AFRICAN DEVELOPMENT BANK

MOROCCO

NOOR OUARZAZATE SOLAR COMPLEX PROJECT – PHASE I (NOOR OUARZAZATE I POWER PLANT)

PROJECT COMPLETION REPORT (PCR)

Public Discosure Authorized DisclosurePublic Authorized

RDGN/PERN

January 2019

Translated Document

PROJECT COMPLETION REPORT AFRICAN FOR PUBLIC SECTOR OPERATIONS (PCR) DEVELOPMENT BANK GROUP

I BASIC DATA

A Report data

Report date Date of report: 30 September 2018 Mission date (if field mission) From: 5 March 2018 To: 16 March 2018

B Responsible Bank staff

Positions At approval At completion Nono MATONDO-FUNDANI Mohamed EL AZIZI Regional Director Director, ORNB Director General, RDGN Amani ABOU-ZIED Leila F. MOKADDEM Country Manager Resident Representative, MAFO Country Manager, COMA Héla CHEIKHROUHOU Ousseynou NAKOULIMA Sector Director Director, ONEC Director, PERN Zakou AMADOU Tarsim ACHRAF Sector Manager Division Manager, ONEC.1 Division Manager, RDGN.1 Ibrahim KONATE Adama MOUSSA Task Manager Chief Energy Officer Principal Electrical Engineer, COMA/RDGN.1 Alternate Task Youssef ARFAOUI Succès MASRA Manager Chief Renewable Energy Specialist Principal Energy Economist, PERN1 Adama MOUSSA PCR Team Leader Principal Power Engineer, COMA/RDGN.1 Adama MOUSSA Principal Power Engineer, COMA/RDGN.1 Succès MASRA Principal Energy Economist, PERN.1; PCR Team Members Beya IMEN BCHIR Principal Environmentalist, SNSC/RDGN.4 Iman SERROKH Disbursement Assistant, FIFC.3/COMA

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C Project data

Project name: Noor Ouarzazate Solar Complex Project – Phase I (Noor Ouarzazate I Power Plant) Project code: P-MA-FF0-001 Instrument number(s): 1. ADB loan no. 2000130008480 2. CTF loan no. 5560130000101 Project type: Investment project Sector: Energy Country: Morocco Environmental categorization (1-3): Category 1 Processing milestones – Bank Key Events (Bank approved Disbursement and closing dates (Bank approved financing only (add/delete financing only) approved financing only) rows depending on the number of financing sources) Financing source/ instrument1: ADB Financing source/ instrument1: Financing source/ instrument1: ADB loan: EUR 168,000,000 ADB loan: EUR 168,000,000 loan: EUR 100,000,000 Date approved: 16 May 2012 Cancelled amounts: EUR Original disbursement deadline: 31 68,000,000 (24 April 2013) December 2016 Date signed: 19 November 2012 Supplementary financing: N/A Original closing date: 31 December 2016 Date of entry into force: 19 November Restructuring (specify date & amount Revised (if applicable) disbursement 2012 involved): N/A deadline: N/A

Date effective for 1st disbursement: 11 Extensions (specify dates): N/A Revised (if applicable) closing date: N/A June 2013 Date of actual 1st disbursement: 26 July 2013 Financing source/ instrument 2: Financing source/ instrument 2: Financing source/ instrument 2: CTF loan: USD 100,000,000 CTF loan: USD 100,000,000 CTF loan: USD 100,000,000 Date approved: 16 May 2012 Cancelled amounts: 0 Original disbursement deadline: 31 December 2016 Date signed: 19 November 2012 Supplementary financing: N/A Original closing date: 31 December 2016 Date of entry into force: 19 November Restructuring (specify date & Revised (if applicable) disbursement 2012 amount involved): N/A deadline: N/A Date effective for 1st disbursement: 11 Extensions (specify dates): N/A Revised (if applicable) closing date: N/A June 2013 Date of actual 1st disbursement: 26 July 2013 Financing source1: Disbursed amount Percentage Undisbursed Percentage (amount, UA): disbursed (%): amount (UA): undisbursed (%): ADB loan 100 60% 682 40% CTF/ADB loan 75.43 100% - - CTF/World Bank loan 73.04 100% - - AFD loan 77.5 77.5% 22.55 22.5%

1 Fixed project conversion rates (consortium bid rate retained: EUR 1 = MAD 11.1535; USD 1 = MAD 8.4129 2 ADB loan of an initial amount of EUR 168 million, adjusted to EUR 100 million to take into account the project’s real needs (cancellation of EUR 68 million) 3 CTF/ADB loan denominated in USD totalling USD 100 million 4 CTF/WB loan denominated in USD totalling USD 97 million 2

EIB loan 77.5 77.5% 22.56 22.5% KFW loan 100.0 100% - - NIF/EU grant 30.0 100% - - BMU/KFW grant 15.0 100% - ACWA Power Consortium (private) 86 100% - - TOTAL 634 85% 113 15% Co-financiers and other external partners: 1. French Development Agency (AFD) 2. European Investment Bank (EIB) 3. World Bank (WB) 4. Clean Technology Fund (CTF)7 5. Neighbourhood Investment Facility (NIF) of the European Union (EU) 6. Kreditanstalt Fur Wiederaufbau (KFW) 7. German Ministry of Environment (BMU) Executing and implementing agency (ies): 1. Moroccan Agency for Solar Energy (MASEN): Borrower vis-à-vis donors 2. ACWA Power Ouarzazate (APO): Noor Ouarzazate I Power Plant Project Company

D Management review and comments

Report reviewed by Name Date reviewed Comments Country Manager Leila F. MOKKADEM Validated Sector Manager Achraf TARSIM 29/11/2018 Validated Regional Director Mohamed EL AZIZI 30/10/2018 Validated Sector Director Ousseynou NAKOULIMA 06/11/2018 Approved

II Project performance assessment

A Relevance

1. Relevance of project development objective

Rating* Narrative assessment (max 250 words) 4 Poorly endowed with conventional energy resources, the Kingdom of Morocco is almost totally dependent on external markets for its supply of modern energy sources to satisfy the growing demand inherent in its economic development and population growth. This energy dependence was about 95% in 2009.

The acceleration of Morocco’s economic and social development has led to a growth in demand for electricity of 6.5% on average per year since 2000. To meet this demand, and in order to overcome this heavy dependence on external markets for its supply of modern (fossil) energy sources, Morocco is implementing its new National Energy Strategy (2010-2030), adopted in March 2009. The latter seeks to: (i) increase electricity generation from renewable energies; (ii) strengthen supply security and energy availability; and (iii) generalise access to electricity (rural areas) at reasonable costs. These objectives will be achieved through diversification of sources through the development of its national renewable energy potential, the promotion of energy efficiency and closer integration into the regional energy system. By 2020, the installed capacity of electricity generation from wind, hydro and solar sources will each represent 2,000 MW, or a total 6,000 MW of renewable sources. Morocco’s ambition, in the green energy sector, is to develop an energy mix of which 42% will be based on renewable energies in 2020 and 52% in 2030.

5 AFD loan of an initial amount of EUR 100 million, adjusted to EUR 77.5 million to take into account the project’s real needs (cancellation of EUR 22.5 million) 6 EIB loan of an initial amount of EUR 100 million, adjusted to EUR 77.5 million to take into account the project’s real needs (cancellation of EUR 22.5 million) 7 CTF resources were mobilised jointly by the AfDB and the World Bank (as CTF executing agency) and administered equally, or 50% per institution. 3

The Noor Ouarzazate Solar Complex Project, with a targeted total capacity of about 580 MW, is part of the Moroccan Solar Programme known as the “Noor8 Programme”. The Programme has been developed as part of the National Energy Strategy (2010-2030), which aims, by 2020, to develop integrated electricity generation projects from the solar source, for a total capacity of at least 2,000 MW. The Noor Programme will be developed in several sites identified across the country (Ouarzazate, Midelt, Tata, Jerrada, Laayoune, Boujdour, etc.). The Noor Ouarzazate site is situated 10 km north-east of the city of Ouarzazate on a total surface area of 3,043 ha, acquired by MASEN. This surface area is the result of a first acquisition by MASEN in 2011, of an initial plot of 2,500 ha and a second acquisition in 2012 of 543 ha, consisting of three plots adjacent to the initial site. The Noor Ouarzazate Solar Complex is, therefore, the first achievement of the Noor Programme.

* For all ratings in the PCR use the following scale: 4 (Highly satisfactory), 3 (Satisfactory), 2 (Unsatisfactory), 1 (Highly unsatisfactory)

Relevance of project design

Rating* Narrative assessment (max 250 words)

4 The Noor Ouarzazate Solar Complex, with a targeted total capacity of 580 MW spread over four (4) power plants, is the first achievement of the Noor Programme. The development of the complex is planned in three (3) main phases:

- Phase I : construction of a first 160 MW concentrated parabolic trough solar thermal power plant (CSP9) (Noor Ouarzazate I) and common infrastructure that will serve all the phases of development of the Noor Ouarzazate complex (access roads, water and electricity supply, fence wall, telecommunications, security, etc.) ;

- Phase II: construction of two (2) concentrated solar thermal power plants with a total capacity of 350 MW, including a 200 MW parabolic trough power plant (Noor Ouarzazate II) and a 150 MW solar tower power plant (Noor Ouarzazate III) ; and

- Phase III: construction of a 70 MW photovoltaic (PV) power plant (Noor Ouarzazate IV power plant).

The surface areas (rights-of-way) of the above-mentioned solar plants are respectively 480 ha (Noor Ouarzazate I); 610 ha (Noor Ouarzazate II); 583 ha (Noor Ouarzazate III); and about 130 ha, expandable to 230 ha (Noor Ouarzazate IV).

Each solar power plant of the Ouarzazate complex will be built under a Public-Private Partnership (PPP) framework for private electricity generation in the IPP form10, covering the design, financing, construction, operation and maintenance of the power plant concerned for a period of 25 years, for concentrated solar thermal power plants (CSP), and 20 years for the photovoltaic (PV) power plant.

