Morocco: Ouarzazate CSP IPP Case Study - Rational for Decision to Invest by the Private Sector Participant

Transcription

1 Morocco: Ouarzazate CSP IPP Case Study - Rational for Decision to Invest by the Private Sector Participant Expert Group Meeting on Infrastructure and Public-Private Partnership Unlocking Infrastructure Investments and Mobilizing Financial Resources in the Arab region Rabat, 18th April 2013

2 Founded in 2004 in the Kingdom of Saudi Arabia Owned by 10 Saudi conglomerates and 2 public sector entities /Investor + Operator Electricity Generation + Desalinated Water Production Saudi Arabia 13% of Electricity + 40% of Desal Water Oman 12% of Electricity + 17% of Desal water Jordan 59% of Jordan s Electricity Dispatching 8100 MW m3/day water + Under Construction 4600 MW Leading of Middle Eastern Origin Now operating in GCC Region + Jordan + Turkey + Morocco + South Africa + Mozambique 2

3 1. Ouarzazate CSP IPP in Morocco - What is it? Concentrated Solar Capacity MWe Technology - Parabolic Trough with 3 hours storage Consortium led by ACWA with Aries IS and TSK EE submitted lowest tariff to Masen The plant will be one of the least expensive solar large scale thermal plants built in the last three years 3

4 2. Ouarzazate CSP IPP Contract Structure ACWA 70 % International Financial Institutions Multiple Loan Agreements for 80% of the Project Costs Masen Capital 25 % TSK 2.5 % Shareholders Agreement Equity Contribution 20% of Project Costs Morocco SPC APO Loan Agreements 80% of Project Costs Masen Aries 2.5 % EPC Contract O&M Contract PPA EPC Contractor 1 NOMAC Masen Back to Back PPA with ONEE 1. Consortium of Acciona, TSK and Sener ONEE

5 3. Ouarzazate CSP IPP in Morocco -New Tariff Benchmark Ouarzazate 160MWe CSP plant in Morocco, is the first competitive procurement of CSP generated electricity in the last few years (without any pre-set tariff indication via a Feed-in-Tariff or a tariff cap) The lowest Feed-in-Tariff that has been achieved in CSP before this tender was at the level of Euro 30 cents ( US 37.5 cents). Typically all plants to date have been developed by contractors or major equipment suppliers being the lead investor, responding to pre-set tariff (be it feed-in-tariff or a tariff cap). Note: US$ 19.0 cents tariff achieved in Ouarzazate (and the competing 24.4 US Cents from the other two bidders) benefited from concessionary financing from International Financing Institutions. 5

6 The Value of Competitive Procurement Shuqaiq IWPP (2007) Marafiq IWPP (2007) Hal/kWh Water Hal/cuM Hal/kWh Water Hal/cuM ACWA /GIC/MC Suez/ACWA /GIC Marubeni/NBC IP/Sumitomo/Oger tek/jumai Mitsui/KEPCO/NPC NPV saving between lowest and next SR 2.3 Billion (USD 615 Million) Rabigh IPP (2009) Hal/kWh ACWA /KEPCO GDF Suez/IP NPV saving between lowest and next SR 3.3 Billion (USD 880 Million) Ouarzazate IPP (2012) MADc/kWh ACWA / Aries /TSK Enel Green/ ACS Corba NPV saving between lowest and next MAD 1.99 Billion (USD 237 Million) NPV saving between lowest and next SR 1.8 Billion (USD 480 Million) Qurayyah IPP (2011) Hal/kWh ACWA / Samsung/MENA Fund 7.41 Marubeni 8.56 NPV saving between lowest and next SR 1.2 Billion (USD 320 Million) Rabigh 2 IPP (2013) Hal/kWh ACWA /Samsung/MENA Fund 8.82 IP/POSCO/Al-Jomaih 9.24 NPV saving between lowest and next SR 446 Million (USD 120 Million) 6

