dedicated energy efficiency loan in South Africa made by the EIB. The money will finance investments in a range of climate change mitigation activities including renewable energy, and enhance South Africa’s actions to combat climate change and facilitate economic development through improving the reliability of electricity supply.

The total value of eligible projects is €100 million, to which EIB will contribute 40%. Specific focus is on industrial cogeneration, but projects will include support for renewable energy schemes, waste or landfill gas for heat and power generation, and energy efficiency installations in residential, public or commercial buildings.

“This loan is part of the EIB’s continued strong commitment to promoting economic development across South Africa,” explains the bank’s Plutarchos Sakellaris. “Working closely with FirstRand Bank to increase electricity generation capacity and promote use of renewable energy will make a key contribution to sustainable growth in the country.”

FirstRand “looks forward to sourcing energy efficiency and renewable energy projects that can provide power for South Africans and help reduce GHG emissions using EIB funding,” adds Sizwe Nxasana of FirstRand Bank. The sub-projects will be identified and individual loans structured by Rand Merchant Bank, the investment banking division of FirstRand Bank.

Potential projects currently under consideration include two 3 MW mini hydro power facilities at existing dams in rural areas of South Africa.

The loan is part of the EIB’s specific mandate for funding in the Republic of South Africa and is the fourth financial package provided to South Africa this year by the EIB and follows both the EIB’s specific objectives and wider European Union policy goals concerning energy efficiency and contributing to reliable energy supply crucial for economic development.

Previous assistance in 2009 has included support for small companies through the Industrial Development Corporation, for municipal infrastructure investments to less developed communities, and facilitating the upgrade and extension of two key toll roads in northern South Africa.

The EIB is active in Africa, the Caribbean and the Pacific under the Cotonou partnership agreement, although the Republic of South Africa receives EIB funding under a separate mandate. In 2007, the EIB pledged financial support to South Africa until 2013 and, from 2007 to 2013, the EIB will lend €900m to the republic.

Last year, the EIB supported sustainable economic development in South Africa by investing €202.5m in three projects, almost doubling its financing activity compared with €113m in 2007.

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Energy efficiency  •  Policy, investment and markets