In addition, the Noor Ouarzazate Solar Complex Project is also part of the CTF Investment Plan for the promotion of concentrated solar thermal power (CSP11) in the Middle East and North Africa (MENA) region (“CTF Investment Plan for MENA-CSP (MENA CSP CTF IP”), which aims to develop CSP plants with a cumulative total capacity of one gigawatt (1 GW). This Investment Plan has been prepared with the countries of the region under the auspices of the African Development Bank and the World Bank. It will enable participating countries to take advantage of their solar resources to contribute to the global fight against the effects of climate change, while significantly increasing the global installed CSP capacity. The MENA CSP CTF IP Plan had been initially approved in December 2009 by the CTF Trust Fund Committee and updated in November 2010, May 2013 and June 2014. The first projects to be approved under the Plan are the Noor Ouarzazate Project – Phase I (160 MW) in June 2011 and the Noor Ouarzazate Project – Phase II (350 MW) in June 2014.

8 Noor means “light” or “glare” in Arabic 9 Concentrated Solar Power (CSP) 10 Independent Power Producer (IPP) 11 Concentrated Solar Power (CSP) 4

2. Lessons learned related to relevance

Key issues Lessons learned Target audience (max 5, add rows as needed) 1. Political The unwavering commitment of Moroccan Authorities to the MASEN commitment at the development of renewable energies has provided an ideal Bank highest level of institutional basis for project success. Morocco’s ambition, in the Donors State is necessary to green energy sector, is to develop an energy mix of which 42% will ensure good energy be based on renewable energies in 2020 and 52% in 2030. It is in transition this context that under the medium and long-term actions, the 2,000 MW Integrated Solar Energy Programme (Noor Programme) and the Integrated Wind Energy Programme were, respectively, launched on 2 November 2009 in Ouarzazate and 28 June 2010 in Tangier, with His Majesty King Mohamed VI as chairperson. Regarding more specifically the Noor Solar Programme, this commitment took concrete form in 2010 through two agreements signed on 26 October 2010, which launched the programme’s first activities. These are: (i) the Framework Agreement between the State and MASEN aimed at defining the terms and conditions for implementing the Moroccan Solar Programme; and (ii) the Tripartite Agreement between the State, ONEE and MASEN, aimed at specifying the rules and conditions for the supply, transmission and marketing of the solar electricity generated. Under the Framework Agreement, MASEN undertakes to carry out all the actions necessary to carry out each project with quality and diligence, while the State undertakes to ensure the financial balance of MASEN by integrating the balance of each project. Indeed, given the still relatively high costs of the CSP technologies to be deployed in the two project plants, in comparison with conventional thermal power plants (coal, fuel oil, gas) and hydropower plants operating in Morocco, a financial gap is expected in the operating phase resulting from the difference mentioned above, despite the mobilisation of concessional financing and the downward trend in the costs of solar technologies. 2. Innovative Reduction of project costs by securing the necessary funds for MASEN project structuring debt financing: The construction of the Noor Ouarzazate I power Bank under Public- plant was planned under a Public-Private Partnership (PPP) Donors Private Partnership framework for private electricity generation in the IPP13 form, to reduce the covering the design, financing, construction, operation and levelised cost of maintenance of the plant concerned for a period of 25 years. The electricity financing mechanism provides for the total cost of the Noor (LCOE12) Ouarzazate I power plant to be financed by the debt for 80% and up to 20% by the equity funds of the Solar Project Company (SPC14). The resources needed for the debt are provided by MASEN, which has mobilised and secured the necessary funds from its external financial partners (donors), including the Bank. The resources needed for the debt will be provided by MASEN through a mechanism of retrocession of concessional loans (or Facilities Agreement (FA)) that it will have contracted from its donors. In order not to increase the cost of the electricity that will be generated, the retrocession will be in a single concessional loan to

12 Levelised cost of electricity (LCOE) 13 Independent Power Producer (IPP) 14 Solar Project Company 5

the SPC, on terms and conditions equivalent to a mix of loans contracted (same terms for average maturity but with a potential interest margin in addition to the average interest rate on loans). A facilities agreement will be signed between MASEN and the SPC and will specify the terms and conditions (retrocession/reimbursement of funds). Concessional financing provided by donors has had a substantial impact on reducing project production costs in comparison with commercial loans (reduction of about 5 to 10%).

This scheme: (i) secures financing of the debt by the Borrower (MASEN) from various donors at concessional rates and by lending them to the SPC through a single loan whose terms and conditions are shared with private developers during the bidding process; and (ii) enables private partners to carve out their debt repayment profile and structure the electricity tariff and debt repayments in multiple currencies, at their convenience, and reduce the currency risk. 3. A rigorous Cost reduction through an international competitive bidding MASEN private developer process: The selection of the private partner (developer), to be Bank recruitment process responsible for the design, financing, construction, operation and Donors with quality offers, maintenance (for a period of 25 years) was made through a rigorous resulting in better international recruitment process. The quality of the process and pricing and the competition between the developers provided better (lower) investment levels price and investment levels than expected. than expected

B Effectiveness

1. Progress towards the project’s development objective (project purpose)

Comments Provide a brief description of the Project (components) and the context in which it was designed and implemented. State the project development objective (usually the project purpose as set out in the RLF) and assess progress. Unanticipated outcomes should also be accounted for, as well as specific reference of gender equality in the project. The consistency of the assumptions that link the different levels of the results chain in the RLF should also be considered. Indicative max length: 400 words. The Noor Ouarzazate Solar Complex Project – Phase I enables Morocco to meet its national and international commitments. Its sector goal is to contribute to reducing Morocco’s energy dependence on external markets and imported fossil fuels by developing electricity generation from renewable energy sources using innovative technologies. Its specific objective is to initiate the large-scale deployment of CSP technology in Morocco by constructing the first CSP power plant, Noor Ouarzazate I, with a capacity of 125 to 160 MW, on the site of the Noor Ouarzazate solar complex (with targeted total capacity at completion of 580 MW).

The Noor Ouarzazate I power plant is expected to be developed using concentrated parabolic trough solar thermal power plant (CSP) technology with an installed capacity of 160 MW and an estimated annual output of 500 GWh. Compared to a power plant operating on heavy fuel oil, it will prevent the emission of greenhouse gases equivalent to about 240 thousand tonnes of CO2 per year, or 6 million tonnes of CO2 during the 25 years of its operation. With an average annual per capita consumption estimated at 1,041 kWh in 2016 (Source: ONEE15), the power plant will guarantee the supply of electricity to more than half a million Moroccans. It will be equipped with a thermal power storage system (using molten salt) that will ensure its operation at full capacity for three (3) hours without solar radiation (sunset, cloudy periods), if sunshine conditions (Direct Normal Irradiance, DNI) so

15 In 2016, the net energy demand reached 35,414 TWh for a Moroccan population of about 34 million, or a consumption of 1,014 kWh/capita (source: ONEE 2016 Annual Report – Electricity Branch) 6 permit. The thermal storage system will offer better integration of electricity generation from this solar power plant (parabolic trough CSP technology) into the national electricity grid through the interconnected electricity grid. More specifically, it will enable the Noor Ouarzazate I power plant to cover national demand for electricity at the peak hours defined in the purchase and sale contracts signed between the various parties. As a reminder, peak hours in the demand for electricity on the national electricity grid are respectively from 5 p.m. to 10 p.m. in winter and from 6 p.m. to 11 p.m. in summer. The project, which is implemented under public-private partnership (PPP) through a Project Company, has a single component, namely "Energy Infrastructure and Project Management". Planned activities consist in the development of the Noor Ouarzazate I power plant, with parabolic trough CSP technology, including: site development, solar farm, power plant, electricity evacuation, thermal energy storage system, heat energy transfer systems, cooling systems, environmental and social measures, technical assistance, engineering and development, works control and supervision, project administration and management, audits of project financial statements, monitoring/evaluation, etc. Following an international bidding process launched on 29 July 2010, a consortium, led by the International Company for Water and Power Projects (ACWA Power) (Saudi Arabia) and consisting of technical members (ARIES Ingenieria y Sistemas, SA (Spain) and TSK Electronica y Electricidad (Spain)), was selected in September 2012 as the contractor of the Noor Ouarzazate I power plant. This consortium offered the price per kWh (net of tax) at peak hours, evaluated the most economical at MAD 1.62/kWh (EUR 0.14/kWh or USD 0.19/kWh). The project company (SPC16) of the Noor Ouarzazate I power plant, incorporated under Moroccan law, was created in November 2012 under the name ACWA Power Ouarzazate (APO). It is 75% majority owned by the ACWA Power consortium (composed of APBH17, TSK, ARIES) and 25% by MASEN through its subsidiary MASEN Capital (MASEN K). The Noor Ouarzazate I power plant is constructed by a consortium of Spanish companies (ACCIONA, SENER and TSK) under a turnkey EPC contract18. The ARIES group (Spain) provides consulting engineering services. The DISEPROSA company (Spain) acts as Lender Technical Advisor (LTA). The latter supervises the construction of the plant and validates payment requests. For this purpose, the LTA conducts periodic site visits and reviews the documents provided by MASEN and APO, in order to validate payment requests associated with the various stages of construction of the plant. The FICHTNER firm plays the role of Independent Engineer and is responsible for the supervision of various tests of the main equipment, the commissioning of the plant and the certification of performance tests. Construction and commissioning of the Noor Ouarzazate I plant: The Noor Ouarzazate I plant was deployed very satisfactorily by MASEN and by the SPC created for this purpose under the name "ACWA Power Ouarzazate (APO)". The plant was deployed using the concentrated parabolic trough solar thermal (CSP) technology. It has an installed capacity of 160 MW with an annual electricity production estimated at 500 GWh. It is also equipped with a thermal energy storage system (using molten salt) that ensures its operation (at full capacity) for three (3) hours without solar radiation (sunset, cloudy periods), if sunshine conditions so permit. The Noor Ouarzazate I plant was commissioned in late 2015. Hence, the date of commissioning of the plant was deferred by mutual agreement between MASEN and APO. The first synchronisation of the plant to the electricity grid was carried out on 25 November 2015. The initial date of commercial operation was deferred until 20 January 2016, when the performance tests were successfully carried out, with retroactive effect as of 31 December 2015. The plant was officially inaugurated on 4 February 2016 by His Majesty King Mohamed VI. All the certificates of initial tests were issued by the Independent Engineer and 31 December 2015 was confirmed as the Initial Commercial Operation Date (ICOD). Thus, all the activities involved in the development of the Noor Ouarzazate I power plant were completed and it entered the operation phase since 1 January 2016.

