Societe Tunisienne de l’Electricite et du Gaz (Steg) is close to securing €670m ($870m) in debt commitments to finance Tunisia’s electricity transmission scheme.

The state-owned utility is set to sign a €270m loan agreement with the Islamic Development Bank (IDB) and €400m loan with the European Investment Bank (EIB).

The development banks entered into negotiations with Steg several months ago, but faltered for some time as a result of debt pricing disagreements.

Steg will use the project finance loans to part-finance equipment for its major transmission upgrades, which it plans to undertake across the country. The plan includes the construction of substations, transmission lines and other infrastructure.

EIB finance will be used for projects in a different geographical region to the IDB loan. Both loans are asset-backed and are guaranteed by the government of Tunisia.

Steg will be able to draw on the debt when it is needed as it has been arranged in an installment financing structure. Both loans have a tenor of 20 years. “The financing is likely to be signed by November”, a source at the Islamic Development Bank (IDB) has predicted.

According to the IDB representative, Tunisia’s plans to upgrade its electricity transmission network are driven by a desire to improve efficiency and minimise power losses. “There are some additional power generation projects in their long-term plans including solar power schemes so they need the transmission infrastructure.”

Tunisia is currently tendering contracts to build two independent power projects (IPPs) at Bizerte and Elmed. The Bizerte project will be gas-fired and is to have a capacity of 350-500MW, while the Elmed plant will use either natural gas or coal and will generate 1,200MW.