Eskom, South Africa’s state-owned electricity producer, has identified a pipeline of R400 billion in just energy transition projects that it plans to fund with concessional financing from international financiers committed to supporting decarbonisation initiatives in developing countries like South Africa.
According to Mandy Rambharos, GM of Just Energy Transition, the pipeline includes wind, solar, gas, and battery projects, some of which will be deployed at the company’s retiring coal power facilities commencing in 2022 Komati.
It also asks for the building of at least 8,000 kilometres of transmission lines, 12 new substations in four provinces, 110 transformers by 2030, the strengthening of important distribution corridors, and the deployment of microgrids in places where grid energy is difficult to access.
Eskom plans to fund the projects using a Just Energy Transition financing facility, which will be a multi-tranche, multi-year facility backed by a multi-lender syndicate on a pay-for-performance basis.
The facility, which Rambharos compares to a construction loan, has been discussed with a number of lender counterparties, who have complimented its simplicity, according to Rambharos.
Opting out of projects that may not fulfil lender requirements, such as gas-to-power projects, has also received widespread support.
In late September, climate envoys from France, Germany, the United Kingdom, the United States, and the European Union visited South Africa as part of the country’s preparations for the COP26 climate talks in November in Glasgow, Scotland.
During the visit, it was resolved to fund the ‘Just Transition Financing Facility’ in order for South Africa to meet its more aggressive climate action goals, starting with Eskom, while simultaneously dealing with the transition’s socioeconomic implications.
With the United Nations Framework Convention on Climate Change, South Africa has reduced its Nationally Determined Contribution range for 2030 to 420 to 350 million tonnes of carbon dioxide equivalent (Mt CO2-eq), which is a substantial improvement above its 2015 promise of 614 to 398 Mt CO2-eq.
A 1 000 MW repowering project at the Komati power plant site and a 3 000 MW project at Richards Bay, both in KwaZulu-Natal, were among the gas projects included in Eskom’s fair transition strategy.