NDB and DBSA Sign Loan Agreement for Greenhouse Gas Emissions Reduction and Energy Sector Development Project

On 1 April 2019, New Development Bank (NDB) and Development Bank of Southern Africa (DBSA) signed the Loan Agreement for Greenhouse Gas Emissions Reduction and Energy Sector Development Project. Under the Agreement, the NDB will provide a loan without a sovereign guarantee to the national financial intermediary DBSA with an amount of up to USD 300 million.

The Loan Agreement was signed by Mr. Xian Zhu, NDB VP & COO and Mr. Patrick Dlamini, DBSA CEO during the 4th Annual Meeting of the New Development Bank in Cape Town, South Africa.

The Greenhouse Gas Emissions Reduction and Energy Sector Development Project is designed to support renewable energy projects in South Africa and help the economy to shift to a more sustainable energy path through structural transformation of the energy sector with emerging renewable technologies.

The objective of the Project is to facilitate investments in renewable energy that will contribute to the power generation mix and reduction in carbon dioxide (CO2) emissions in South Africa, in line with the South African Government’s Integrated Resource Plan 2010 and its target of reducing greenhouse gas emissions as articulated in the National Development Plan 2030.

The loan will be in the form of a two-step loan of up to USD 300 million to DBSA, which in turn will be on-lent to the DBSA’s identified subprojects, within particularly the wind, solar, and biomass energy sectors.

The project will bring significant developmental impacts through the subprojects, particularly related to environmental and social benefits from the reduction in carbon dioxide emissions, increase in generation capacity from renewable energy sources, and increase in the efficiency of the energy sector in South Africa. The project is also expected to contribute to unlocking private sector investment, and increasing the availability of long-term funds for projects in the energy sector in the country.

Background information

The NDB was established by Brazil, Russia, India, China and South Africa to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development. To fulfill its purpose, the NDB will support public or private projects through loans, guarantees, equity participation and other financial instruments. According to the NDB’s General Strategy, sustainable infrastructure development is at the core of the Bank’s operational strategy for 2017-2021. In August 2018, the Bank received AA+ long-term issuer credit ratings from S&P and Fitch.

The DBSA is a development finance institution wholly owned by the Government of South Africa, with a mandate to finance sustainable infrastructure development within South Africa as well as the rest of the continent of Africa and its oceanic islands. In addition to municipal infrastructure within the borders of South Africa, the core focus of the Bank is in the energy, water, ICT, and transportation sectors, with a secondary emphasis on the health and education sectors. The Bank’s products suite stretches across the infrastructure value chain, from project preparation, through the financing cycle, and ultimately, project implementation, operation, and maintenance. Climate mitigation and sustainability generally are key to the DBSA strategy in respect of all its focus areas.