Electricity generation from the Noor Ouarzazate I power plant: In two (2) years of operation (January 2016 to December 2017), the Noor Ouarzazate I plant produced and delivered 814 GWh to the national electricity grid, including 163 GWh (20%) at peak hours and 651 GWh (80%) outside peak hours, and prevented the emission of about 428 thousand tonnes of CO2eq.

16 Solar Project Company 17 ACWA Power Bahrain Holdings 18 Engineering Procurement Construction 7

2. Outcome reporting

Outcome Baseline Most End target Progress Narrative assessment Core Sector indicators (as per value recent (C) towards (indicative max length: 50 words per outcome) Indicator RLF; add more rows (Year) value (expected value target (Yes/No) as needed) (A) (B) at project (% achieved) completion) [(B-A)/(C-A)] Outcome 1 : - 414 GWh 370 GWh 112% Achieved and exceeded: At project Yes National generated per year appraisal in 2012, the Noor Ouarzazate electricity by the from 2016 I plant was planned with an installed generation from Noor capacity of 125 to 160 MW for an renewable Ouarzazat annual output of 370 GWh. At its sources is e I plant completion in 2015, the Noor increased during the Ouarzazate I plant had an installed through the year 2017 capacity of 160 MW with an annual additional output estimated at 500 GWh. During energy 2017, corresponding to its second generated by year of operation, the plant’s output the Noor was 414 GWh against 400 GWh in Ouarzazate I 2016, resulting in a total of 814 GWh plant generated in two years of operation, including 163 GWh (20%) generated at peak hours (5 p.m. to 10 p.m. in winter and 6 p.m. to 11 p.m. in summer), and 651 GWh (80%) outside peak hours. Outcome 2: - 217 240 90% Achieved: Based on ONEE’s Emission Yes Greenhouse gas thousand thousand Factor19, and in comparison with power emissions in the tonnes of tonnes of plants operating on coal or heavy fuel electricity CO2eq CO2eq per oil, the Noor Ouarzazate I plant (160 subsector in avoided year from MW CSP), thus, prevented the emission Morocco are by the 2016 of greenhouse gases equivalent to about avoided with Noor 217 thousand tonnes of CO2 in 2017 the additional Ouarzazat and 211 thousand tonnes of CO2 in electricity e I plant 2016, or a total of about 428 thousand generated by during the tonnes of CO2 in two years of the Noor year 2017 operation. Ouarzazate I plant Outcome 3 : 35% of 30% of 116% Achieved and exceeded: Out of a total Yes Industrial industrial industrial budgeted cost of MAD 7,072 million integration integratio integration for the Noor Ouarzazate I plant, an (local) into n at the equivalent of MAD 5,581 million went solar achieved completion to the EPC contract20. At the end of technologies is at the of the Noor power plant works (in March 2016), initiated and has completio Ouarzazate EPC contract expenditure on local become n of the I power service providers, including the local effective with Noor plant in manufacture of the plant’s infrastructure the deployment Ouarzazat 2015 equipment, amounted to a total of MAD of the Noor e I power 1,940 million, resulting in a 35% Ouarzazate I plant in industrial integration rate21, or 5% more plant March than the contractual target of 30%. 2015

19 Emission factor of 0.5510 t of CO2/MWh 20 Engineering Procurement Construction 21 Ratio of the total amount spent on local services to the total amount of the EPC contract 8

Outcome 4 : - - - 100% Achieved: The Noor Ouarzazate I plant No Morocco’s was constructed and commissioned in trade balance is late 2015 and has an installed capacity improved (in of 160 MW with annual electricity comparison production estimated at 500 GWh. The with imports of power plant contributes to boosting the fossil fuels to positive impact of the solar resource on produce the trade balance of Morocco, which electricity will thus be able to save on foreign equivalent to exchange because of the avoidance of that generated imports of fossil fuels (coal, fuel oil, annually by the gas) needed to produce electricity Noor equivalent to that generated annually by Ouarzazate I the Noor Ouarzazate I plant. power plant) Outcome 5 : - 1,977 800 247% Achieved and exceeded: The number No Creation of temporary of temporary jobs created by the Noor temporary jobs jobs in Ouarzazate I plant had reached its during February maximum level in February 2015 with construction 2015 1,977 on-site temporary jobs. On works of the (maximu average, there were nearly 70% of Noor m number Moroccan workers, 35% of whom were Ouarzazate I reached) local workers from the region power plant (Ouarzazate and Ghessate) Outcome 6: - 78 50 156% Achieved and exceeded: In December Non Creation of permanen 2017, or after two years of operation of permanent jobs t jobs in the Noor Ouarzazate I plant, the number for the December of permanent jobs was 78, including 77 operation and 2017 Moroccans (99%) and 7 women (9%), maintenance of or 28 jobs more than the initially the Noor planned number of 50. The total number Ouarzazate I of local workers from the region plant (Ouarzazate and Ghessate) was 38, or 49% of the total number. The number of workers indicated above does not include workers of the EPC contractor (and its subcontractors) involved in the activities related to the end of construction of the plant and operation and maintenance (O&M).

Rating* (see IPR Narrative assessment methodology) 4 All project outcome indicator targets were achieved and even exceeded in several cases. Therefore, the overall outcome rating is deemed highly satisfactory.

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3. Output reporting

Output indicators (as Most End target Progress Narrative assessment Core Sector specified in the RLF; recent (B) towards (indicative max length: 50 words per output) Indicator add more rows as value (expected target (Yes/No) needed) (A) value at (% achieved) project (A/B) completion) Output 1 : The 1 1 100% Achieved: The Noor Ouarzazate I plant Yes Noor Ouarzazate I (2015) was constructed and completed very power plant, with satisfactorily by MASEN and the SPC, concentrated Acwa Power Ouarzazate (APO). It has an parabolic trough installed capacity of 160 MW and was solar thermal (CSP) deployed using the concentrated parabolic technology for an trough solar thermal (CSP) technology. It installed capacity of has been in commercial operation since 125 to 160 MW, is 31 December 2015. constructed and is operational Output 2 : The 1 1 100% Achieved: The Noor Ouarzazate I plant Yes thermal energy (2015) (160 MW CSP) was equipped with a storage system to thermal energy storage system (using guarantee the molten salt), which guarantees its operation of the Noor operation at full capacity (160 MW) for Ouarzazate I plant at three (3) hours without solar radiation full capacity (160 (after sunset or during cloudy periods), if MW) for three (3) sunshine conditions so permit. The storage hours, without solar system offers better integration of radiation, is electricity generated from this (parabolic constructed and is trough CSP technology) solar plant into the operational national electricity mix through Morocco’s interconnected national electricity grid. It enables the plant to cover national demand in electricity at peak hours from 5 p.m. to 10 p.m. (winter) and from 6 p.m. to 11 p.m. (summer). Output 3: The 1 1 100% Achieved: The SPC of the Noor No Project Company Ouarzazate I plant, incorporated under (SPC22) of the Noor Moroccan law, was created in November Ouarzazate I plant is 2012 under the name ACWA Power created and set up Ouarzazate (APO). It is 75% majority owned by the ACWA Power consortium (composed of APBH23, TSK and ARIES) and 25% by MASEN through its subsidiary MASEN Capital (MASEN K). Output 4 : The 1 1 100% Under the Framework Agreement between No State/MASEN the State and MASEN aimed at defining Specific Agreement the terms and conditions for implementing relating to the Noor the Moroccan Solar Programme (Noor Ouarzazate I plant is Programme), and signed on 26 October signed 2010, a specific agreement should be signed between the State and MASEN and for each project of the Moroccan Solar Programme (Noor). Thus, the specific

22 Solar Project Company 23 ACWA Power Bahrain Holdings 10

agreement between the State and MASEN relating to the Noor Ouarzazate Solar Complex Project – Phase I (Noor Ouarzazate I Plant) was signed on 13 July 2012. The latter defines (i) the mechanisms of economic and financial balance that will benefit MASEN, under the Noor Ouarzazate I Project; (ii) the terms and conditions necessary for carrying out the Noor Ouarzazate I project; and (iii) the specific commitments of the Parties set out in this agreement. It concerns, more specifically, the support (commitment) of the State to ensure the financial balance of the project, if necessary, by covering the difference between the purchase price per kWh by MASEN from the SPC (APO) and the selling price to ONEE. Output 5 : Common 1 lot 1 lot 100% Common infrastructure associated with the No infrastructure Ouarzazate solar complex and to be set up associated with the during phase I, is built (non-project), by Ouarzazate Solar MASEN and ONEE-Electricity Branch Complex is built and (access roads, water supply system, is operational electricity evacuation facilities, telecommunications infrastructure, security, fence wall, various buildings, etc.). All planned infrastructure has been built and completed. Rating* (see IPR Narrative assessment methodology) 4 Physical execution was very satisfactory and all output indicator targets were achieved and exceeded in certain cases (the installed capacity of the Noor Ouarzazate I plant for example is 160 MW against a forecast of between 125 MW and 160 MW). Equipment delivered and installed complies with required international quality standards. The assembly work of this equipment was carried out in the rules of art.

4. Development Objective (DO) rating

DO rating (derived Narrative assessment (indicative max length: 250 words from updated IPR)* 4 The combination of outcome and output ratings, based on the IPR methodology, provides a very good assessment of the progress made by the project in achieving its development objective. The excellent quality of the technical performances and the good output of the Noor Ouarzazate I Plant during its first two years of operation (2016-2017) help achieve quantitative objectives in terms of electricity generation, thus contributing to increase the share of renewable energies in Morocco’s national energy mix and enable the country to meet its national and international commitments to combat the effects of climate change. Indeed, the Noor Ouarzazate I Plant was developed using the concentrated parabolic trough solar thermal (CSP) technology. It has an installed capacity of 160 MW with an annual electricity production estimated at 500 GWh. In comparison with a power plant operating on heavy fuel oil, the Noor Ouarzazate I Plant prevents the emission of greenhouse gases equivalent to about 240 thousand tonnes of CO2 per year, or 6 million tonnes of CO2 for the 25 years of its operation. With an average per capita annual consumption estimated at 1,041 kWh in 2016 (source: ONEE24), the Noor Ouarzazate I Plant guarantees electricity supply, since its commissioning in late 2015, to more than half a million Moroccans, in a country where access to electricity is almost universal with a Rural Electrification Rate (RER) of more than 99.5% at the end of 2017.

