Eskom and Agence Française de Développement (AFD) signed a R1.5bn loan agreement on Thursday to support the electricity utility's investments in extending and strengthening its power transmission grid along the west coast of South Africa.

According to a statement, this loan constitutes the first tranche of a R6.5bn multi-tranche loan facility signed between the two institutions in March 2017.

According to Eskom, the transmission system plays a pivotal role in the nation-wide provision of electricity, as it delivers electricity from the power stations to distribution centres across SA.

"This first tranche will be dedicated to financing of the Namaqualand Strengthening Phase 2: Juno Gromis Project, which aims to strengthen the power network in the Northern Cape Province, integrate renewable energy sources, and ultimately facilitate cross border transmission," says Eskom.

Construction is expected to start in early 2019.

"This multi-tranche loan facility will contribute to Eskom's plans to strengthen and refurbish the transmission infrastructure while diversifying our funding structures," said Phakamani Hadebe, Eskom's group CEO.

Christophe Farnaud, ambassador of France to South Africa, said this investment will enhance the reliability and security of electricity supply, improve the network capacity for future load growth, and will ultimately strengthen regional energy trade which is a very positive development for the region.

AFD is reviewing a number of project parts in Eskom's TDP for the subsequent tranches of the multi-tranche facility by 2020.

According to the statement, Eskom and AFD have been partners since 2011.