Developing renewable energy projects A guide to achieving success in the Middle East Third edition
January 2016 About Eversheds About PwC Eversheds is one of the largest full service law PwC helps organisations and individuals create firms in the world with over 4,000 people including the value they are looking for. PwC is a network more than 500 partners and almost 2,000 legal of firms in 157 countries with more than 208,000 advisers. We have 57 offices across 31 countries people who are committed to delivering quality in within major cities in Europe, the Middle East, Asia assurance, tax and advisory services. and Africa. Established in the Middle East for 40 years, PwC Eversheds Clean Energy Group has advised on has firms in Bahrain, Egypt, Iraq, Jordan, Kuwait, over 30GW of renewable energy projects globally. Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the United Arab Emirates, The team is focussed on advising across all with around 3,500 people. (www.pwc.com/me) technologies from solar, onshore and offshore wind to biomass, hydro, waste to energy and PwC refers to the PwC network and/or geothermal. We specialise in covering the full one or more of its member firms, each of which is a project lifecycle from securing bankable and separate legal entity. Please see www.pwc.com/ marketable development assets to construction, structure for further details. financing, M&A and capital market exit solutions. More information on PwC can be found by visiting Our clients include Governments, institutional us at www.pwc.com. investors and funds, international developers, utilities and banks.
We have over 100 lawyers focussed on the sector Acknowledgements based around the world and in the Middle East Principal authors: Michelle Davies have teams in Abu Dhabi, Dubai, Jordan, Saudi (Eversheds), Bethan Hodge (Eversheds), Arabia, Iraq and Qatar. In Egypt, Eversheds works Shakeeb Ahmad (PwC) and Yanxiang Wang closely with Shahid Law Firm, one of the leading (PwC). law firms in the country. We are currently jointly engaged on a number of infrastructure projects in The report also benefited from the Egypt with Shahid Law, and we are proud to have assistance of MESIA, SASIA and EDAMA, such strong local law capability available through and from the teams at the Climate Bond their office. Initiative and EnerTech.
We are proud to have been awarded MENA This report is available for download Law Firm of the Year 2014/15 by MESIA and from www.eversheds.com/energy and are committed to helping create a successful www.pwc.com/me renewable energy sector in the MENA region.
In association with:
Disclaimer: The information contained in this document is intended as a guide only. Whilst this information is believed to be correct as at the date of publication, it is not a substitute for appropriate legal and financial advice, detailed research or the exercise of professional judgement. No author or contributor can take responsibility for the information contained in this document.
Developing renewable energy projects – A guide to achieving success in the Middle East Contents
Forewords 2 Chapter 1: Egypt 4 Chapter 2: Jordan 24 Chapter 3: Kuwait 42 Chapter 4: Qatar 60 Chapter 5: Saudi Arabia 74 Chapter 6: United Arab Emirates 92
Appendices 120 Appendix 1: Green sukuk to finance low-carbon and climate 121 resilient infrastructure in the Middle East Appendix 2: Renewable energy project financing: 132 environmental and social considerations Appendix 3: An Overview of Investment Treaty Protection 136 Appendix 4: Current Renewable Energy Projects as at 138 January 2016 Appendix 5: References 143
For further information please contact:
Michelle T Davies Tim Armsby Global Head of Clean Energy Head of Energy and Eversheds LLP Infrastructure – Middle East Eversheds LLP T: +44 29 2047 7553 T: +971 (0) 2 494 3630 M: +44 7785 973936 M: +971 (0) 50 611 0891 E: [email protected] E: [email protected]
Jonty Palmer Shakeeb Ahmad Power and Utilities Leader Renewable Energy and Sustainability PwC Middle East PwC Middle East M: +971 56 6838192 M: +971 56 4010074 E: [email protected] E: [email protected]
1 Forewords
2015 was a significant year for the renewable It is this potential to be less reliant on national energy market and for the MENA region. grid infrastructure and base load generation which has the potential to be transformational. Three key developments in the global The third change we have seen is the renewable energy market generally stand potential and appetite for market disruption. out to us as a team. First, the maturity of the It seems that the power sector is asking not core technologies has made these projects if, but when. This means that our sector, as significantly more bankable and marketable ever, will continue to be nimble, prepared to the extent that capital is chasing projects and successful. and institutional capital is able to participate much earlier than before making it easier What does all this mean for the MENA region? for development and construction capital MENA has some of the best renewable energy to be recycled into new opportunities. resource globally. It is also blessed with a The cost of capital in certain markets has growing availability of regionally sourced correspondingly reduced. capital both from banks and funds and from an expert community of developers, technical The maturing of the technologies and the and other advisors. It has Governments which corresponding impact this has had on the understand the opportunity and are prepared approach of funders has allowed key market to engage with the market to ensure that their participants to also mature and refine their programmes work for all. approach so that they are far better equipped now to assess country risk. This is opening up MENA is in a prime position to benefit from a growing number of new markets which may the global momentum which has only been have been challenged even three years ago to spurred on by the recent Paris COP outcome. attract the level of international engagement they are now enjoying. We are honoured and proud to be working in the renewable energy sector in MENA with The second development has been an some of the leading participants and leaders acceptance that storage has the potential to, in this market. We are also delighted to have and very likely will, completely turn traditional such expert partners including IFC, Shahid power market models on their head. In this Law, PWC, MESIA and WFES, all of whom respect three key things are happening. First, have worked hard to ensure that the market the electric car/transport market is emerging maintains its momentum and delivers success with strong confidence that it will be the for its participants. dominant transport technology. Second, storage cost curves are reducing rapidly with Best wishes for a successful and enjoyable 2016. many accepting a cost curve similar to silicon.
Finally, software technology is allowing aggregation of storage and renewable energy Michelle T Davies generating solutions to operate on rapid Global Head of Clean Energy, Eversheds LLP demand response times so as to create virtual power plants. Middle East Law Firm of the Year 2014 and Woman of the year 2013 & 2014
2 Developing renewable energy projects – A guide to achieving success in the Middle East Oil & gas prices remain volatile while the energy policy meets economic policy – for cost of renewables continues to fall. This is job creation, trade, investment and private a major driver behind the developments we sector growth. The International Renewable have seen last year and are expecting for Energy Agency (IRENA), headquartered here 2016 and beyond. in the region in Masdar City, provides us with ample evidence of this trend. Renewable In 2015, the MENA region has seen wind and energy now also features heavily in many solar developments breaking new low-cost of the region’s nationally determined records – this attracted strong international contributions to a global climate change interest and resulted in new project solution which underpins the unprecedented development and investment. Paris Agreement reached at COP21.
Solar PV, is now cheaper than gas for new MENA markets also continue to develop power projects in a number of markets their ability to integrate more and more in the region, as is wind where resources renewables at an operational level – building are strong. But instead of renewables the institutional capacity through new “competing” with conventional power, authorities, policies, regulation and tariffs. their ability to complement and neatly fit This now includes de-centralised renewable into an energy system is now more widely energy generation as seen in Dubai’s solar understood. The strong and continuing rooftop scheme as well as more integrated decline in oil prices also impacts renewables resource planning. in a number of ways: Longer term, it acts as a catalyst further strengthening country’s What should also continue, is the resolve to diversify the energy mix and enhancement of utilities’ capabilities, the economy, decoupling both from price tendering processes and perhaps business volatility and single-fuel dependency. models – to match the needed pace of technology deployment in the coming years. Of course, lower oil prices also put pressure We are seeing transformational change on government revenues in exporting of entities and entire sectors in the MENA countries – which could result in reduced power & water industry, which will also government investment for public utilities, facilitate increased renewables integration. including renewables. To date, this effect has however not been observed: Energy Looking ahead into 2016 the prospects (and water) security remains an utmost of renewable energy in the MENA region priority for decision-makers across the region are vast, exciting and yet not without their and increasing private sector investment challenges. We hope this publication also plays a role. We are hence seeing a provides an overview of the region’s continued thrust for new renewable energy renewable energy landscape and will help projects – despite low oil prices – and we’re both business and Government fully exploit observing increasing targets for renewable the opportunities that renewables can offer energy shares in 2020 and 2030. the MENA region.