24 In 2017, the net electricity demand on the national electricity grid amounted to 37,216.7 GWh (Source: ONEE 2017 Activity Report – Electricity Branch) for a Moroccan population of about 35.2 million inhabitants, or a consumption of 1,057 kWh/capita. 11

5. Beneficiaries (add rows as needed)

Actual (A) Planned (B) Progress towards % of Category (e.g. farmers, students) target women (% achieved) (A/B) Moroccan Moroccan 100% N/A With an annual production estimated at 500 population population GWh, the Noor Ouarzazate I plant guarantees electricity supply to more than half a million Moroccans, in a country where access to electricity has become almost universal (more than 99.5% at the end of 2017). National ONEE 100% N/A The Noor Ouarzazate I solar power plant is Electricity and beneficial for ONEE, since the latter is the Water Authority national operator of the national electricity grid (ONEE) and responsible for satisfying the national demand for electricity. The power plant contributes to meeting the growing national demand for electricity (6.5% on average per year since 2000) generally, and especially at peak hours (5 p.m. to 10 p.m. in winter and 6 p.m. to 11 p.m. in summer), thanks to its thermal energy storage system. Moroccan State Moroccan 100% N/A For the State, the Noor Ouarzazate I solar State plant, constructed under the current project, contributes to reducing the country’s energy dependence and improving its balance of payments, in comparison with electricity generated from plants operating with imported fossil fuels (coal, gas, fuel oil/diesel). Indeed, poorly endowed with fossil energy resources, Morocco imported more than 96% of its growing energy needs between 2002 and 2009. A significant share of these imported fuels was intended to supply conventional thermal power plants operating with fossil fuels (coal, gas or fuel oil). In 2017, net national demand for electricity on the national grid, which stood at about 37 TWh, had been satisfied at 70.2% from fossil fuel plants (coal (46.5%), natural gas (15.5%) and fuel oil/diesel (8.2%)). Production from renewable sources, including the Noor Ouarzazate I plant and imports (mainly from Spain) accounted for 13% and 16.8%, respectively. Moroccan 30% expected 35% local 117% The Noor Ouarzazate I solar plant was companies, rate of local industrial constructed with a 35% industrial integration through a rate of industrial integration rate rate, provided by local Moroccan companies or local industrial integration actually achieved industries. The services of these Moroccan integration in the provided by at the completion companies covered various trades (metallurgy, development Moroccan of the Noor electrical cabling, civil engineering, services, and deployment companies Ouarzazate I power etc.). In the operation phase of the plant, local activities of the plant, thanks to companies will continue to benefit from Noor Ouarzazate various services installation maintenance and service provision I plant provided by contracts. Moroccan companies

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Temporary jobs 800 1,977 247% The number of temporary jobs created in the created in the (February 2015) construction phase of the Noor Ouarzazate I construction plant, had reached its maximum level in phase of the February 2015, with 1,977 workers on the site. Noor Ouarzazate Moroccans accounted on average for 70% of I plant the total number of workers. Local workers from the Ouarzazate region represented, on average, respectively, 25% of the total number of workers and 36% of the total number of Moroccan workers. Permanent jobs 50 78 156% In December 2017, or after two years of created in the (December 2017) operation of the Noor Ouarzazate I power operation phase plant, the number of permanent jobs created of the Noor was 78, including 77 Moroccans (99%) and 7 Ouarzazate I women (9%). The total number of workers plant from the region (Ouarzazate and Ghassate) was 38, or 49% of the total number. The number of workers indicated above does not include the workers of the EPC contractor and its subcontractors, involved in the activities related to the end of construction of the plant and operation and maintenance (O&M). Universities, Universities, 100% N/A The Noor Ouarzazate I plant was, at its grandes ecoles, grandes commissioning in late 2015, the largest single- research and ecoles, turbine CSP plant in the world. It thus offers to development research and Morocco and the rest of the world, an institutes, etc. development opportunity for universities, the grandes ecoles institutes, etc. and other research and development institutes to have reliable statistical data and feedback on the large-scale deployment of CSP technology (CSP plants with capacities greater than 100 MW)

6. Unanticipated or additional outcomes (add rows as needed)

Description Type (e.g. gender, Positive or Impact on climate change, negative project (High, social, other) Medium, Low) Local development plan initiated and implemented: (additional Infrastructure Positive High outcome: The Ouarzazate Solar Complex Project required the Agriculture acquisition by MASEN of land with a total surface area of 3,043 ha Water that was part of a vast traditional community territory belonging to Education the Ait Ougrour Toundout community (Ghassate Rural Municipality). Health This is almost desert land unsuitable for farming, and with no quality Cultural vegetation for pastoral activities (pasture). The surface area represents Training an insignificant fraction of the overall collective usufruct (about 5%). Gender The 3,043 ha were the subject of a land procurement action plan for MAD 32 million (EUR 3 million). At the request of the territorial community concerned by the acquisition, this amount is used to carry out local development projects that have been identified and implemented by the Department of Rural Affairs (DAR, Ministry of Interior), acting as a supervisory organ of this community. DAR organised several sessions to collect needs and prioritise projects, which resulted in a list of agreed projects organised around several components: irrigation facilities; drinking water supply; sociocultural projects; infrastructure projects; cropland protection; road infrastructure projects; health infrastructure projects and education- 13 related infrastructure projects.

At the end of January 2018, a total of about MAD 28 million was committed for various local development projects (irrigation, drinking water, health and education infrastructure, socio-cultural projects, etc.), or nearly 87% of the total budget (MAD 32 million) resulting from the sale of land. The balance available is awaiting the needs expressed by local communities for new local development projects. Voluntary local development activities of MASEN and the SPC, Infrastructure Positive High APO: MASEN and APO (SPC of the Noor Ouarzazate I power Agriculture plant) each have a voluntary social action plan for the local Water population. MASEN’s Local Development Strategy focuses on Education encouraging the territorial development of areas of implantation, Health according to a sustainable model involving the economic, the human Cultural and the environmental. MASEN seeks to maximise the synergies and Training spin-offs of its energy projects by contributing to the fight against Gender poverty, improving the living conditions of people near its electricity generation sites, ensuring shared sustainable economic development, and preserving the environment. Adapting to the socio-economic profile of its areas of implantation, MASEN intervenes in many sectors, including basic infrastructure, education, health and agriculture. The local development strategy adopted by MASEN is based on three areas of intervention: (i) development and animation of regions (agriculture, entrepreneurship, jobs); (ii) improvement of the social environment of the population (health, education, patronage); and (iii) opening up of regions (basic infrastructure). These are targeted actions for the benefit of the local population to support the integration of the Ouarzazate Solar Complex Project into its socio-economic and territorial environment. These actions include the organisation of mobile medical caravans in the Ghassate Rural Municipality, road maintenance, welding training programmes in partnership with the regional branch of the Vocational Training and Labour Promotion Authority (OFPPT), organisation of holiday camps for children, actions to support agriculture and livestock development, sponsorship and patronage (distribution of school supplies, Taznakht carpet festival, Ouarzazate international marathon, etc.).

In addition to the local development activities carried out by MASEN, APO has also implemented a Corporate Social Responsibility (CSR) strategy for the local population. For some targeted actions, MASEN and APO work together for their financing and deployment.

As part of its Local Development Strategy, a total of 100 projects or actions were carried out by MASEN from 2010 to 2017 for a total budget of about MAD 80 million, including nearly MAD 73 million (91%) invested for 55,676 direct and indirect beneficiaries.

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7. Lessons learned related to effectiveness (add rows as needed)

Key issues (max 5, add rows as needed) Lessons learned Target audience 1. The process of selecting the private The process of selecting the private MASEN consortium responsible for the design, consortium responsible for the development Bank financing, construction, operation and of the Noor Ouarzazate I plant under PPP, Co-financiers maintenance of the Noor Ouarzazate I plant for was carried out through a two-stage a period of 25 years, was very competitive and international bidding process, preceded by a resulted in savings between the costs obtained pre-qualification phase. This process was and those estimated at project appraisal very competitive and helped reduce the total cost of the power plant project, which finally amounted to MAD 7,100 million, or EUR 634 million, against an initial estimated cost of about EUR 800 million. The mobilisation of climate funds played a The project received nearly USD 200 MASEN catalytic and predominant role in project million from the Clean Technology Fund Bank financing. (CTF) Trust Fund of the Climate Investment Co-financiers Fund (CIF). These funds, which were jointly mobilised by the African Development Bank (AfDB) and the World Bank, played a catalytic and predominant role in the financial closing and contributed to reducing the levelised cost of electricity (LCOE25) of the Noor Ouarzazate I plant. If the CTF contribution was replaced by conventional financing from international financial institutions, the project’s LCOE would be increased by at least 5%. If this contribution were replaced by commercial loans on the market, the impact on the tariff of the electricity generated by the Noor Ouarzazate I power plant would be about 10 to 15% up.

C Efficiency

1. Timeliness

Planned project duration – years Actual implementation time – years Ratio of planned and actual Rating* (A) (as per PAR) (B) (from effectiveness for 1st disb.) implementation time (A/B) 48 months 36 months 1.3 4 Narrative assessment (indicative max length: 250 words) The project implementation schedule was estimated at 60 months at project appraisal. The latter had been approved by the Bank on 16 May 2012. Financing agreements with the Bank (AfDB and CTF/AfDB) were signed and entered into force on 19 November 2012. The first drawings (disbursements) on ADB and CTF/ADB loans were made on 26 July 2013.

The Public-Private Partnership (PPP) agreement between MASEN and APO on the design, financing, construction, operation and maintenance of the Noor Ouarzazate I power plant for a period of 25 years, was signed on 26 April 2013 and went into force on 12 June 2013. The latter provided for the construction and commissioning of the Noor Ouarzazate I plant for a period of 28 months, from the date of entry into force of the above agreement. Thus, the Initial Commercial Operation Date (ICOD) of the plant had been initially set for 12 October 2015, but this date could

25 Levelised cost of electricity (LCOE) 15 not be sustained due to various factors. This mainly concerns the delay in delivering certain equipment (control system cabinets) and obtaining the land transport authorisations for heavy equipment. In addition, the damage caused by strong winds in August 2014 (broken mirrors, damaged collectors) and interruptions of work and transport of equipment, following the major floods of November 2014, caused delays in the construction of the power plant.