7 4. Ouarzazate CSP IPP Impact of Concessionary Funds But even when that advantage is removed (as shown below) the project using competitive bidding in this IPP framework would have ended up delivering US 24.5 cents per kwh as compared with lowest level achieved to date of 37.5 US Cents (a saving of 35%)? What has CIF Funds and other IFIs funds brought to this project? Brought the WACC of the project down as the leverage is high and the pricing is subsidized (buying down the risk premium of the project) Mobilizing larger amount of funds (bringing other public sources of funding from MDBs, bilateral agencies, and government) Debt Funding Leverage Tenor/ years Debt all-in rate Resulting tariff US cents/kwh Likely funding from commercial sources for this very large CSP project in Morocco 75/ % 24.5 The optimistic commercial debt funding case 75/ % 21.5 IFI funding (including CTF Funds) 80/ % 18.9

8 5. Ouarzazate CSP IPP - Key Risk for an IPP We are a utility. We invest for 30 to 40 years, i.e., long term business model If there is no track record of honoring the rule of law, if there is no track record of transparency, if there is no track record of respecting the private sector or welcoming foreign direct investment and having in place the necessary institutional support mechanisms, we simply will not seek to invest in that country. But regardless of the robustness of the contract, the reliability and the credit worthiness of the customer and his past behavior, we also need to recognize the fundamental reality Is the customer willingly going to pay the US X cents of tariff after the euphoria of getting a deal done and equally importantly is the customer going to keep paying this tariff in year 15, 16, 17 ;all the way to year 25 recognizing that electricity and water are the essentials of life and very emotive and politically sensitive topics We are firstly concerned of the viability/affordability of the tariff today while compared to alternatives today Then we are very concerned that in future years while we are still recovering our capital investment, the buyer will have access to electricity at lower cost (as the cost even for renewables will be lower) Consider the reality. 1. Morocco currently pays in the order of US13 cents for base load electricity (The tariff of the last coal fired IPP). 2. If peak load capacity is correctly assessed it is likely that it is costing Morocco US 17 cents. 3. The cost of solar power in 5 years time will be lower than what it is today and 10 years time it will be much lower than what it is today. 8

9 6. Ouarzazate CSP IPP - The Rationale for Our decision Having convinced our construction partner to price bottom up with reasonable profit margin (and not play the market pricing game) and with the contribution of the IFI concessionary financing; having brought the tariff down to the US 19 cents level, which is not far from what peak capacity is currently costing the Government of Morocco, we are comfortable of the tariff viability in the short to medium term. The longer term where either CSP or PV with more competitively priced storage solution could end up delivering electricity at single digits in terms of US Cents, our tariff viability remains at risk. We are taking comfort from: 1. The fact that 160MW capacity will be a smaller fraction of the total generating portfolio of Morocco at THAT time (year 10+) 2. 80% of the project cost is being funded not by the private sector (banks) but by IFIs and their loans are also getting paid back over 25 years. So all those Governments will stand shoulder to shoulder with us. 3. AND last but not least, Morocco has NEVER to date ever behaved unreasonably in honoring contracts through many difficult times (track record for respect for contracts). 9

10 Ouarzazate CSP Project Real opportunity to contribute to economic development Real opportunity to develop local manufacturing capacity and service sector on the back of the construction effort in building the plant. While the construction is a 28 months activity, the follow on projects Masen has unveiled offers a longer term sustained opportunity. The operation and maintenance needs spanning 25 years offers sustained opportunity for light manufacturing, repair and services capacity. Again the subsequent projects will offer the volume. Solar energy is still in it s infancy. Enormous opportunity exists to develop technology and innovate. ACWA has already initiated R&D collaboration with a Moroccan University. Ouarzazate is a spectacular location from a scenery, remoteness and even climate view point. The development of a significant solar energy facility comparable by global standards will by itself offer the plat form for the strengthening of location attraction for the tourism industry 10

11 Our Involvement in Renewable Energy We are building an international utility company that reliably delivers bulk electricity and desalinated water at the lowest possible tariff We serve our customers by responding to their needs. Thus we are fuel neutral; albeit with an internal target of building a portfolio of renewable energy assets of 1500 MW by the end of 2017 Our approach to renewable energy is no different to that for fossil fuel based production; relentless focus on achieving the lowest cost at that given time Using Photo Voltaic Technology: we own and operate a 60MW PV plant in Bulgaria ;and Have submitted a tender for a 100MW PV at Makkah Using Concentrated Solar (CSP ) technology: We are in financing in South Africa on a 50MW CSP plant (SolAfrica) We are in financing in Morocco of a 160MW CSP plant (Ouarzazate) 11