Besides costs, we are observing a growing appreciation of the business case for renewables, including the wider socio- economic benefits that can come alongside Jonty Palmer the generated electricity – This is where Power and Utilities Leader, PwC Middle East Developing renewable energy projects – A guide to achieving success in the Middle East 3 Chapter 1: Egypt
Egypt Overview Area 1,001,450 km2 (2015) Population 88.5 m (2015) GDP (PPP) Total: $946.6 b (2014) Per capita: $10,900 (2014)
CO2 Emissions Total: 227.08 m tons (2012) Per capita: 2.65 tons (2011)
Source: CIA Factbook, EIA
Egyptian Power Sector (2014) Installed capacity 32 GW Peak demand 26 GW Peak demand growth 5% Installed capacity requirement by 2020 45 GW
Source: RES4MED, EIU
Retail Price Levels US cents Local Currency (Piastre) Power Min (2015) 1/kWh 5/kWh Max (2015) 8/kWh 60/kWh Fuel Petrol (2015) 34/litre 264/litre Water Min (2014) 3/m3 23/m3 Max (2014) 31/m3 240/m3
Source: Egyptera, Egyptindependent, Numbeo
4 Developing renewable energy projects – A guide to achieving success in the Middle East Key Bodies referred to: CRCICA Cairo Regional Centre for International Commercial Arbitration EEHC Egyptian Electricity Holding Company EETC Egyptian Electricity Transmission Company EgyptERA Egyptian Electric Utility and Consumer Protection Regulatory Agency GAFI General Authority for Investment and Free Zones HCWW Holding Company for Water and Wastewater MOEE Egyptian Ministry of Electricity and Renewable Energy NREA New and Renewable Energy Authority OPEC Organization of the Petroleum Exporting Countries UNCITRAL United Nations Commission on International Trade Law
Key Terms used: BOO Build Own Operate BOOT Build Own Operate Transfer BIT Bilateral Investment Treaty FIT Feed-in-Tariff GDP Gross Domestic Product GW Gigawatt IPP Independent Power Producers JSC Joint Stock Company kWh Kilowatt Hour LLC Limited Liability Company MW Megawatt PPA Power Purchase Agreement PV Photovoltaic RE Renewable Energy TSO Transmission System Operator
Developing renewable energy projects – A guide to achieving success in the Middle East 5 Egypt
1.1. Context and Key Drivers
Egypt is the largest non-OPEC oil Furthermore, the large scale producer in Africa and second largest deployment of renewable natural gas producer. However, it is energy would: also the largest oil and natural gas consumer in Africa. Natural gas and • Free up gas for more profitable oil are the primary fuels used to meet uses: Potential natural gas exports energy demand, and accounted for in Egypt have previously been 85% of total energy consumption diverted to the domestic market in 2014. to meet growing energy demand. Consequently, Egypt’s gas exports A shortage of natural gas is a declined by an annual average of contributing factor in Egypt’s frequent 3% from 2009 to 2014. Developing electricity blackouts since 2011. Egypt domestic renewable energy would Government is actively closing the ensure that more natural gas is gap by importing liquefied natural available for export. gas (LNG) and building new power plants. The new West Nile Delta • Meet growing demand: Egypt’s offshore natural gas project will peak demand is expected to grow at increase the gas supply by 25% from a rate of 5% annually. This increase late 2017. Increasing Egypt’s domestic in demand and declining oil and gas renewable energy capacity will help production mean that Egypt needs diversify its energy mix and improve to diversify energy production to fill energy security. these gaps or face further electricity blackouts.
Egypt’s gas exports declined by an annual average of 3% from 2009 to 2014.
6 Developing renewable energy projects – A guide to achieving success in the Middle East • Leverage the advantageous geography and climate: Egypt Egypt has very rich has very rich renewable energy renewable energy resources. The global horizontal resources. irradiance is 2,450 kWh/m2/year, and direct normal radiation is 2,800 kWh/m2/year. Wind full load hours at 3,015 hours/year is the highest among Arab countries, especially in the Gulf of Suez.
Zafarana Wind Farm1
Developing renewable energy projects – A guide to achieving success in the Middle East 1 Courtesy: Deutsche Welle (DW) 7 Egypt
1.2. Market Readiness
Recent political upheavals, while GDP. The subsidies have fallen due increasing overall market risk, have not to the lower oil prices in 2015 as affected Egypt’s long term commitment well. The Government has published to renewable energy. Although private details of further tariff increase to be sector investment in renewable energy implemented in coming years with is a relatively new market in Egypt, the aim of achieving a break even the country’s high potential and the point and fully remove subsidies by government’s commitment to increasing 2018. Egypt is also in the process of its renewable energy output make it an implementing a smart card system attractive investment opportunity. to re-target subsidies towards those most in need. Key initiatives which demonstrate Egypt’s commitment to renewable • Feed-in-tariff: In September energy include: 2014, the Egyptian Ministry of Electricity and Energy announced • Energy subsidy reform: Electricity specific feed-in-tariffs for electricity subsidies cost the government generated by distributed solar almost $2 billion in 2013-14 in and wind sources as part of the addition to fuel products subsidies government’s efforts to increase the of about $14 billion, which country’s energy capacity in the face contributed to a high budget deficit. of the serious power shortage in the However, the Egyptian government medium term. has recognised the regressive nature of these subsidies and committed to subsidy reform. In early 2013, the government increased slab tariffs for electricity for heavy industries, reduced subsidies on Electricity subsidies inputs for electricity producers, and cost the government increased tariffs for households almost $2 billion in 2013- 14 in addition to fuel that consumed more per capita. In products subsidies of July 2014, the government raised about $14 billion, which prices for subsidized petroleum contributed to a high products which saved subsidies in budget deficit. the government budgets by 2% of
8 Developing renewable energy projects – A guide to achieving success in the Middle East • Dedicated funds: In January 2012, • Land access: The government has the Cabinet approved a renewable allocated more than 7,600 km2 of energy fund dedicated to financing desert land for deployment of future renewable energy projects. Clear public and private wind farms. All determination of sources of financing permits for distributing this land have and procedures for disbursement of been handed over to NREA. funds to renewable energy projects are still under discussion.
• Renewable energy-focused The government has research centers: The New and allocated more than 7,600 km 2 of desert Renewable Energy Authority land for deployment (NREA) is the Government entity of future public and responsible for promoting and private wind farms. supporting renewable energy. The Energy Research Center and Cairo University are the main technical research centers in Egypt.
1.3. Current Project Status
Given the need to reduce national In January 2015, the Egyptian dependence on residual domestic and president Abdel Fattah El Sisi said imported gas, Egypt has announced that the country would maintain its that it will place greater emphasis on its aggressive energy strategy, which considerable solar and wind potential. includes 4.3GW of renewable energy projects through the FIT scheme. The Egyptian government expects the Solar accounts for 1,300MW and wind renewable energy sector to produce accounts for 2,000MW. In June 2015, 20% of total power generation by 2022, Siemens signed a contract to provide 12% of which will be generated by wind 16.4 GW of electricity capacity which energy alone. includes 2,000MW of wind projects. In the same month, NREA awarded Desert Both wind farms and the secondary Technologies and Enerray SpA two 50 priority area of biodiesel production are MW PV projects through the Feed-in- supported by the country’s abundance Tariff Program in Benban. of land, stable climate conditions and
Developing renewable energy projects – A guide to achieving success in the Middle East competitive labour force. 9 Egypt
NREA stated in early 2015 that 67 solar In addition to the FIT scheme, EETC is applicants and 27 wind applicants tendering for a 250 MW wind project have been selected to take part in in the Gulf of Suez and a 200MW solar developing over 4.3 GW of renewable PV project, both under build, own energy projects in the country. As and operate contracts. Four out of six this Guide goes to print, most of the eligible consortia submitted their bids PV developers have been allocated for the wind projects. Furthermore, land by NREA in Benban (Aswan), the EETC tendered for a 250MW wind Zafarana (Gulf of Suez) or West of Nile, project, a 200MW solar PV project and and a number of wind developers a 50MW CSP project in the West Nile have been allocated land in the Gulf of area. The process of evaluation of the Suez. The allocation is temporary and tenders was initiated in late 2015. As is done on the basis of a memorandum this Guide goes to print, the winners of of understanding to undertake the the tenders have not been announced. necessary site measurements for the projects by the developers.
