The African Development Bank (AfDB) has approved a 1.86 billion euro loan for Eskom to finance a power project that will significantly boost South Africa and the southern African region's energy capacity.

"South Africa's energy problem has been a major impediment to Africa's leading economy," AfDB president Donald Kaberuka said in a statement on Thursday.

"The bank is pleased to be associated with this project. We look forward to working with South Africa towards achieving energy security. This operation should be seen in the context of the bank's ongoing efforts to help Africa bridge the infrastructure gap," he said.

The Medupi power plant located in Lephalale, Limpopo Province, was expected to be commissioned by February 2012.

Besides Medupi, Eskom was working on a number of renewable energy programmes, including a pilot wind farm in the Western Cape, a 100MW heliostat pre-feasibility, tower-type solar power plant, and a 100MW wind farm feasibility study.

Eskom was also pursuing a demand-side energy conservation program aimed at saving 4225MW of electricity.

The total cost of the project was estimated at 11.19 billion Euros, and would be financed with 53 percent equity and 47 percent by loans, with the World Bank and the export credit agencies as co-lenders with the AfDB.

The bank group's operations in South Africa commenced in 1997, and as at the end of August 2009, the bank had approved 16 operations, with a total commitment of Units of Account (UA) 1.074 billion. Ongoing operations as at end August 2009 amounted to UA737.04 million, with a disbursement rate of 80 percent.

One UA equals US1.59 as at November 25, 2009.

Sapa