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Tuesday, October 4, 2022

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Egypt’s solar PV plant financing: Taking on many firsts

In a string of initiatives to encourage clean energy projects, a consortium of multilateral banks extended a financing package to fund six utility scale solar photovoltaic (PV) projects. DURGAHYENI MOHGANA SELVAM speaks to the Islamic Corporation for the Development of the Private Sector (ICD) to find out more about the projects and their financing.

The projects are being developed by an international consortium of companies, namely Scatec Solar and its development partners, Norfund and Africa50. The projects, which will have an aggregate generation capacity of 300 MW, are being developed under the Egyptian government’s feed-in-tariff program; and will be situated in the Benban Solar Park, close to the city of Aswan. The solar park has a planned total capacity of 1.8 GW, and is expected to be the largest of its kind in Africa. The banks involved are the ICD, the IDB, the EBRD, the GCF and the FMO.

The total cost of the project portfolio will be approximately US$450 million, financed on the basis of a 75:25 debt to equity participation. The debt of US$335 million will be provided by the ICD for US$25 million, the IDB for US$75 million, the EBRD for US$115 million, the FMO for US$72 million and the GCF for US$48 million.

This financing has added a feather to the caps of the various parties involved. The transaction represents the ICD’s second participation in the financing of renewable energy projects in its member countries. It is also the IDB’s second major solar power transaction in recent times under its public-private partnership operation, the first being a syndicated financing for Shuaa Energy 1, an 800 MW solar project in Dubai.

It is the IDB’s first non-sovereign financing in the power sector of Egypt. It is also the GCF’s highest contribution to a single recipient and the first under its cooperation agreement with the EBRD signed in April this year.

Many things are expected from the financing. ”The transaction marks a new milestone in [the] ICD’s continued progress in expanding the scope of cooperation with strategic international DFIs [development finance institutions] where there is significant geographic overlap in operations and substantial future collaboration potential,” the ICD told IFN. As for the project, it is expected to create of up to 2,000 jobs during the construction stage. Each project under the portfolio is anticipated to reduce 62,120 tonnes of carbon dioxide-equivalent per year.

Financing for Egypt’s solar power plant portfolio
US$335 million
19th October 2017
Obligor Scatec Solar, Norfund and Africa50
Project size US$450 million
Aggregate principal amount ICD: US$25 million IDB: US$75 million EBRD: US$115 million FMO:US$72 million GCF: US$48 million
Type of facility Non-recourse project financing
Structure Senior financing
Use of proceeds To finance a portfolio of six utility scale solar PV projects in the Arab Republic of Egypt
Debt to equity participation 75:25
Debt size US$335 million
Equity size US$115 million
Equity provider Scatec Solar, Norfund and Africa50
Mandated lead arranger(s) Islamic Corporation for the Development of the Private Sector (ICD), IDB, the European Bank for Reconstruction and Development (EBRD), the Green Climate Fund (GCF) and the Dutch Development Bank (FMO)
Project supported by: 25-year power purchase agreements with Egyptian Electricity Transmission Company, backstopped by a sovereign guarantee
Governing law Egyptian law

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