Key Renewable Energy Facts Installed Capacity 4.8 GW
Pipeline Capacity 880 MW
Targets 20% by 2022
Implied Capacity 10 GW
Source: EIU, REN21
Current Renewable Energy Projects Status Project Technology Status Size Location
Kom Ombo PV PV Main 200 MW Aswan Contract Bid
Gabal El Zeit Wind Execution 220MW Suez
Gulf of Suez Wind Main 250 MW Suez Contract Bid
Gulf of Zayt Wind Execution 120MW Red Sea
Assiut Barrage & Hydropower Hydro Execution 40 MW Asyut Plant
Egypt Ministry of Electricity & Wind Complete 200 MW Gabal El Zeit Energy – Gabal El Zeit Wind Farm
10 Developing renewable energy projects – A guide to achieving success in the Middle East Current Renewable Energy Projects Status Project Technology Status Size Location Kureimat Hybrid Power Plant: PV Complete 20 MW out Cairo Solar Island Package of 140 MW
Zafarana Wind Complete 545MW Suez
Naga Hammadi Barrage Hydro Complete 64 MW Naga Hammadi
Power Plant in Benban PV Execution 100 MW Benban
Source: MEED
1.4 Regulatory Policies
Committed to the development of the out the general rules for its capital, renewables sector, Egypt passed the management, profits distribution Renewable Energy Law in December and auditing, etc. 2014. The new law sets out the regulatory framework for renewables • Investment Law No. 8 of the in Egypt. The executive regulations of year 1997 (as amended by Law the law have not yet been issued. A new No. 17 of the year 2015) and its Electricity Law was also passed in July Executive Regulations issued 2015, which completely reforms the by Prime Ministerial Decree No. electric utility. 1820 of the year 2015 – Mainly sets out investment incentives, In addition to the Renewable Energy Law customs exemptions, the allocation and the new Electricity Law, a number of of land to investors and the means existing policies and regulations remain of settlement of any disputes arising applicable to the sector. between the investors and the relevant Egyptian authorities. Current Policies and
regulations A new Electricity Law was also passed in July • Companies Law No. 159 of the 2015, which completely year 1981 and its Executive reforms the electric utility. Regulations (as amended) – Establishes the requirements for the incorporation of the SPV and sets Developing renewable energy projects – A guide to achieving success in the Middle East 11 Egypt
• Renewable Energy Law No • Electricity Law No. 87 of the year 203 of year 2014 – Governs the 2015 – This new Electricity Law establishment of power generation introduces fundamental changes projects from renewable sources, to the structure and behaviour of and generally sets out the rules the electricity market to ensure applicable to the allocation of land a liberalised market. Generally, it for such projects, the connection to establishes a competitive electricity the national grid and the sale of the market that encourages private power generated from such projects sector involvement (through in accordance with the feed-in tariff. project companies set up in Egypt in the form of joint stock • Prime-Ministerial Decree No. 1947 companies) in the generation of the year 2014 – Establishes feed- and distribution of electricity, by in tariffs for electricity generated creating an atmosphere which from renewable sources. The attracts investments to the energy purpose of the feed-in tariff is to sector. Under the new Law, the guarantee a fixed price for energy role of EEHC is shifting towards producers (for 25 years for solar a supervisory role and more free energy projects and for 20 years competition is introduced in the for wind projects) to encourage production, transfer, distribution investment into the renewable and sale of electricity for the non- energy sector. regulated market. EETC becomes an independent company under • EgyptERA SPV Incorporation the new Law and has the exclusive Guidelines issued on 17 March responsibility of electricity 2015 – Sets out the rules applicable transmission and network operation. to the incorporation of FIT project EETC also has the obligation to allow companies as well as those third parties to use its networks with applicable to such companies equal opportunities. EETC must following commercial operation. make available information about
The new Electricity Law is expected to be the main legislation governing the power sector in Egypt.
12 Developing renewable energy projects – A guide to achieving success in the Middle East its activities for the commercial Upcoming policies and benefit of the agencies working in regulations the electricity sector. The Law also reorganises EgyptERA by giving it a more extensive role in the electricity • The Executive Regulations of the market and separating it from the Renewable Energy Law – Expected MOEE. Further, both EETC and to regulate in detail the subject of EgyptERA now have an obligation power generation from renewable to ensure the efficiency of the sources. electricity sector; EETC must operate the electricity transmission system • The Executive Regulations of the in a manner that achieves efficiency New Electricity Law – Expected and stability and EgyptERA must to be issued soon to regulate in develop rules and procedures to detail the new market structure raise the efficiency of electricity and the revised roles of the electric usage and prevent any monopolistic utility entities, such as EEHC, EETC, practices in the sector. The Law EgyptERA and NREA. Notably, EETC ensures availability of supply to users ceases to be affiliated to EEHC at equitable prices while taking under the new Electricity Law and into consideration environmental is expected to be transformed into aspects and mandates that the tariff a Transmission System Operator of electricity must be approved by (TSO). EgyptERA before being officially issued. The Law also complements the Renewable Energy Law by encouraging renewable energies and power generation from secondary resources.
Developing renewable energy projects – A guide to achieving success in the Middle East 13 Egypt
1.5. Governing Laws
Counterparties and governing laws
A developer will need to enter into a number of contracts to develop a renewable energy project in Egypt. We set out below the relevant counterparty and law applicable to each of the key contracts:
Contract Counterparties Governing law
Real Estate Contract Owner/Landlord Egypt (freehold/leasehold) for the SPV premises
Usufruct Agreement for the New and Renewable Energy Egypt project’s plot of land Authority
Usufruct Agreement and New and Renewable Energy Cost Sharing Agreement Authority and Lenders Direct Agreement
SPV Bylaws Shareholders Egypt
Network Connection Egyptian Electricity Egypt Contract Transmission Company
Cost Sharing Agreement Egyptian Electricity Egypt Transmission Company and New and Renewable Energy Authority
Network Connection Egyptian Electricity Contract and Cost Transmission Company, Sharing Agreement Direct Ministry of Finance and Agreement Lenders
Renewable Energy Power Egyptian Electricity Egypt Purchase Agreement Transmission Company
Renewable Energy Power Egyptian Electricity Egypt Purchase Agreement Direct Transmission Company, Agreement Ministry of Finance and Lenders
14 Developing renewable energy projects – A guide to achieving success in the Middle East Contract Counterparties Governing law
Guarantee Ministry of Finance Egypt
EPC Contract Third party contract Negotiable
Operation and Management Third party contractor Negotiable Contract
The choice of the governing law of the finance documents is usually subject to the agreement of the parties. If finance is not obtained from Egypt, it is common for finance documents to be governed by English Law. Egypt allows both Islamic and Non – Islamic finance.
Dispute resolutions/ Egypt has a well- developed court system considerations of three tiers: the court of first instance, the Court Egypt has a well-developed court system of Appeal and the Court of three tiers: the courts of first instance, of Cassation. the Court of Appeal and the Court of Cassation. Further, the Cairo Regional Save where the Egyptian courts or Centre for International Commercial local arbitration through CRCICA have Arbitration (CRCICA) is a well- mandatory jurisdiction, international established venue for the settlement arbitration is often favoured as a dispute of disputes either through mediation resolution mechanism in key contracts. or arbitration. CRCICA has been active for thirty-five years administering both Egypt is a signatory of both the ICSID domestic and international cases, and and the New York Convention on the has handled over 1,000 cases covering Recognition and Enforcement of Foreign a wide range of sectors. Additionally Arbitral Awards. Egyptian courts have a CRCICA has a very diverse list of good record of enforcing foreign arbitral arbitrators from different countries in the awards. world, and also from different fields in order to best accommodate the diverse Egypt is also a signatory of a number cases it handles. of bilateral and multilateral treaties for reciprocal enforcement of judicial The Egyptian Arbitration Law No. 27 of awards such as the Riyadh Convention year 1994 follows the principles of the on Judicial Cooperation between States International Chamber of Commerce of the Arab League. and the United Nations Commission on International Trade Law (UNCITRAL) Developing renewable energy projects – A guide to achieving success in the Middle East arbitration rules. 15 Egypt
Bilateral investment treaties Egypt is not a party to the Energy Charter Treaty. Although it has Observer Status in the organisation, A member of the World Trade this does not allow investors to Organisation since 1995, Egypt is party invoke the investor – State arbitration to numerous regional and international provisions in the Treaty. trade initiatives and market access agreements. Accordingly, if an investor wishes to access investment protections for a Among others, Egypt is party to the clean energy investment in Egypt, it Agadir Free Trade Declaration, Greater should consider not only whether a Arab Free Trade Agreement, Common treaty is in place between Egypt and Market for Eastern and Southern Africa the investor’s home State, but also Trade Agreement and Egypt-EFTA the terms of the potentially applicable Free Trade Agreements. treaty or treaties to evaluate whether its investment will be covered by one Egypt also has a wide network of or more treaties. Careful structuring Bilateral Investment Treaties (BITs). of an investment can allow an investor There are currently 112 BITs signed to maximise its protection under and in force. These include BITs with international investment protection Australia, China, Denmark, France, instruments. Spain, India, Kuwait, Malaysia, Russia, Switzerland, United Arab Emirates,
Indonesia, United Kingdom, Japan, South Africa and the United States. Egypt has been a member of the World Other BITs are being negotiated. Trade Organisation since 1995. Egypt’s BITs secure the common protection of expropriation without compensation, free transfer of investments and returns, most favourable nation treatment, fair and equitable treatment and provision of full protection and security of foreign assets and rights.