Therefore, the commissioning date of the Noor Ouarzazate I plant was deferred by mutual agreement between MASEN and APO. The first synchronisation of the plant to the electricity grid was carried out on 25 November 2015. The initial date of commercial operation was deferred to 20 January 2016, when all the performance tests were successfully carried out, with retroactive effect as of 31 December 2015. The plant was officially inaugurated on 4 February 2016 by His Majesty King Mohamed VI. All the certificates of initial tests were issued by the Independent Engineer and 31 December 2015 was confirmed as the ICOD date. Thus, all the activities involved in the development of the plant were completed and it entered the operation phase since 1 January 2016.

2. Resource use efficiency

Median % physical implementation Commitment rate (%) (B) Ratio of the median percentage Rating* of RLF outputs financed by all (See table 1.C – Total commitment rate of all physical implementation and financiers) financiers (A) (see II.B.3) commitment rate (A/B) 100% 85% 118% 4 Narrative assessment (indicative max length: 250 words) The international bidding process to select the private consortium for the design, financing, construction, operation and maintenance of the Noor Ouarzazate I power plant, was very competitive. It resulted in quality offers with better (lower) price and investment levels than forecasts. The total budgeted investment cost of the plant eventually amounted to a total of MAD 7,100 million, or about EUR 634 million (at fixed conversion rates of the selected consortium’s offer). Based on forecasts (estimates), MASEN had mobilised more resources than necessary (about EUR 800 million) from donors, leading to the cancellation of part of the external financing thus mobilised. A total of EUR 113 million, corresponding to 17% of the total amount of external financing mobilised for the development of the Noor Ouarzazate I plant, has been cancelled. These are 68 million (ADB loan), 22.5 million (AFD loan) and 22.5 million (EIB loan).

However, it should be specified that the cost of the Noor Ouarzazate I power plant, at project appraisal in 2012, included a significant overall provision of 14% (physical contingencies, implementation uncertainties and price escalation). This relatively significant margin is explained by the fact that: (i) the costs of the concentrated solar thermal (CSP) technology, used in the project, were high and had not yet reached a level of relative stability at the global level; and (ii) the Noor Ouarzazate I plant, being the first achievement of the Noor Programme deployed by MASEN, had no feedback from similar projects except those received from its partners worldwide.

3. Cost benefit analysis

Economic Rate of Return Updated Economic Rate of Return Rating* (at appraisal) (at completion) Not applicable Not applicable Not applicable Narrative assessment (indicative max length: 250 words) At appraisal, the economic viability of the Noor Ouarzazate I plant project was not satisfactory, even when environmental benefits were included. Nevertheless, the project was financed: (i) on the basis of expected global benefits in teaching and learning about the deployment of concentrated solar thermal (CSP) technology for large- capacity plants (greater than 50 MW) such as the current one, whose capacity, at appraisal, was estimated at between 125 to 160 MW; and (ii) because it is the first step in a long-term renewable energy transformation programme for Morocco, and whose benefits cannot be taken into account in a conventional cost-benefit analysis.

However, the project economic rate of return (ERR) was calculated based on the cost/benefit method for a period of 28 years (3 years of construction and 25 years of operation of the plant). The economic costs were estimated on the basis of investment costs, net of taxes, adjusted for conversion factors (equipment, works and services needed to construct the plant) and project operation, maintenance, administration and management costs. Project revenue is that mainly 16 from the sale of electricity to MASEN, which is then resold to ONEE. At project appraisal, the ERR ranged between 1 and 3% considering a discount rate of 10%, depending on whether electricity sales are valued at the selling price to ONEE or the long-term marginal cost of the system. Project ERR just meets the minimum required. From an economic point of view, the project was therefore not justified, but its contribution to the development of solar energy and the fight against climate change justified the support provided by various donors, including the Bank and the Climate Investment Fund. However, the project’s economic and financial model highlights, for the private developer, a minimum rate of return in line with good market practises. The project’s internal financial rate of return (IFRR) was calculated taking into account investment costs, net of customs duties and taxes, and operating and maintenance costs. Project revenue is that from the sale of electricity by MASEN to ONEE, at basic electricity sale rates applicable in Morocco. Since the selection of the private consortium responsible for the design, financing and construction of the Noor Ouarzazate I plant and its operation and maintenance for a period of 25 years is based on the most economical product kWh price, the project will in fact generate a return on investment based on a kWh tariff guaranteeing a minimum of profitability for the project company’s equity funds.

The project will also boost the positive impact of the solar resource on Morocco’s trade balance, which will be able to make savings in foreign exchange because of the expected reduction of imports of fossil fuels (coal, fuel oil, gas). Other positive externalities of the project come from: (i) benefits related to the reduction of greenhouse emissions; (ii) enhanced reliability of electricity supply to productive sectors to improve the competitiveness of national enterprises; and (iii) the valuation of industrial integration measures and job creation.

4. Implementation Progress (IP)

IP Rating Narrative comments (commenting specifically on those IP items that were rated Unsatisfactory or Highly (derived from Unsatisfactory, as per last IPR). (indicative max length: 500 words) updated IPR) * 4 The average of the ratings of individual criteria of Implementation Progress is 4, which is very satisfactory. In addition, no criterion was rated unsatisfactory.

The Noor Ouarzazate I plant project was approved by the Bank on 16 May 2012. The AfDB and CTF/ADB loan agreements were signed on 19 December 2012 between the Bank and MASEN (Borrower). The guarantee agreements relating to the two loan agreements were signed the same day between the Bank and the State of Morocco (Guarantor). The loan agreements entered into force on the date of their signature as mentioned above. The conditions precedent to the first disbursement of the AfDB and CTF/ADB loans were fulfilled on 11 June 2013, or twelve (12) months after project approval. MASEN fully met the other conditions and commitments associated with the Bank’s intervention before 31 December 2013. It also complied with all the provisions set out in the loan agreements signed with the Bank: (i) procurement of goods, works and services; (ii) implementation of financial management systems and submission of audit reports of project financial statements; (iii) establishment of project monitoring- evaluation mechanisms; (iv) transmission of periodic progress reports on a half-yearly basis; and (iv) implementation of environmental and social safeguard measures; (iv) organisation of half-yearly project supervision missions; etc.

Disbursements of AfDB and CTF/ADB loans: The Bank’s financing for the project consists of an ADB loan of EUR 168,000,000 and a CTF/ADB loan of USD 100,000,000. The loan and guarantee agreements related thereto were signed on 19 November 2012, giving effect to their entry into force on that date. The initial deadlines for the last disbursements of the two loans were set for 31 December 2015. That relating to the ADB loan was extended for another one year up to 31 December 2016. Following the cost reduction noted at the end of the bidding process, a sum of EUR 68,000,000 was cancelled on 29 May 2013 on the ADB loan, which currently stands at EUR 100,000,000. The ADB and CTF/ADB loans were disbursed in full on 19 December 2014 and 9 November 2015, respectively.

Physical execution: Project implementation was very satisfactory. The Noor Ouarzazate I plant was constructed, completed and put into commercial operation in late 2015. It has an installed capacity of 160 MW CSP and is equipped with a thermal energy storage system (using molten salt), which ensures its operation at full capacity for three (3) hours without solar radiation (sunset, cloudy periods), if sunshine 17

conditions (Direct Normal Irradiance (DNI)) so permit. The thermal storage system will offer better integration of electricity generated from this solar plant (parabolic trough CSP technology) into the national electricity grid through the interconnected electricity grid. More specifically, the storage system enables the plant to cover national demand for electricity at peak hours (5 p.m. to 10 p.m. in winter and 6 p.m. to 11 p.m. in summer).

The Noor Ouarzazate I power plant was officially inaugurated on 4 February 2016 by His Majesty the King of Morocco Mohamed VI.

5. Lessons learned related to efficiency

Key issues (max 5, add rows as Lessons learned Target audience needed) Was the optimisation of the The bidding process for the recruitment of the private developer Bank technical design of the Noor responsible, under Public-Private Partnership (PPP), for the design, Borrower Ouarzazate I power plant financing and construction of the Noor Ouarzazate I plant, and its Co-financiers decisive in the process of operation and maintenance for a period of 25 years, was carried out selecting the private in two stages, preceded by a pre-qualification phase. The first stage developer? of the bidding process concerns only the submission by competing consortiums of their technical proposals, while the second stage concerns the submission of the revised technical proposals and financial proposals.

The bidding process was launched based on minimal basic technical specifications. The latter concerned a parabolic trough solar thermal (CSP) technology plant with an installed capacity of between 125 and 160 MW and equipped with a three-hour storage capacity. Storage is essential in the power plant’s design as it is the means by which the plant can contribute to the satisfaction of national demand for electricity on the national interconnected electricity grid at peak hours in the evening (5 p.m. to 10 p.m. in winter and 6 p.m. to 11 p.m. in summer).

The minimal specifications thus give more flexibility to bidders (private developers) to propose an optimized design of the plant to meet the requirements in terms of capacity and thermal storage. This approach also gives bidders the opportunity to explore innovative approaches to meet these requirements, while minimising the amount of thermal storage required, which could also have a significant impact on the capital cost of the plant. This approach highlights the value of a two-stage bidding process, preceded by a pre-qualification phase, as was the case.

The selected offer was a parabolic trough solar thermal (CSP) power plant with a capacity of 160 MW and a three-hour thermal energy storage system.

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D Sustainability

1. Financial sustainability

Rating* Narrative assessment (indicative max length: 250 words) 4 In accordance with the Framework Agreement between the State and MASEN, aimed at defining the terms and conditions for implementing the Moroccan Solar Programme (Noor Programme), signed on 26 October 2010, a specific agreement between the State and MASEN for the Noor Ouarzazate Solar Complex Project – Phase I (Noor Ouarzazate I power plant) was signed on 13 July 2012. The latter defines (i) the mechanisms of economic and financial balance that will benefit MASEN under the Noor Ouarzazate I project; (ii) the terms and conditions necessary for carrying out the Noor Ouarzazate I project; and (iii) the specific commitments of the Parties set out in this agreement. It concerns more specifically the support (commitment) of the State to ensure the project’s financial balance, if necessary, by covering the difference between the purchase price per kWh by MASEN from APO and the selling price to ONEE. It should also be recalled that the signing on 26 October 2010 of the Tripartite Agreement between the State, ONEE and MASEN, as part of the deployment of the Moroccan solar programme, sought to specify the rules and conditions for the supply, transmission and marketing of solar generated electricity, thereby guaranteeing the project’s institutional sustainability.

