The World Bank is in talks for a possible $1 billion loan to help South Africa reform its energy sector as it struggles to overcome record power outages that have paralyzed the economy, a World Bank official told Reuters.

The loan, which will go directly to the government rather than state utility Eskom, is "under discussion," Marie-Françoise Marie-Nelli, the bank's South African director, said in an interview in Marrakech, Morocco.

"It's coming soon," she added, declining to give a specific timeline.

South Africa is facing its worst power crisis, with Eskom's aging coal-fired power plants experiencing frequent breakdowns. Rolling blackouts have stifled economic growth while spurring private investment in renewable energy.

“This is a policy-making loan to support critical reforms,” Marie-Nellie said of potential World Bank funding. "There is a particular focus on transmission because it is a stumbling block to new (capacity) being built primarily by the private sector."

In February, the South African government agreed to assume more than 254 billion rand ($13.4 billion) of Eskom's debt through a debt relief package, subject to conditions.

The main condition is that the power company cannot take on any new debt for three years unless approved by the country's finance minister.

In 2019, the government committed to splitting Eskom into three subsidiaries - transmission, generation and distribution. Eskom said in August that its transmission arm would not be operational until 2025.

Marie-Nellie said the World Bank loan would also support South Africa's "just transition" away from coal to ensure vulnerable groups do not suffer as a result. The government is "also considering the wider climate agenda, including a carbon tax".

In November 2022, the World Bank approved $497 million in financing for the decommissioning and repurposing of a coal-fired power plant owned by Eskom.