16 Developing renewable energy projects – A guide to achieving success in the Middle East Employment considerations • Termination of Employment Contracts – Developers should be aware of the rather restrictive Employment relationships are Labour Law provisions in relation governed by the Labour Law No. 12 of to the classification of definite and year 2003 (Labour Law). indefinite employment contracts and the applicable termination The Labour Law applies to private processes. sectors employees regardless of their activities. Save for limited exceptions, • Distribution of Dividends – At the Labour Law does not differentiate least 10% of the net profits of a between Egyptian and foreign joint stock company determined for employees. Investors should be aware distribution should be distributed of the following employment-related to the employees provided that considerations: such distribution does not exceed the total annual salaries of the • Annual Pay Rise – The Labour Law company’s employees. sets out a mandatory pay rise of wages at a rate not less than 7% of A ratio of at least nine the employee’s basic salary on which Egyptian employees social contributions are calculated. to every foreigner is applicable to employers • Guarantee of Benefits – The Labour wishing to hire foreign employees, unless Law generally does not allow the specially exempted. decrease of the employees’ benefits. Also special disciplinary rules set out in the Labour Law apply, and dismissal of employees must be pronounced by the Labour Tribunal.
• 9:1 Ratio – A ratio of at least nine Egyptian employees to every foreigner is applicable to employers wishing to hire foreign employees, unless specially exempted.
Developing renewable energy projects – A guide to achieving success in the Middle East 17 Egypt
1.6 Investment Considerations
Setting up a business The SPV (in the form of a JSC) must be incorporated by a minimum of three shareholders, including the • Incorporation – Generally foreign lead developer and other qualified investors would invest through investors. The winning consortium a limited liability company (LLC) (or single developer) must hold at or private joint stock company least 51% of the capital of the SPV (JSC). Save in certain specified at least until commercial operations sectors, 100% foreign ownership is date (COD) and the lead developer permitted. A LLC is the simplest form must alone hold not less than 25% of of company and may be managed such capital at least until the lapse of by one or more managers. It has no two years from COD. minimum capital and its capital is not divided into shares. A JSC has a The minimum capital requirement of EGP • Maximum Capacity – authorized MW capacity for any SPV 250,000 and its capital is divided awarded a PPA for a solar or wind into shares. It is managed by a board project under the FIT scheme may of directors. not exceed 50MW per site.
FIT projects must be incorporated in the form of a JSC with a minimum capital requirement determined A LLC is the simplest by NREA. This is at the moment set form of company and at EGP 15,000,000 for over 20MW may be managed by one up to 50MW capacity, and at EGP or more managers. 6,000,000 for 20MW capacity.
Pursuant to the general corporate rules applicable, the payment of the issued capital of SPVs may be apportioned as follows: 10% of the issued capital must be paid at incorporation, to be topped up to 25% within three months from incorporation, and the remaining 75% to be paid within five years from incorporation.
18 Developing renewable energy projects – A guide to achieving success in the Middle East • Participation – The total share Unit. Changes of ownership within a capital of any member in several maximum of 49% of the share capital consortia may not exceed the of the SPV are allowed provided that total capital required to establish they are in line with the EgyptERA FIT projects with a capacity of SPV Incorporation Guidelines and 100MW per site per technology following the approval of GAFI. (solar PV or wind), provided that EgyptERA must be notified of each shareholder shall present any change in the shareholding a declaration disclosing its structure following the issuance of shareholding percentages in the the generation licence. The revised share capital of other qualified SPVs. version of the project documents However, after the lapse of two years including the Cost Sharing from commercial operation, the total Agreement and the Power Purchase participation cap requirement will be Agreement have introduced a waived. number of limitations of the change of ownership and control, so this • Change of Ownership – The lead issue must be carefully looked at developer may not be changed on a case-by-case basis to ensure before the second anniversary compliance with the legislative and of the commercial operation. contractual framework in place Consortium members may be before effecting any changes. replaced or changed by an equivalent or superior party prior to the incorporation of the SPV, subject to confirmation by the Feed-in Tariff
Developing renewable energy projects – A guide to achieving success in the Middle East 19 Egypt
Development assets – real Permitting estate, security In both BOO and FIT projects, the NREA is responsible for the allocation bidder is responsible for obtaining of Government owned plots of land the necessary permits and licences to developers for the establishment to carry out operations. In addition to of their solar and wind FIT projects. any permits which must be obtained The land is allocated to developers for the incorporation of the SPV on a usufruct basis for a term of or the transfer of its ownership, twenty-five years for solar projects the production and sale of energy and twenty years for wind projects produced from renewable sources in consideration for two per cent of must be authorised by EgyptERA the value of the sold energy. Material and an operating licence must also permits are already in place for such be obtained from the Industrial plots. A usufruct is usually provided for Development Authority for the BOO schemes as well. generation of power. Further, a construction permit must be obtained Payment structures for any permanent constructions forming part of the power plants.
For FIT schemes, following the For the site of Benban, NREA has incorporation of the SPV, agreements obtained all site-wide permits as a will be signed with EETC, NREA and facilitation for the developers. the Ministry of Finance (see section 1.5(a) above). The sale of power is dealt with under the Power Purchase Agreement. For BOO schemes, a PPA is entered into with the successful bidder following evaluation of technical and commercial proposals.
20 Developing renewable energy projects – A guide to achieving success in the Middle East 1.7 Support Mechanisms
Bidding processes The land is allocated on a first-come first-served Under BOO schemes, tenders basis based on the tend to follow a route similar to the investors’ preferences and the plots’ availability. conventional power sector in that there will be a prequalification round following which bidders will submit In 2014, when the FIT scheme was technical and commercial proposals launched, all qualified developers who for evaluation, and subsequently EETC did not have access to private land for will enter into a PPA with the successful their FIT project were entitled to apply bidder. The government will provide to NREA for the allocation of land. The the site in BOO schemes. land is allocated on a first-come first- served basis based on the investors’ In the mid-1990s, independent preferences and the plots’ availability. power producers (IPPs) participated The developers are granted access to in the electricity generation field the land for a period not exceeding through the construction of privately- fifteen months to undertake the developed power plants under BOOT necessary technical measurements arrangements and 20-year power and studies, upon the signing of a purchase agreements. memorandum of understanding for land access with NREA. In the early-2000s, the government invited offers from private developers The capital of the SPV can be used, to qualify in international competitive immediately following incorporation, bids issued by EETC to operate towards the payment of all costs renewable energy farms under BOO involved in the FIT project. arrangements.
Developing renewable energy projects – A guide to achieving success in the Middle East 21 Egypt
Support mechanisms – key • Network Connection Contract: points on PPAs, FITs etc Sets out the terms and conditions on which the power producer may connect to the transmission system Fichtner Consulting was recently and use it to supply electricity to appointed by NREA to draft/redraft the buyer under the Power Purchase the Power Purchase, Usufruct, Agreement Connectivity, Cost Sharing and Direct Agreements. These draft documents • Usufruct Agreement: Establishes were made available to the developers the user’s rights of usufruct over the on 09 April 2015. Following a series of FIT site and the basis on which the comments raised by the developers user may use the site. and lenders, a revised version of the documents was produced, and the • Renewable Energy Power Cost Sharing Agreement was the Purchase Agreement Direct first to be issued (in November 2015) Agreement: Provides for the among the revised documents. financiers’ right to step into the Power Purchase Agreement in case • Cost Sharing Agreement: Creates a of an SPV default. It also includes framework for each Developer to pay a guarantee from the Government its share of costs to enable EETC and over the buyer’s payments under the NREA to construct energy and road Power Purchase Agreement. infrastructure necessary for the FIT
• Renewable Energy Power Purchase Agreement: Sets out all technical, commercial and legal terms and conditions for the construction, operation and maintenance of the FIT facility and the sale and purchase of electricity.