2. Institutional sustainability and strengthening of capacities

Rating* Narrative assessment (indicative max length: 250 words) 4 The institutional sustainability of the Moroccan Solar Programme is based on the commitment of the State to ensure its financial balance, which is a decisive element for the financial sustainability of solar projects, especially those using concentrated solar thermal (CSP) technology, whose costs were relatively high. This commitment took concrete form in 2010 through two agreements signed on 26 October 2010 that helped to launch the current project, which is the first achievement of the Noor Solar Programme. These are: (i) the Framework Agreement between the State and MASEN, aimed at defining the terms and conditions for implementing the Moroccan Solar Programme; and (ii) the Tripartite Agreement between the State, ONEE and MASEN, aimed at specifying the rules and conditions for the supply, transmission and marketing of the solar power generated. Under the Framework Agreement, MASEN undertakes to carry out all the actions necessary for the implementation of each project with quality and diligence, while the State undertakes to ensure the financial balance of MASEN by integrating the financial balance of each project. Indeed, given the still relatively high costs of the solar thermal (CSP) technology that is used for the deployment of the CSP power plants, as is the case for the current project (Noor Ouarzazate I plant), in comparison with the conventional thermal power plants (coal, fuel oil, gas) and hydropower plants operating in Morocco, financial gaps are expected in the operation phase, resulting from the difference between the electricity purchase price by MASEN from project companies and the selling price to ONEE, despite the mobilisation of concessional financing, including climate funds, and the downward trend of CSP technology costs.

3. Ownership and sustainability of partnerships

Rating* Narrative assessment (indicative max length: 250 words) 4 As part of the Public-Private Partnership, two (2) electricity supply and purchase contracts were signed on 19 November 2012, each for a period of 25 years. These are: (i) the contract between MASEN and APO for the supply and purchase of the electricity generated by the Noor Ouarzazate I power plant; and (ii) the contract between MASEN and the National Electricity and Water Authority (ONEE) for electricity supply and resale.

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4. Environmental and social sustainability

Rating* Narrative assessment (indicative max length: 250 words) 4 The project was classified in category 1 by the Bank on 27 April 2011, in accordance with its Environmental Assessment Procedures (2001 version). The Ouarzazate solar complex, in its entirety for a total targeted capacity of about 500 MW, was the subject of a Framework Environmental and Social Impact Assessment (FESIA26) and a Land Procurement Plan (PAT) in 2011. The FESIA, carried out in July 2011, obtained the certificate of conformity issued by the Moroccan Ministry in charge of the environment (environmental acceptability). The complete report of the assessment and the PAT were made available to the public both on the MASEN website (where it is still accessible) and their summaries posted on the AfDB website on 28 October 2011.

After recruitment, by international bidding, of the private consortium responsible for the construction of the Noor Ouarzazate I power plant and its operation and maintenance for a period of 25 years, the project company known as Acwa Power Ouarzazate (APO) was created and set up. The latter conducted the Specific Environmental and Social Impact Assessment (SESIA27) from November 2012 to February 2013. This includes the specific Environmental and Social Management Plan (ESMP28) of the Noor Ouarzazate I solar plant (Volume III of the SESIA), comprising the first phase relating to construction (CESMP29) and the second phase relating to operation and maintenance (OESMP30). The SESIA also obtained the environmental and social certificate of conformity issued by the Moroccan Ministry in charge of the environment (environmental acceptability).

On its part, MASEN and the Electricity Branch of the National Electricity and Water Authority (ONEE) conducted all the environmental and social impact assessments (ESIA) for various common infrastructure associated with the Ouarzazate solar complex (roads, raw water supply facilities, electricity facilities, security infrastructure, etc.). All the above- mentioned environmental and social assessments are available on the MASEN website: http://www.masen.ma/fr/publications/rapports/noor-ouarzazate

From its commercial operation date (in January 2016) to late 2017, or in two (2) years of operation, the Noor Ouarzazate I plant was the subject of several periodic environmental and social audits conducted by the independent firm 5 Capitals. A total of six (6) audits were conducted, covering the following respective periods: (i) date of commercial operation of the plant (January 2016) to July 2016; (ii) August to November 2016; and (iii) December to February 2017; (iv) December 2016 to August 2017; (v) July to September 2017; and (vi) October to December 2017. Audits were also planned during the year 2018. The results and recommendations of these audits are included in the half-yearly progress reports transmitted to donors. According to the results presented by MASEN, no non-compliance was noted during the last quarter of 2017. The few observations noted concern the strengthening of soil protection measures against pollution (increase in the number of spill kits and their location, soil sealing) and the improvement of training reports to better reflect session content.

The corrective action plan implemented during the second half of 2016 enabled the two non- compliances of the first audit to be removed and identified as points for improvement: (i) storage of hazardous materials by waterproofing the deposit sites and/or setting up a drainage system to contain possible leaks; (ii) reporting in writing and documentation of possible cases of incidents avoided; and (iii) compilation of environmental requirements in a single document for better centralisation of information. The action plan was strengthened in 2017

26 Framework Environmental and Social Impact Assessment (FESIA) 27 Specific Environmental and Social Impact Assessment (SESIA) 28 Environmental and social management plan (ESMP) 29 Construction Environmental and Social Management Plan (CESMP) 30 Operational Environmental and Social Management Plan (OESMP) 20

through: (i) training enhancement, especially on the handling of new equipment versus associated risks; (ii) construction and installation of equipment for the management of hazardous waste; (iii) installation of a drainage platform to contain possible leaks during purging operations; and (iv) implementation of an avifauna-monitoring plan. The follow-up of the auditor’s recommendations is a continuous exercise that is part of the routine environmental monitoring of the plant. Awareness and training campaigns on safety and hygiene at work are also organised regularly for workers on the site.

As concerns the implementation of the ESMP in the operation phase, NOMAC31 and APO maintain a good monitoring of air quality in terms of tracking emissions of volatile particles, dust and exhaust fumes; implementation of soil protection measures against erosion and pollution and measures to mitigate noise and vibration; appropriate management of solid waste and wastewater and traffic as well as the monitoring of noise emissions from the Noor Ouarzazate I power plant.

5. Lessons learned related to sustainability

Key issues (max 5, add rows as needed) Lessons learned Target audience Did the water consumption of The Noor Ouarzazate solar complex gets its water supply Government the Noor Ouarzazate I power from the Mansour Eddahbi dam reservoir, with a capacity of Bank plant have an impact on the 440 million m3 and a Regular Annual Volume (RAV) of 250 Co-financiers region’s water resources? million m3 (57% filling rate). The contractual annual volume authorised for the Noor Ouarzazate I power plant is 1.75 million m3, or 0.70% of the RAV of the dam reservoir. During the first year of its operation in 2016 (January - December), the Noor Ouarzazate I power plant recorded a total annual water consumption of 1.7 million m3, or 97% of the authorised contractual annual volume and less than 0.7% of the RAV. Thanks to the water-saving measures implemented in the cooling tower and the steam cycle, the power plant’s annual water consumption decreased significantly by 5% in 2017 compared to 2016. Indeed, the consumption rose to about 1.6 million m3, or about 92% of the authorised annual volume and just under 0.7% of the Mansour Eddahbi dam’s RAV.

31 National Operation & Maintenance Company (NOMAC) 21

III Performance of stakeholders

1. Bank performance

Rating* Narrative assessment by the Borrower on the Bank’s performance, as well as any other aspects of the project (both quantitative and qualitative). See guidance note on issues to cover. (indicative max length: 250 words) 4 The Bank’s performance was very satisfactory during the project cycle. In order to meet the commissioning deadline for the Noor Ouarzazate I power plant, the Borrower (MASEN) had solicited and obtained from the Bank in June 2011, the authorisation to carry out Advance Contracting (AC) for the recruitment of the private consortium that will be responsible for the design, financing, construction, operation and maintenance of the Noor Ouarzazate I plant for a period of 25 years. Given the non-conventional nature of this bidding process and the technical complexity of the plant to be deployed (CSP technology to be deployed for a large production capacity equipped with a thermal energy storage system), MASEN used external expertise through high-level international firms or consultants in several fields (legal, financial, technical, tax, procurement, etc.). The Bank regularly issued non-objection notices within the agreed time throughout the bidding process as well as the other project documents submitted for review (financial audit reports).

During project implementation, the Bank was regularly mentioned as one of the first donors to honour, within the expected time, the disbursement requests submitted to external financial partners during drawing operations (calls) of funds (replenishments of project special accounts). As a reminder, disbursement requests are sent by MASEN to various donors on a pari-passu basis (in proportion to the share of each in project financing). The Bank participated in all the joint supervision missions of donors, or a total of nine (9) missions, the first of which was carried out in December 2013 and the last (the most recent) in March 2018, at the end of which this project completion report is produced. Comments to be inserted by the Bank on its own performance (both quantitative and qualitative). See guidance note on issues to cover. (indicative max length: 250 words) Project supervision by the Bank was carried out at the frequency of two (2) missions on average per year. Indeed, the Bank carried out 11 project supervision missions, the first of which was in October 2013 and the last (more recent) in March 2018. Nine (9) of these supervision missions were joint donor missions. The Bank’s supervision teams were regularly composed of the following experts: electrical engineer, environmentalist, disbursement officer, financial management specialist, procurement expert.

Supervision missions were the framework for fruitful exchanges between donors, MASEN and APO. They met the expectations of stakeholders. The recommendations made by donors, including the Bank, following the supervision missions, were all implemented by MASEN and APO. This same is true of the recommendations from the reviews of annual audit reports of project financial statements. Key issues (related to Bank performance, max 5, add rows Lessons learned as needed) 1. Efficiency of the 1. The Noor Ouarzazate I plant project was supervised by the Bank via two (2) Bank’s supervision supervision missions on average per year from 2013 to 2018. These are usually joint supervision missions involving all the donors involved in project financing, including the Bank, the French Development Agency (AFD), the European Investment Bank (EIB) (an E&S expert), the World Bank (WB), the Kreditanstalt für Wiederaufbau (KfW) and the European Union (EU). These missions enabled the Bank to carry out a half-yearly evaluation of progress made in overall project implementation on all aspects (physical progress of the Noor Ouarzazate I plant and common infrastructure associated with the Noor Ouarzazate complex, financial execution, implementation of environmental and social measures, progress of local development projects, constraints or difficulties encountered and the solutions recommended to remedy them, etc.).

