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- Expert group meeting / Tunis 3-5 October 2012 - Innovative mechanisms for financing renewable energy projects in North Africa MSP Project-pipeline and analysis of financing strategies Martin Ehrlich (PWMSP).

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  1. - Expert group meeting / Tunis 3-5 October 2012 -Innovative mechanisms for financing renewable energy projects in North AfricaMSP Project-pipeline and analysis of financing strategiesMartin Ehrlich (PWMSP) The contents of this publication are the sole responsibility of the authors and can in no way be taken to reflect the views of the European Union

  2. Scope of the presentation • MSP and PWMSP • MSP Investment Pipeline • RE financing • RES-e economics • Large scale RES-e financing – ongoing debate

  3. MSP projects and financing strategies 1- MSP and PWMSP

  4. Paving the way for the MSP Project activities Task 1 – Harmonised legislative and regulatory framework Task 2 – Transfer of knowledge and capacity building Task 3 – Support to the implementation of sustainable energy policies Task 4 – Support to investment Task A – Mediterranean grid Task B – Support to MSP implementation Task C - Master Plan of the Mediterranean Electricity Interconnection

  5. The Challenge - Financing the MSP • Centralised RES-e • Wind • PV • CSP without storage • CSP with storage • Decentralised RES-e • Energy efficicency • Energy saving • Demand side manmagement • Rural Electrification • Grid connected • Off-grid • Electricity networks and connection 20 GW by 2020 Bankable Projects Private investors Each technology has different cost-benefit charaecteristics and framework requirements

  6. Costs of the MSP – 20 GW RES-e Source: Mission IGF-CGIET (2009) - Rapport sur le plan solaireméditerranéen

  7. Extra cost burden Source: Mission IGF-CGIET (2009) - Rapport sur le plan solaireméditerranéen

  8. MSP investment prinicples • Reliance on private investors • Public-private partnership (PPP) • Financial feasibility • Variety of technologies • Subsidy-incentive requirements • Energy efficiency (EE) investments should normally be cost efficient • Different country specific situations • In MPCs three situations can be observed: • Electricity supply prices are below the economic costs of supply • Electricity supply prices fully cover the costs of supply • Electricity supply conditions do not permit a reliable electricity supply

  9. MSP projects and financing strategies 2 – MSP investment pipeline

  10. MSP project pipeline 2010 FEMIP / EIB / EUROMED (2010): Study on the Financing of Renewable Energy Investment in the Southern and Eastern Mediterranean Region

  11. Updating of MSP project pipeline (draft)

  12. Updating of MSP project pipeline

  13. Updating of MSP project pipeline

  14. MSP projects and financing strategies 3- RE financing

  15. RE & EE investment categories 3- RE financing

  16. RES-e investment categories 3- RE financing

  17. RES-e investment context 3- RE financing

  18. MSP projects and financing strategies 4 - RES-e economics

  19. Economic and financial analysis Economic analysis • Point of view of the national economy • Costs and benefits valued with social opportunity costs • Use of accounting / shadow prices / border prices • Neglecting of transfers between entities of the economy Financial analysis • Point of view of the project – investment • Analysis with given market prices • Transfers and taxes

  20. Economic and financial considerations • Farafra Oasis /Egypt – PV Project 4 - RES-e economics Source: EMPower Programme – PV case studies for Egypt – Project information memorandum

  21. Economic & financial impacts Economic and financial analysis

  22. RES-e costs and energy price level

  23. Discounting – time preference

  24. RES-e cost development

  25. RES-e long-term transition

  26. MSP projects and financing strategies 5 – Large scale RES-e financing

  27. RES-e framework • Thrust ! • Economic and financial viable energy sector • Long-term perspective • Reliable and transparent framework • Long-term contracts • Efficient administration and procedures • Risk coverage options • Risk ! • Distorted energy prices • Absence of long-term perspectives • Unreliable and intransparent framework • Uncertain contractual basis • Long and unorganised procedures

  28. Project Financing and Risk Management • Project risk • Technological choice and financing terms • Policy risk • Adverse changes in the policy context • Financial risk • Adverse changes in the economic and financial parameters • Legal and regulatory risk • Uncertainties and inconsistencies at regulatory, legal and judicial level • Country risk • Possibility of economic and political disturbances • Force majeur • Natural disasters and other major incidents

  29. Project Financing and Risk Management Source: EMPower (2010) Steps towards bankability Documentation III – PV Business Model

  30. Project Financing and Risk Management Source: EMPower (2010) Steps towards bankability Documentation III – PV Business Model

  31. 24-09-2012 Le consortium mené par Acwa Power International a donc été déclaré adjudicataire de cette première centrale Ozz 1, pour un prix heure de pointe évalué de 1,6187 dirhams ($0,19) par kWh, soit un différentiel de 21% avec l’offre suivante. http://www.masen.org.ma/ ($0,19 / €0,15 par kWh)

  32. UfM - MSP Masterplan process • Build a coherent and comprehensive strategy; • Develop and better use investment support tools; • Develop and better use production support tools; • Design and implement technical assistance tools; • Improve the existing specific financial support for energy efficiency and decentralized renewable energy; and, finally, • Create a structured pipe-line of MSP projects with the support of MSP specific tools.

  33. http://www.eib.europa.eu/infocentre/publications/all/mediterranean-solar-plan-project-preparation-initiative.htm?lang=enhttp://www.eib.europa.eu/infocentre/publications/all/mediterranean-solar-plan-project-preparation-initiative.htm?lang=en

  34. What types of technical assistance can the MSP-PPI support? • Pre-feasibility and feasibility studies; • TA for preparing projects’ technical specifications and tender documents, grid connection studies, etc.; • On-site RE resource assessments or audits; • Environmental and social impact studies; • Detailed analysis of the projects’ financial structure (including an implicit analysis related to the tariffs and subsidies frameworks needed in the subsequent implementation of the project); • Analysis of the economic impacts of the project; • TA for the implementation of the Project Implementation Units (PIUs) related to RE or EE investments; • TA / studies to speed up further project preparation and to accompany the initial stages of the implementation until the start of disbursement of the MSP investment projects.

  35. THANK YOU FOR YOUR ATTENTION Martin Ehrlich m.ehrlich@mvv-decon.com

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