22 Developing renewable energy projects – A guide to achieving success in the Middle East With special thanks to:
Girgis Abd El-Shahid Donia El-Mazghouny Partner Attorney at Law Shahid Law Firm Shahid Law Firm T: +202 2392 9224 T: +202 2393 5557 M: +2012 2327 0824 M: +2012 2740 8886 E: [email protected] E: [email protected]
Developing renewable energy projects – A guide to achieving success in the Middle East 23 Chapter 2: Jordan
Jordan Overview Area 89,342 km2 (2015) Population 8.1 m (2015) GDP (PPP) Total: $79.91 b (2014) Per capita: $12,000 (2014)
CO2 Emissions Total: 18.74 m tons (2012) Per capita: 3.09 tons (2011)
Source: CIA Factbook, EIA
Jordanian Power Sector (2015) Installed capacity 4.3 GW Peak demand 3.1 GW Peak demand growth 6.9% Installed capacity requirement by 2020 6.8 GW
Source: RES4MED
Retail Price Levels (2015) US cents Local Currency (Fils) Power Min 5/kWh 33/kWh Max 37/kWh 265/kWh Fuel Petrol 96/litre 680/litre Water Min 11/m 3 75/m3 Max 270/m3 1,920/m3
Source: Water Authority of Jordan, dynamic-ews, JoPetrol, Numbeo
24 Developing renewable energy projects – A guide to achieving success in the Middle East Key Bodies referred to: DLS Department of Land and Survey EMRC Energy and Minerals GCC Gulf Co-operation Council MEMR Ministry of Energy and Mineral Resources MoE Ministry of Energy NEPCO National Electric Power Company OIC Organization of the Islamic Conference UNCITRAL The United Nations Commission on International Trade Law
Key Terms used: BIT Bilateral Investment Treaty CSP Concentrated Solar Power EIA Energy Investment Allowance EPC Engineering, Procurement and Construction GDP Gross Domestic Product IPP Independent Power Producer kWh Kilowatt Hour MENA Middle East and North Africa MW Megawatt O&M Operations and Maintenance PPA Power Purchase Agreement PV Photovoltaic REEL Renewable Energy and Efficiency Law
Developing renewable energy projects – A guide to achieving success in the Middle East 25 Jordan
2.1. Context and Key Drivers
Jordan has the greatest incentive in the Middle East region to develop a 40% of the energy mix renewable energy industry. With no is met by gas that is supplied by the Arab oil and gas production of its own, the Gas Pipeline from country currently relies on imports for Egypt.2 96% of its energy needs.
40% of the energy mix is met by gas It is certain however that developing that is supplied by the Arab Gas domestic renewable energy capacity Pipeline from Egypt.2 The supply has could help ensure Jordan’s long- however been disrupted a number term energy security. Related key of times, requiring the country’s drivers include: power backup to then run on diesel and heavy fuel oil. The unreliability • Reduce fuel imports: Jordan and recent unavailability of supply is looking to generate 30% of has resulted in national energy bills its electricity production from reaching record levels in Jordan. indigenous sources by 2020 to reduce its reliance on imported The current depression in the oil price fuel. Renewable energy capacity may impact on Jordan’s appetite development will help meet for renewables. On the one hand, it these targets. could impact the sector negatively because of the competitiveness of • Meet growing demand: Jordan oil. On the other hand, many are of had 4,300MW of power generation the view that the fluctuations could capacity in 2015 which already runs serve to deepen Jordan’s resolve for at full load during both the summer a strong renewable sector. This is and winter peaks. Peak power because policy makers need to create demand growth has averaged about a self sustaining local supply which is 7% over the past five years although resistant to global oil price changes. there have been spikes of almost 15% in some years, e.g. during the extended heat wave in 2010. That power surge, coupled with network failures, resulted in rolling load-shedding across the country.
26 Developing renewable energy projects – A guide to achieving success in the Middle East • Long term security of energy supply: Energy imports have become increasingly volatile in the past few years due to repeated instances of sabotage and political unrest in Jordan’s neighbouring countries. Renewable energy has the ability to deliver long-term security of energy supply.
• Leverage the advantageous geography and climate: Jordan has one of the highest solar irradiance levels in the world of 4-7kWh per square metre coupled with more Jordan has one of the than 300 days of sunshine. This highest solar irradiance provides a high potential for the levels in the world of development of solar power in the 4-7kWh per square metre coupled with country. Jordan also possesses high more than 300 days of potential of wind energy resources sunshine. with annual average wind speeds exceeding 7m/s (at 10m height) in some areas of the country.
A wind farm in Tafila, Jordan3
2 Other imports comprise oil supplies delivered by Iraq (which, with recent developments have also been disrupted) and a small amount of electricity imported through the pan-Arab power grid.
3 Picture is an illustration only. Courtesy: Jordan Wind Developing renewable energy projects – A guide to achieving success in the Middle East 27 Jordan
2.2. Market Readiness
The National Energy Policy mandates • exempts all systems and a strong emphasis on efficient and clean equipment for renewable energy generation of power. The government of projects from customs duties and Jordan is giving considerable attention sales tax. to the utilisation and implementation of renewable energy resources. • GCC and EU to assist with financing: The Renewable Energy and Energy The government has started taking Efficiency Fund was launched in steps to define regulations to promote 2013 by MEMR. This is financed renewable energy and is actively by the Jordanian government and seeking external finance. Key initiatives receives donations from the Gulf which demonstrate Jordan’s Co-operation Council (GCC). The commitment to renewable energy Fund provides grants for energy include: projects and guarantees investors’ funding requirements. In 2015, • Defined regulatory structure: Jordan launched EU-funded Jordan has implemented a legal renewable energy and energy framework to support its renewable efficiency demonstration projects energy targets. The country passed worth 6 million euros. Towards the the Renewable Energy and Efficiency end of 2014, European Bank for Law (REEL) in April 2012 which: Reconstruction and Development and the French Development • established the direct proposal Finance Institution, PROPARCO also regime for private companies to announced they would provide $100m negotiate directly with Ministry loans for solar projects. of Energy and Mineral Resources (MEMR) for renewable projects; Jordan is expected to commission around • requires the National Electric 1,800 MW of solar and Power Company (NEPCO) wind power capacity and regional distribution by 2018. companies to purchase electricity generated by renewable energy projects and to pay for the grid connection; and
28 Developing renewable energy projects – A guide to achieving success in the Middle East • Feed-in tariffs: The Energy and • Grid expansion: The current capacity Minerals Regulatory Commission of the Jordanian grid is limited. It (EMRC) announced in December stands at 3,200 MW and can only 2012 the introduction of a feed-in accept another 500 MW. Last year, the tariff system for net metering which is government cancelled plans to accept designed to reduce energy demand proposals to build five wind-run power and will allow the sale of surplus plants with a total capacity of 400 MW energy generated back to the national due to the grid’s inability to absorb grid. This is the first feed-in tariff to be additional loads. However, towards implemented in the Middle East. the end of 2014, the Ministry of Energy and Mineral Resources announced the • Wheeling Regulations: The EMRC expansion of the national electricity later issued wheeling regulations grid capacity by 1,000 MW. This designed to enable and regulate will enable more renewable energy off-site renewable energy production projects to connect to the grid. and on-site consumption by private off takers. This market, whilst in its infancy, is particularly active.
2.3. Current Project Status
Following on from the National Energy The government is keen to develop Strategy, the government has started both wind and solar power. A 117MW moving towards implementation. wind farm in Tafila, Jordan has just Jordan’s Energy Minister, in mid-2014, recently reach commercial operations. announced that the government expects The government is preparing to accept to commission about 1,800MW of solar offers for additional wind capacity of and wind power capacity by 2018. Of 170MW. In the last few months of 2014, these, power purchase agreements have there were a series of ambitious solar already been signed for 300MW of solar PV projects announced including a power projects and 200MW of wind 52MW plant and two 10MW PV plants all power projects. located in the southern Ma’an region.