In addition to supervision missions, Bank and MASEN teams have regular exchanges on the overall situation of the project. 22

2. Project 2. Project monitoring at the AfDB is ensured by the COMA energy expert, who thus management by the assumed the role of Task Manager (TM32) from 2013 to 2018. The same is true of Bank’s Country disbursements of AfDB resources that are processed by the COMA Disbursement Office in Morocco Assistant. The two experts mentioned and the COMA Country Programme Officer are (COMA) part of AfDB teams for the project supervision missions led by the project TM.

In addition to the above-mentioned conventional supervision missions, the COMA (Bank) and MASEN (Borrower) teams maintained, throughout the project implementation phase, a regular exchange of views on the progress of the project. Several meetings were held in Rabat at COMA or MASEN premises on specific topics (disbursements, review of audit reports, etc.).

Finally, it should be noted that COMA experts held regular sessions to disclose the results of project supervision missions to the Ministry of the Economy and Finance (Service for Relations with Regional Financial Institutions (SROFR) at the Treasury and External Finance Department (DTFE)).

2. Borrower performance

Rating* Narrative assessment on the Borrower performance to be inserted by the Bank (both quantitative and qualitative, depending on available information). See Guidance Note. (indicative max length: 250 words) 4 MASEN regularly transmitted the half-yearly progress reports, within the agreed time, to all the donors (including the Bank) involved in the Noor Ouarzazate I plant project. The reports were produced using a format that had been approved by all donors in December 2013, during the first joint project supervision mission. Ten (10) half-yearly project progress reports were produced and transmitted to donors. The first report covered the period from June 2013 (start of construction of the plant) to December 2013, thus corresponding to the second half of 2013, while the most recent (10th) concerned the first half of 2018. The progress reports are of very good quality and are very well detailed. They give the precise situation of all project performance indicators (physical progress of the Noor Ouarzazate I plant and all common infrastructure associated with the Ouarzazate solar complex, financial situation, measures to mitigate environmental and social impacts, incidents recorded, industrial integration, creation of temporary or permanent jobs, social actions and local development projects for the population of the project area, etc.).

Similarly, the external audit reports of the financial statements of the Noor Ouarzazate I plant project are regularly submitted to donors and within the time required by the Bank, which is six (6) months after the end of the accounting year. Five (5) external audit reports of project financial statements covering the fiscal years 2013 to 2017 inclusive, were submitted by MASEN to donors, including the Bank, which considered them acceptable, while making the recommendations to be implemented by MASEN and APO. The closing financial report, after the liquidation of payments on all resources, will be produced and submitted to donors.

At the environmental and social level, the Noor Ouarzazate I plant was the subject of several periodic external audits conducted by the independent firm 5 Capitals. In two years of operation (January 2016- December 2018), six (6) environmental and social audits were carried out, covering the period from the commercial operation of the plant (January 2016) to December 2017. Audits were also planned during the year 2018. These audits assessed the impacts of the environmental and social mitigation measures that were implemented.

MASEN was very attentive and receptive to the recommendations made by the Bank following project supervision missions or after the reviews of audit reports and generally implemented them. The youth, dynamism and responsiveness of MASEN teams were also major assets in the conduct and success of the implementation of this first solar project deployed by MASEN and having a complex character on several aspects (financial arrangement under a PPP model, multi-donor context, technology used and capacity deployed, etc.). Key issues (related to Lessons learned

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Borrower performance, max 5, add rows as needed) How did technical Technical assistance was necessary in such a project that is technically very complex because assistance benefit of the technology used (CSP solar technology) and the size of the Noor Ouarzazate I plant to MASEN (from be deployed (160 MW single-turbine CSP). In addition, this was the first solar project project design to implemented by MASEN, which did not, as an entity, have any experience with similar implementation)? projects in terms of both design and implementation.

MASEN thus benefited, in terms of design (technical and financial) and monitoring of project implementation, from the guidance and support of varied technical assistance in various fields (technical, financial and tax, legal, etc.). It is provided by experts or high-level specialised firms.

During project implementation, MASEN also benefited from technical assistance. The ARIES Group (Spain) provided consulting engineering services and the DISEPROSA company (Spain) acted as Lender Technical Advisor (LTA). The latter supervised the construction of the Noor Ouarzazate I plant and validated payment requests. To this end, the LTA carried out several periodic site visits and conducted reviews of the documents provided by MASEN and APO, in order to validate payment requests associated with the various stages of construction of the plant. Finally, the FICHTNER firm played the role of Independent Engineer and was responsible for the supervision of various tests of main equipment, the commissioning of the plant and the certification of performance tests.

In view of the above, technical assistance to MASEN was deemed necessary.

3. Performance of other stakeholders

Rating* Narrative assessment on the performance of other stakeholders, including co-financiers, contractors and service providers. See guidance note on issues to cover. (indicative max length: 250 words) 4 APO Consortium – Deployment of the Noor Ouarzazate I power plant: The Noor Ouarzazate I plant was constructed by a consortium of three Spanish companies (ACCIONA, SENER and TSK), under a turnkey type Engineering Procurement Construction (EPC) contract. The ARIES Group (Spain) provided consulting engineering services. The DISEPROSA company (Spain) acted as Lender Technical Advisor (LTA). The latter supervised the construction of the plant and validated payment requests. To this end, the LTA carried out periodic site visits and conducted reviews of the documents provided by MASEN and APO, in order to validate payment requests associated with the various stages of construction of the plant. The FICHTNER firm played the role of Independent Engineer and was responsible for the supervision of various tests of main equipment, the commissioning of the plant and the certification of performance tests.

The Public-Private Partnership (PPP) agreement between MASEN and APO relating to the development of the plant provided for its construction and commissioning in 28 months from 12 June 2013 (date of entry into force of the contract), with commissioning scheduled for 12 October 2015, but this date could not be sustained due to various factors. This mainly concerns the delay in delivering certain equipment (remote control system cabinets) and obtaining the land transport authorisations for heavy equipment. In addition, the damage caused by strong winds in August 2014 (broken mirrors, damaged collectors) and interruptions of work and transport of equipment following the major floods of November 2014 also took place.

Therefore, the date of commissioning of the Noor Ouarzazate I plant was deferred by mutual agreement between MASEN and APO. The first synchronisation of the plant to the electricity grid was carried out on 25 November 2015. The initial date of commercial operation was deferred to 20 January 2016, when all the performance tests were successfully carried out, with retroactive effect as of 31 December 2015. The power plant was officially inaugurated on 4 February 2016 by His

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Majesty Mohamed VI, King of Morocco. All the certificates of initial tests were issued by the Independent Engineer and the date of 31 December 2015 was confirmed as the Initial Commercial Operation Date (ICOD) of the plant. Thus, all the activities involved in the development of the Noor Ouarzazate I plant were completed and the latter entered its operation phase since 1 January 2016.

MASEN: Construction (non-project) of common infrastructure associated with the Noor Ouarzazate solar complex: The access road to the Noor Ouarzazate solar complex from national road no. 10 (Ouarzazate – Errachidia) was constructed and completed since 2013. The complex’s raw water supply infrastructure (from the Mansour Eddabi dam reservoir located some ten kilometres away), including the remote management system, was constructed and completed in December 2015. The water supply system includes the construction of a water intake at the dam, including the development of an access road, the installation of pumping stations, the laying of raw water pipes, the construction of a settling station, the installation of a remote management and control system, and the construction, within the complex, of a raw water tank with a capacity of 2x15 000 m3 that was completed in June 2014, and from which the various solar plants of the site will be connected. The other common infrastructure (hydrological, telecommunications, security, fence wall, various buildings, etc.) of the complex was also constructed.

ONEE-Electricity Branch: Construction (non-project) of energy evacuation infrastructure: ONEE connected the Noor Ouarzazate solar complex to the interconnected national electricity grid. Indeed, the latter constructed a new 225 kV distribution station (commissioned in April 2015), within the complex, and two (2) new 225 kV lines (commissioned in June 2015), including one for the 225/60 kV substation in the city of Ouarzazate and the other for the 225/60 kV substations in the cities of Tinghir and Errachidia. A third 225 kV line is being built by ONEE (thanks to AFD financing) to connect the 225 kV substation of the Noor Ouarzazate solar complex to the 225/60 kV substations in the cities of Tazart and Tensift. This new line should be commissioned in 2018, or before the solar complex is fully operational, particularly the Noor Ouarzazate II; Noor Ouarzazate III and Noor Ouarzazate IV power plants, scheduled for commissioning in 2018.

Co-financiers: Disbursements of project funds: At the financial level, all donors fully disbursed their respective planned financing before the end of 2017. This financing was mainly intended to cover the debt of the Noor Ouarzazate I plant in the project’s financial package. Similarly, MASEN and APO released all the equity funds expected since July 2015.

For the sharing of documents to the various donors, MASEN set up a secure “data room” platform with access codes that were assigned to the members of the donor teams.

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Key issues (related to performance of Lessons learned (max 5) Target audience (for other stakeholders, max 5, add rows as lessons learned) needed) Did the various donors Yes. Donors collectively appraised the project. During the MASEN sufficiently consult and project appraisal phase, identification, preparation and Bank coordinate with each other? evaluation missions were carried out jointly. Due to the Co-financiers need to co-finance the project and the fungible nature of pooled resources, donors (Bank, World Bank, KFW, EIB, AFD, NIF/EU) agreed on the use of the procurement rules and procedures of one of them. Thus, the majority agreed to use World Bank procurement rules and procedures as the reference for the bidding process to select the private developer of the Noor Ouarzazate I plant.

During the implementation phase (2013-2018), permanent consultation between the same donors was maintained. Thus, project supervision missions were jointly carried out on a half-yearly basis (March and September).

In addition to the above-mentioned missions, several telephone or video conferences were organised by MASEN with donors on specific issues. Regular consultations between the donors and MASEN enabled the latter to agree on several aspects of the project (disbursement mechanism, formats of half-yearly progress reports and interim financial reports, terms of reference of financial audits, implementation of project environmental and social management plan measures, industrial integration, local development, etc.).

