Power utility Eskom signed a US250m (R1,9 billion) loan on Monday that will finance the building of SA’s largest solar energy and wind power generation projects.

Signing the guarantee, finance minister Pravin Gordhan said SA had a “huge comparative advantage” when it came to solar power generation.

Public enterprises minister Malusi Gigaba said the loan was an indication that there was “great investor confidence in SA”.

The 40-year loan agreement, signed in Pretoria, will help finance the building of a 100MW solar power plant near Upington and the 100MW Sere wind farm near Vredendal in the Western Cape.

The 200MW capacity of the two power plants could generate enough electricity to power 200 000 homes.

Eskom CEO Brian Dames said the wind farm would be completed by 2013 and the solar farm a year later in 2014.

Repayments on the loan will start in 10 years. It is expected to be paid off over the following 30 years at an interest rate of 0,25% annually on the amounts dispersed.

The loan was approved by the World Bank on 27 October and comes from its clean technology fund.

Eskom has already received $100m from the African Development Bank for the two projects, which will be the largest in SA.

The loans are being guaranteed by the SA government.

It is hoped that each project will reduce SA’s carbon emissions by 5m tons a year. — Sapa