Developing renewable energy projects – A guide to achieving success in the Middle East 29 Key Renewable Energy Facts
Installed Capacity 180 MW
Pipeline Capacity 551 MW
Targets 10% primary energy by 2020
Implied Capacity 680 MW by 2020
Source: EIU, REN21
Current Renewable Energy Projects Status
Project Technology Status Size Location
Jordan Solar One PV Execution 20 MW Mafraq
Falcon Maan for Solar Energy PV Execution 21 MW Maan
Foursan Capital Partners/ PV Execution 10 MW Aqaba Shamsuna Power
Adenium Energy – Zahart Al Salam PV Execution 10 MW Maan
Adenium Energy – Al Ward Al PV Execution 10 MW Maan Joury
Adenium Energy – Al Zanbaq PV Execution 10 MW Maan
Adenium Energy Capital PV Execution 30 MW Maan
MEMR – Waid Araba Wind Main 25-30 MW Contract Bid
MEMR – Al Harir, Wadi Araba Wind Execution 300-400 Maan and Maan MW
Greenland Alternative Energy/ PV Execution 10 MW Maan EJRE/Scatec JV
EJRE / Scatec JV PV Execution 20 MW Maan
Scatec/Quest Energy Investment/ PV Execution 10 MW Amman Kingdom Electricity JV – Oryx
MEMR – El-Quweira PV PPA signed 75 MW Quweira
MEMR – Maan Wind Execution 66 MW Maan
Jordan Wind Renewable Energy Wind COD 117 MW Tafilah LLC – Tafila Wind Farm
SunEdison / MEMR – Maan PV Execution 20 MW Maan Development Area
MEMR – Fujeij Wind Complete 70-90 MW Amman
Shams Maan Power Generation PV Execution 52.5 MW Maan
30 Developing renewable energy projects – A guide to achieving success in the Middle East Current Renewable Energy Projects Status
MEMR – Azraq Grid Connected PV Complete 2 MW Zarqa PV Solar Plant First Investment Co for Clean PV Execution 23.8 MW Maan Energy/MEMR – Maan Devp Area Mustakbal Clean Tech – Ma'an PV Complete 1 MW Maan Hofa Wind Complete 1 MW Hofa Greater Amman Municipality – Waste to Main TBC Amman Solid Wasste to Energy Facility Energy Contract Bid
WAJ – As Samra Biosolids Waste to Main TBC Zarqa Monofill Project Energy Contract PQ
Kingdom Electricity Company – PV Complete 10 MW Badia The Northern Badia Project
Source: MEED
Overview of RfP Solar Rounds
Request For Current status Proposals round Round 1 solar There are currently 12 Round 1 projects approved with an aggregate capacity of nearly 200MW.
All round 1 projects are now in construction.
Round 1 wind The Round 1 bidding process closed on 30 September 2014.
There were four qualifying bids submitted.
These proposals were for up to 250MW of wind projects. One PPA has been signed already.
Round 2 solar 24 Round 2 solar developers have been qualified. Only four projects will be developed, each project shall be 50MW.
MEMR has chosen the lowest 4 tariffs from the 24 developers qualified, and is currently negotiating the PPAs. Two PPAs have already been signed for two 50MW projects to be developed in the Mafraq Development Area
Round 2 wind Round 2 wind has been cancelled by MEMR.
Round 3 In February 2014, an invitation to submit expressions of interest was issued for wind and solar projects with total capacity of 100MW per project.
Round 3 has however been cancelled by MEMR.
It is understood that MEMR cancelled this round as a result of failing to secure the funding needed to expand the national power grid to accommodate the projects. However, recently, the Government was able to procure grants and funding to expand the grid. Such project is being called the “Green Corridor”. Developing renewable energy projects – A guide to achieving success in the Middle East 31 Jordan
2.4. Regulatory Policies
Jordan is unique in the Middle East New regulations and due to the fact that there is a policy in the lower inherent risk place which requires the Government in solar projects are to cover the cost of grid connection for likely to lead to more investor confidence and developers. Jordan’s almost complete raise the “bankability” dependence on imported fossil fuels of projects. has significantly altered the discourse on renewable energy. Strategy recommendations include:
In many cases, the relatively high cost • implementation of renewable energy of renewable energy is still lower than laws (such as REEL) to stimulate that for energy from fossil fuels, and as private sector investments; a result the Government is willing to pay for feasible projects at a price almost up • implementation of wind energy to their avoided cost. New regulations projects with at least 600MW and the lower inherent risk in solar capacity by 2020; and projects is likely to lead to more investor confidence and raise the “bankability” • the continued development of the of projects. Fund.
Under its 2007-2020 National Energy Under the Strategy, developers can Strategy, renewable and nuclear submit their proposals for projects energy are set to transform the directly to the Government. Known Kingdom into a net exporter by 2030. as the Direct Proposal Process, the The aim is to have the renewable Government has received strong energy share of the energy mix interest from developers (see increase to 7% by 2015 and to 10% by section 1.7). 2020, a substantial increase from the 1% it currently represents. In terms of capacity, this equates to some 600MW by 2015 and to double this by 2020.
32 Developing renewable energy projects – A guide to achieving success in the Middle East 2.5. Governing Laws
Counterparties and governing laws
A developer will need to enter into a number of contracts with various parties in order to develop a renewable energy project in Jordan. The appropriate counterparty to each of the key contracts is set out below:
Contract Counterparties Governing law
Real estate contract Selling landowner/landlord Jordan
Grid connection NEPCO/distribution companies Jordan agreement and PPA
EPC contract Third party contractor Negotiable
O&M contract Third party contractor Negotiable
Finance documents are usually Dispute resolutions/ governed by English law if finance is considerations obtained from outside Jordan, which is permitted. Jordan allows both Islamic International arbitration is often and non-Islamic financing. favoured as a dispute resolution Many previous conventional IPPs in mechanism in key contracts under rules Jordan have been financed by foreign such as the International Chamber of banks and lenders. The Government Commerce and the United Nations has previously accepted that IPPs can Commission on International Trade enter into direct agreements with Law (UNCITRAL) arbitration rules. This banks funding IPP projects to grant is the forum of choice for investors assignment and step in rights. and developers as it allows for greater flexibility while maintaining confidentiality. Jordan allows both Islamic and non-Islamic financing.
Developing renewable energy projects – A guide to achieving success in the Middle East 33 Jordan
Bilateral investment treaties Jordan has entered into In addition to being a member of 42 Bilateral Investment (BITs) that are the World Trade Organization and Treaties currently in force. ratifying numerous international trade and market access agreements, Jordan has also entered into a number of investment agreements aimed at business risk associated with cross- further promoting the development of border investments, and improve an business in the Kingdom. investor’s position in any subsequent dispute connected with those investments. Jordan has entered into 42 Bilateral Investment Treaties (BITs) that are In addition, Jordan is party to several currently in force. These include regional investment agreements, BITs with China, France, Germany, including the Agreement on India, Korea, the Netherlands, Russia, Promotion, Protection and Guarantee Switzerland, the United Kingdom, and of Investments among Member States the United States. Other treaties have of the Organization of the Islamic been signed and may come into force, Conference (the OIC Agreement) while others are under negotiation. and the Unified Agreement for the The purpose of investment treaties Investment of Arab Capital in the Arab is to provide favourable conditions State (the UAIAC). These treaties also for inward investment and cross- provide investors with substantive border economic co-operation, and rights, and while the position is not as reciprocal protection of the foreign certain as in relation to BITs, Arbitral nationals’ investment. In return, Tribunals have interpreted both the they provide investors with certain OIC Agreement and the UAIAC as substantive rights and protections, containing a standing offer which and, importantly, give investors the allows investors to enforce those rights right to enforce those rights through through investment treaty arbitration. an investment treaty arbitration against the State – a key protection in itself. Protection under one or more investment treaties can reduce the
34 Developing renewable energy projects – A guide to achieving success in the Middle East Jordan is not a party to the Energy protection in relation to breaches Charter Treaty. Although it has of contract committed by the State Observer status in that organisation, or State parties associated with an that does not allow investors to investor’s investment. invoke the investor – state arbitration provisions in the Treaty. Accordingly, if an investor wishes to access investment protections for a Jordan is a contracting party to the clean energy investment in Jordan, ICSID Convention and the New York it should consider not only whether a Convention on the Recognition and treaty is in place between Jordan and Enforcement of Foreign Arbitral the investor’s home State, but also Awards. Some Jordan treaties consider the terms of the potentially generally provide investors with applicable treaty or treaties to evaluate a range of dispute resolution whether its investment will be options (although provide for ICSID covered by one or more treaties. arbitration only). Careful structuring of an investment can allow an investor to maximise Jordan BITs generally share the its protection under international common substantive protections investment protection instruments. of fair and equitable treatment, full protection and security, most Jordan is a contracting favoured nation treatment, and party to the ICSID Convention and the protection from expropriation. New York Convention However, Jordan BITs offer different on the Recognition and degrees of investor protection, and Enforcement of Foreign impose different requirements for an Arbitral Awards. investor and its investment to qualify for protection. To give one example, some BITs (including the BITs with China, the Netherlands and the United Kingdom) include an ‘umbrella clause’, which requires the State to observe obligations entered into in respect of investments made by the investor, which can offer additional Treaty
Developing renewable energy projects – A guide to achieving success in the Middle East 35 Jordan
2.6. Investment Considerations
Setting up a business
There are certain limitations on foreign ownership in Jordan. Whilst ownership of solar generation projects by foreign persons is unlimited, engineering and construction services are limited to 50% foreign ownership, and the retail and sale of any product is limited to 50% foreign ownership.