IV Summary of key lessons learned and recommendations

1. Key lessons learned

Key issues (max 5, Key lessons learned Target add rows as needed) audience 1. Strong The unwavering commitment and support of Moroccan Authorities to make an Government commitment at energy transition through the development of renewable energies, including MASEN the highest level the solar subsector through the Noor Programme (2,000 MW by 2020) were of State is a decisive and provided an ideal institutional basis for project success. prerequisite for making major Indeed, as part of its new National Energy Strategy (2010-2030), adopted in energy March 2009, the Kingdom of Morocco set itself the goal of developing an transitions. energy mix, of which 42% will be based on renewable energies and 52% in 2030. State support for the project was made concrete even before the start of the project by the signing, in October 2010, of the Framework Agreement between the State and MASEN. The latter defined the terms and conditions for implementing the Moroccan Solar Programme. Subsequently and as provided for in the Framework Agreement, a specific agreement relating to the current project (Noor Ouarzazate I plant) was signed between the State and MASEN in July 2012. The latter defined, inter alia, the economic and financial balance mechanisms of the project, and the terms and conditions necessary for carrying out the project.

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2. Long-term At appraisal, the Economic Rate of Return (ERR) of the project just met the Bank strategy visions required minimum. From the economic point of view, the project was Donors may call into therefore not justified, but its contribution to the development of solar energy MASEN question the in Morocco and the fight against climate change justified the support provided Government relevance of the by the various donors, including the Bank and the Climate Investment Fund. conventional economic and The current project is the first achievement of the Moroccan Solar Programme financial (Noor), which was launched in Ouarzazate in November 2009, under the analysis of the chairperson of His Majesty King Mohamed VI. This programme aims, by donors of certain 2020, to develop integrated solar power generation projects for a total capacity investment of at least 2,000 MW, and the current project (160 MW Noor Ouarzazate I projects. plant) is its first achievement. This programme goes beyond just generating electricity. In addition to promoting the low-carbon development of Morocco’s energy sector and energy security and thus the preservation of the environment, the Noor Programme aims to stimulate major industrial investments in the solar subsector and strengthen Moroccan industrial competitiveness. It also aims to maximise the synergies and spin-offs of solar energy projects by contributing to the fight against poverty by improving the living conditions of the population near its sites through shared local development projects.

In any case, the current project has been of considerable interest at the global level, and the Noor Ouarzazate I plant has shown the world that concentrated solar thermal (CSP) technology can be a real sustainable alternative to conventional technologies of electricity generation from fossil fuels (coal, fuel oil, etc.) 3. An innovative The development of the Noor Ouarzazate I plant was planned within a Public- Bank structuring of Private Partnership (PPP) framework for private electricity generation in the Co-financiers the Public- form of IPP34, covering design, financing, construction, operation and Borrower Private maintenance of the plant concerned for a period of 25 years. The financing Partnership mechanism provides for the total cost of the power plant to be financed up to project can 80% by the debt and the rest, or 20% by SPC equity funds. The resources reduce the necessary for the debt were provided by MASEN, which mobilised and levelised cost of secured the needed funds from its external financial partners (donors), electricity including the Bank. The retrocession of these concessional resources, (LCOE33) including climate funds, between MASEN and the SPC, Acwa Power Ouarzazate (APO), was carried out through a Facilities Agreement (FA). In order not to increase the cost of the electricity to be generated, the retrocession was carried out in a single concessional loan to the SPC, on terms equivalent to a mix of the loans contracted (same terms for average maturity but with a potential interest margin in addition to the average interest rate of loans). Thus, concessional financing provided by donors had a major impact on the reduction of the cost of electricity generated by the project (Noor Ouarzazate I plan), by about 5 to 10% in comparison with commercial loans.

This scheme: (i) secures the financing of the debt by the Borrower (MASEN) from the various lenders at concessional rates and by lending them to the SPC through a single loan, whose terms and conditions are shared with private developers during the bidding process; and ii) enables private partners to carve out their debt repayment profile and structure the electricity tariff and debt repayments in multiple currencies at their convenience and reduce the currency risk.

33 Levelised cost of electricity (LCOE) 34 Independent Power Producer (IPP) 27

2. Key recommendations (with particular emphasis on ensuring sustainability of project benefits)

Key issue (max 10, add rows as Key recommendation Responsible Deadline needed) 1. Is the financial and economic Yes, the financial and economic viability of the project is MASEN In the viability of the project ensured? ensured by the establishment of an institutional Government operation mechanism guaranteeing the financial balance of the phase project. In accordance with the Framework Agreement (from between the State and MASEN, aimed at defining the 2016) terms and conditions for implementing the Moroccan Solar Programme (Noor Programme), signed on 26 October 2010, a specific agreement was signed between the State and MASEN on 13 July 2012 for the Noor Ouarzazate Solar Complex Project – Phase I (Noor Ouarzazate I plant). The agreement aims to define: i) the mechanisms for economic and financial balance that will benefit MASEN, under the Noor Ouarzazate I project; (ii) the terms and conditions necessary for carrying out the Noor Ouarzazate I project; and (iii) the specific commitments of the Parties set out in this agreement. Through the specific agreement, the State undertook to ensure the project’s financial balance (if necessary) by covering the difference between the purchase price of electricity by MASEN from APO and the selling price to ONEE. 2. How is the technical viability The technical viability of the project is ensured by the APO In the of the facilities of the Noor establishment of a contract for operation and MASEN operation Ouarzazate I power plant project maintenance (O&M) of the Noor Ouarzazate I plant. The phase ensured? Noor Ouarzazate I plant project was deployed within a (from Public-Private Partnership (PPP) framework for private 2016) electricity generation, covering the design, financing and construction of the plant, and its operation and maintenance for a period of 25 years. Since the commissioning of the Noor Ouarzazate I plant in late 2015, it has been operated by First National Operation & Maintenance Company Ltd (NOMAC). NOMAC is well established in several countries (Middle East, North and South Africa, Central and Eastern Europe) and provides high-quality services for the operation and maintenance of global energy and water production facilities. Taking advantage of the current project, a local subsidiary, called NOMAC Morocco (limited liability company under Moroccan law), was created and set up. Under an O&M contract signed between APO (SPC of the Noor Ouarzazate I plant) and NOMAC Morocco and MASEN, NOMAC Morocco is in charge of the operation and maintenance of the Noor Ouarzazate I plant, thereby guaranteeing the sustainability and technical viability of the facilities. The (permanent) staff recruited for the operation and maintenance activities of the power plant is essentially made up of Moroccans (77 out of 78 in December 2018, or 99%).

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V Overall PCR rating

Dimensions and criteria Rating* DIMENSION A: RELEVANCE 4 Relevance of project development objective (II.A.1) 4 Relevance of project design (II.A.2) 4 DIMENSION B: EFFECTIVENESS 4 Development Objective (DO) (II.B.4) 4 DIMENSION C: EFFICIENCY 3 Timeliness (II.C.1) 4 Resource use efficiency (II.C.2) 4 Cost-benefit analysis (II.C.3) - Implementation Progress (IP) (II.C.4) 4 DIMENSION D: SUSTAINABILITY 4 Financial sustainability (II.D.1) 4 Institutional sustainability and strengthening of capacities (II.D.2) 4 Ownership and sustainability of partnerships (II.D.3) 4 Environmental and social sustainability (II.D.4) 4 OVERALL PROJECT COMPLETION RATING 4

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VI Acronyms and abbreviations

Acronym (add rows as needed) Full name AFD French Development Agency AfDB African Development Bank COMA Bank (AfDB) Country Office in Morocco CSP Concentrated Solar Power CSP Country Strategy Paper (of the AfDB) CTF Clean Technology Fund EIB European Investment Bank ERR Economic Rate of Return ESIA Environmental and Social Impact Assessment ESMP Environmental and Social Management Plan EU European Union GWh Gigawatt-hours (1 million kilowatt-hours) HV High voltage IFRR Internal Financial Rate of Return KFW Kreditanstalt für Wiederaufbau kV Kilovolts (1,000 Volts) LTA Lender Technical Advisor MAD Moroccan Dirham MASEN Moroccan Agency for Solar Energy MENA Middle East and North Africa MW Megawatt NIF Neighbourhood Investment Facility (of the European Union) ONEE National Electricity and Water Authority PERN Renewable Energy and Energy Efficiency Department (of the AfDB) PPP Public-Private Partnership SPC Solar Project Company TWh Terawatt-hours (1 billion kilowatt-hours) UA Unit of Account USD United States Dollar VHV Very High Voltage WB World Bank

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Annex 1: Project Costs and Financing

Table 1: Cost of the Noor Ouarzazate I Plant Project (in EUR million) Description Estimated Cost at Percentage of cost at completion amount at appraisal appraisal Design and development of a concentrated solar thermal (CSP) plant, with an installed capacity of 125 to 160 MW equipped with a thermal energy storage system to ensure the operation of the plant, at full capacity, for three (3) hours without solar radiation, including mainly site development, solar farms, electricity plants, electricity evacuation 806 634 79% facilities, thermal energy storage systems, heat energy transfer systems, dry cooling systems, environmental and social measures, technical assistance, engineering and development, works control and supervision, tests and commissioning, project administration and management, financial audits, monitoring/evaluation. (*) The process of recruiting a private consortium responsible for the design, financing, construction, operation and maintenance (for a period of 25 years) of the Noor Ouarzazate I power plant was conducted through an international bidding process. The quality of this competitive bidding paid off. Indeed, the bidders in competition had presented quality offers with better (lower) price and investment levels than expected. It should also be noted that, being the Noor Programme project, the costs of the Noor Ouarzazate I power plant had been estimated by MASEN with a significant margin and substantial provision (14%) for technical uncertainties, physical contingencies and price escalation. The loan amounts were adjusted to take into account the real needs of the project.

Table 2: Sources of Financing of the Noor Ouarzazate I Plant Project (in millions) Financing instrument/source Currency Approved Partial Net amount at Disbursement rate of the amount cancellation completion net amount (*) ADB loan EUR 168 68 100 100% CTF/ADB loan USD 100 - 100 100% CTF/World Bank loan USD 97 - 97 100% AFD loan EUR 100 22.5 77.5 100% EIB loan EUR 100 22.5 77.5 100% KFW loan EUR 100 - 100 100% NIF/EU grant EUR 30 - 30 100% BMU (KFW) grant EUR 15 - 15 100% TOTAL Donors EUR 661 113 548 100% ACWA Power (private) MAD 86 - 95 100% Consortium Total financing EUR 747 113 634 100% (*) The loan amounts were adjusted to take into account the real needs of the project

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