Cape Town - The African Development Bank (AfDB) has approved a €1.86bn 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 €11.19bn, 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.

- Sapa