A foreign entity wishing to do business in Jordan has three main options:
Type of business Maximum Minimum Requirements foreign capital shareholding requirements
Operating 100% _ • Need to appoint a representative Branch of foreign who is resident in Jordan company • Limited term, for performance of specific contract unless granted a specific licence from government authorities
Limited liability 100% (50%)* JOD 50,000 • Minimum of two shareholders, company per non – unless exemption granted Jordanian • May only use specified shareholder memorandum and articles of association
Private 100% (50%)* JOD 50,000 • Minimum of two shareholders, shareholding per non – unless exemption granted company Jordanian • Flexibility in terms of shareholder memorandum and articles of association • Allows issue of different classes of share
*50% shareholding requirement if undertaking engineering and construction or retail and sale of any product
36 Developing renewable energy projects – A guide to achieving success in the Middle East Tax structuring Interest Interest paid by banks to depositors Corporate income tax is generally subject to a 5% Corporate income tax is levied on withholding tax. the profits of corporate entities and foreign branches that arise in Withholding tax Jordan. Rates vary from 14% to 30% Payments of taxable income made by depending on the type of activity: residents to non-residents are subject to 10% withholding tax. Withholding Banking 35% tax is considered to be a payment on Insurance, telecommunications, 24% account for companies and a final tax stockbrokers, finance companies, for individuals. currency exchange companies and leasing companies Foreign tax relief Industrial sector 14% Foreign tax relief is granted in All other 20% accordance with tax treaties signed with certain other countries.
Capital gains • It is worth noting that solar and wind projects under rounds 1 and Capital gains are usually exempt aside 2 have benefitted from various tax from income derived from current and exemptions. depreciable assets which is taxable as ordinary income. Interest paid by banks to Dividends depositors is generally subject to a Dividends are generally exempt 5% withholding tax. from tax.
Developing renewable energy projects – A guide to achieving success in the Middle East 37 Jordan
Development assets – real Both foreign-owned estate, security Jordanian companies and branches of foreign Real estate companies can own and lease Jordanian land but Both foreign-owned Jordanian only for the purposes of companies and branches of foreign their business. companies can own and lease Jordanian land but only for the purposes of their business. It must be noted that it is not possible to Where land is purchased, the project apply to the Government for approval must be completed within three years of a project until the necessary land of the relevant purchase, with a possible rights have been actually granted, or extension of a further three years. If the landowner approves the application the project is not completed within this (notwithstanding that the land rights for period, the project company will the project have not been granted at this be liable to pay 5% of the land’s market stage). In the case of pre-packaged land, value to the Department of Land and the process is much simpler and less Survey (DLS) each year, for ten years, time consuming, much of the “upfront” after which the land must be sold. work should have been completed. The land shall not be transferred or sold during these three years, Some structures which may be utilised unless the minister of finance upon to secure land rights or exclusivity prior a recommendation by the general to a formal land arrangement being director of the Department of Land entered into are as follows: and Survey, approving such an act in accordance with the law.
Options for lease • Not commonly used or sale • Not a registrable interest
Break clause in • Termination provision exercisable after pre-determined period lease
Memorandum of • More common form of exclusivity agreement understanding • Deposit payable to landowner, with requirement to sell/lease by a certain date • Only valid for a defined term • Not a registrable interest
38 Developing renewable energy projects – A guide to achieving success in the Middle East Irrevocable • Granted by landowner in favour of developer’s agent to transfer land power of when development assets secured/project awarded attorney • Only legally valid for one year • Jordanian law prohibits grant to developer directly • Used to avoid payment of transfer taxes (10%) • Only usually granted on payment equal to full value of land, but can be used in conjunction with escrow agreement to avoid payment of full consideration at outset
Escrow • Purchase/lease amount held in escrow agreement • Released to landowner when conditions fulfilled • Released to developer if conditions not fulfilled
Security Payment structures Land owned by a project company It is unusual to transfer title of land in can be mortgaged,and leases can Jordan until the entire price for the be assigned as security to a bank. land is paid. If payment is deferred, Mortgages must be registered at the seller would probably require that the DLS to be validated. A lease the land is mortgaged in its favour. will normally contain terms which (See the solutions suggested above require the landlord to enter into an regarding irrevocable powers of “assignment agreement” and “notice attorney and escrow arrangements). of assignment” either when requested In lease agreements, payments can by the developer, or at the time the be deferred or linked to milestones. In lease is entered into, but can remain practice, landlords are used to fixed undated until the actual assignment annual lease payments. takes place and the documents are dated.
It is unusual to transfer title of land in Jordan until the entire price for the land is paid.
Developing renewable energy projects – A guide to achieving success in the Middle East 39 Jordan
Permitting An application for the generation licence Consents, licences and permits is made to the ERC, which usually takes In both the tender and the Direct approximately two Proposal processes, the developer months. must apply for and obtain the necessary licences and permits after its bid or An application for the generation licence proposal has been accepted, even if is made to the EMRC, which usually the site has been acquired on a pre- takes approximately two months. Annual packaged basis. fees are payable under the licence at a rate of JOD 0.01 per kilowatt sold The Power Purchase Agreement (PPA) by the facility. A proposed draft of the will provide the developer with a regulation suggested amending the specified period of time to obtain all foregoing tariff, however this regulation required licences and permits. The main is yet to be issued. licences a developer must obtain are a generation licence from the EMRC and Other permits required to construct an environmental permit. and operate the facility include a construction permit, which can only be Grid connection obtained after the detailed drawings of Connection to the grid will be provided the plant are approved by the relevant for in the PPA and a connection municipality. The time required to obtain agreement will be entered into with such permits will vary, but is unlikely to the grid operator. No specific grid take less than two months. Government connection consent or permit is costs associated with this permit are not required, other than the connection significant. agreement which will be entered into simultaneously with the PPA.
It is likely that an Energy Investment Allowance would have to be submitted to the Ministry of Energy for approval because power plants are listed as projects that require a comprehensive. Obtaining an EIA usually takes three to four months, but there are no significant Government fees or costs associated with obtaining approval, only those associated with preparing the EIA.
40 Developing renewable energy projects – A guide to achieving success in the Middle East 2.7. Support Mechanisms
Renewable power projects can currently Direct Proposal process be developed either in response to Government tenders or through the Under the Direct Proposal process, Direct Proposal option. a developer is able to source its own site for development. Whilst the Tender process developer would own the project under a Direct Proposal, the developer Under the tender process, a site will be would be responsible for obtaining specified and pre-packaged. the development assets itself. The Government (or the counterparty to The tenders issued to date have been the PPA (the “Transmission Licensee”) for EPC and operations services only would have the option to purchase the where the Government has owned facility at the end of the PPA term. As the project. The developer is asked to part of the PPA, the developer would simply build and operate. also enter into a connection agreement with the Transmission Licensee to allow for connection to the grid. To date, the Direct Proposal process has only seen Under the Direct projects connected to the Transmission Proposal process, a Licensee’s grid. However, in future it developer is able to source its own site for may extend to projects that can be development. connected directly to the distribution companies’ grids.
The Northern Badia Project4
4 Courtesy: Philadelphia Solar
Developing renewable energy projects – A guide to achieving success in the Middle East 41 Chapter 3: Kuwait
Kuwait Overview Area 17,818 km2 (2015) Population 4.0 m (2014) GDP (PPP) Total: $282.6 b (2014) Per capita: $70,700 (2014)
CO2 Emissions Total: 116.84 m tons (2012) Per capita: 42.99 tons (2011)
Source: CIA Factbook, EIA
Kuwaiti Power Sector (2012) Installed capacity 14.7 GW Peak demand 12.1 GW Peak demand growth 8% Installed capacity requirement by 2020 24.5 GW
Source: MEED
Retail Price Levels (2015) US cents Local Currency (Fils) Power Min 0.3/kWh 1/kWh Max 4/kWh 12/kWh Fuel Petrol 20/litre 60/litre Water Min 22/m3 66/m3 Max 70/m3 211/m 3
Source: Kuwait Ministry of Electricity and Water, Numbeo
42 Developing renewable energy projects – A guide to achieving success in the Middle East Key Bodies referred to: CTC Central Tenders Committee GCC Gulf Cooperation Council HC Higher Committee IRENA International Agency for Renewable Energy KFAS Kuwait Foundation for the Advancement of Science KIA Kuwait Investment Authority KISR Kuwait Institute for Scientific Research KSE Kuwait Stock Exchange MEW Ministry of Electricity and Water MoF Ministry of Finance OPEC Organization of Petroleum Exporting Countries PAI Public Authority for Industry PTB Partnerships Technical Bureau
Key Terms used: BOT Build-Operate-Transfer EOI Expression of Interest FCIL Foreign, Comparative & International Law IPP Independent Power Producer ISCC Integrated Solar Combined Cycle LNG Liquefied Natural Gas MMBtu Million British Thermal Units PJSC Public Joint Stock Company PPP Public-private partnership RFP Request for Proposal RFQ Request for Qualification
Content provided by: Fahad Almarri Advisory Service Supervisor EnerTech Holding Company KSCC
Developing renewable energy projects – A guide to achieving success in the Middle East 43 Kuwait
3.1. Context and Key Drivers
Kuwait is a leading oil exporter, and is It consumes 552 billion cubic feet currently the fifth largest oil producer per year of which about 12% is in the Organization of Petroleum imported. Kuwait plans to increase Exporting Countries (OPEC). Despite gas production to 3 billion cubic feet its rich oil reserve, the country lacks per day by 2030 in efforts to satisfy gas production and recently became a domestic consumption and decrease net importer of natural gas leading to imports of LNG. Renewable energy focus more on natural gas exploration can also be an alternative solution and development for domestic for decreasing imports of LNG. consumption. As a result, there is a concern that it won’t be able to meet • Meet growing demand and future electricity demand (which is benefit from load tailoring: The expected to double by 2030). energy peak demand in Kuwait is increasing by 8% annually. The Although Kuwait had one of the installed capacity needs to double healthiest power reserve margins in the to 24,500MW by 2020 to meet the region a decade ago, the rapid increase peak load demand. In 2014, installed of peak load demand has resulted in the capacity was very close to peak reserve margin narrowing significantly. demand without the ideal reserve of 20%. To achieve that, Kuwait To maximise export capacity and needs to build more power plants. reduce its dependency on oil, Kuwait Renewable energy would allow recognises that it needs to diversify Kuwait to meet growing demand its energy mix. Key drivers include while allowing for the maximisation the following: of oil and gas exports. Furthermore, peak solar power output dovetails • To free up oil and gas for more neatly with peak, temperature-driven profitable uses: Kuwait exports electricity demand. 2,767,000 barrels of oil per day with an average domestic consumption of Kuwait is a net importer 467,000 barrels per day. In terms of of natural gas. It consumes natural gas, Kuwait is a net importer. 552 billion cubic feet per year of which about 12% is imported.
44 Developing renewable energy projects – A guide to achieving success in the Middle East • Leverage the advantageous • Address environmental problems: geography and climate: Solar The haze that frequently hangs over resources are abundant in Kuwait, Kuwait City is a consequence of the and there is also a significant significant amount of heavy fuel oil potential for wind power. The Global and crude oil burned in the country’s Horizontal Irradiance is 1,900 kWh/ power stations. Statistically, co2 m2/year and the full load hours for emissions per capita are also very wind is 1605 hours/year.5 high in Kuwait. Supplementing the conventional generating capacity with renewable energy installations will help reduce the emissions and pollution significantly.
Al Abdaliyah Integrated Solar Combined Cycle, Kuwait (ISCC)6
5 IRENA
6 Partnerships Technical Bureau, Kuwait
Developing renewable energy projects – A guide to achieving success in the Middle East 45 Kuwait
3.2. Market Readiness
Kuwait Investment Authority (KIA), the The Kuwaiti government country’s sovereign wealth fund, has is employing more private capital through also decided to invest in domestic public-private projects renewable energy projects. The national (PPP) as well as Technology Enterprises Company, a independent water and subsidiary of KIA, is actively involved power projects (IWPP). in private equity and venture capital investments on the international market starting at 0.3 US cents per kWh – in renewable technologies including which is one of the lowest electricity a 11% stake in Heliocentris, a leading retail prices in the world. This specialist in renewable energy solutions reflects the heavily subsidised input based in Berlin, Germany, $18bn fuel prices. Kuwait’s domestic gas investment of Daimler AG for more price to industry is USD 2/MMBtu efficient future of oil drilling and the use while the international LNG price of more renewable energy sources. is around USD 10-15/MMBtu. This naturally renders renewable energy Kuwait has a structured regulated power less competitive in the market and market. The Ministry of Electricity and investors less confident about the Water (MEW) is the central regulatory prospects for renewable energy. body and the sole supplier of electricity and water resources. However, to • Limited policies and regulations: achieve its goal of increasing installed Renewable energy policy is not yet capacity to 25 GW by 2020, the Kuwaiti well established in Kuwait. Instead, government is employing more private the government’s focus has been capital through public-private projects on reducing the environmental (PPP) as well as independent water and impact of fossil fuel used to power projects (IWPP). generate electricity. Additionally, well-integrated policies will attract While Kuwait is initiating deployment more renewable energy investments of renewable energy, the following in Kuwait. challenges exist:
• Subsidies for conventional power sources: Kuwait’s electricity tariff structure is heavily subsidised,
46 Developing renewable energy projects – A guide to achieving success in the Middle East • Institutional setting: Kuwait has • Limited region-specific R&D and not yet established a dedicated talent pool: Kuwait has two major renewable energy agency. However, research centres: Kuwait Institute for the Kuwait Institute for Scientific Scientific Research (KISR) and Kuwait Research (KISR) has focused on Foundation for the Advancement of studying and formulating regulations Science (KFAS). There is however, and policies that may assist the a shortage of qualified engineers, Kuwaiti government in promoting renewable energy companies renewable energy development. and support services and focused The Partnerships Technical Bureau capability building is required. (PTB) is in charge of the integrated solar combined cycle (ISCC) • Limited infrastructure readiness: project at Al-Abdaliya and also Kuwait has not yet developed the assesses unsolicited proposals required grid infrastructure and grid from renewable energy developers. management abilities to support Whether future renewable energy large-scale power supply from projects will fall under this body or renewable energy, to support more a separate, dedicated renewable variability in supply or to enable energy body will be established demand side management. remains to be seen.
3.3. Current Project Status
Kuwait is beginning to develop its approved power and infrastructure renewable energy programme, with the projects. In September 2015, Kuwait stated aim of achieving 5% electricity signed a contract with Spain’s TSK generation from renewable energy Group to set up a 50 MW solar PV by 2020. So far, a 1MW rooftop solar power project. project has been installed in Kuwait City, and a few other small projects are Despite these promising early steps, a in progress. As of August 2015, the 280 significant number of additional projects MW al Abdaliya power plant in Kuwait, need to be developed for Kuwait to be which combines 60 MW of solar capacity able to achieve its strategic 5% target. with gas fired units, is in the list of newly
Developing renewable energy projects – A guide to achieving success in the Middle East 47 Kuwait
Key Renewable Energy Facts
Installed Capacity 2 MW
Pipeline Capacity 150 MW
Targets by 2020 5% by 2020, 15% by 2030
Implied Capacity 1,225 MW
Source: MEED, REN21
Current Renewable Energy Projects Status
Project Technology Status Size Location
KOC – Umm Gudair PV Execution 10 MW Umm Gudair
MEW / KISR – Shagaya Solar Execution 70 MW Shagaya Renewable Energy Complex
MEW / KISR – Shagaya Renewable PV Execution 10 MW Shagaya Energy Complex: Phase 1
MEW / KISR – Shagaya Renewable CSP Execution 50 MW Shagaya Energy Complex: Phase 1
MEW / KISR – Shagaya Renewable Wind Execution 10 MW Shagaya Energy Complex: Phase 1
KAPP/Kuwait Municipality – Kabd Waste to Main TBC Al-Ahmadi Municipal Solid Waste Project Energy Contract Bid Governorate
Al Abdaliya power plant PV Approved 60 MW Abdaliya
Source: MEED
3.4. Regulatory Policies
Kuwait currently does not have a commitment to the development of formal renewable energy policy renewable energy in the country. The framework. agency’s mandate is to promote and support the increasing introduction Kuwait has however approved and spread of renewable energy. the Articles of Association of the The Articles are aimed at achieving International Agency for Renewable sustainable development. Energy (IRENA), which shows a
48 Developing renewable energy projects – A guide to achieving success in the Middle East Furthermore, Article 122 of Law 42 The new PPP Law of 2014 concerning Environment (Law 116 of 2014) was Protection provides that all published on the 23rd government authorities should use of July 2014 and is power saving systems in their new expected to come into facilities and that the new Environment force in early 2015. Authority shall include the requirement of the use of power saving Pursuant to Article 13 of Law 116 of systems. Implementation of the same 2014, the equity of the public joint may encourage use of renewable stock project companies incorporated energy systems such as solar energy. under this law, for projects worth more than KD 60 million, is to be distributed There are IPP by-laws and feed-in tariff as follows: structures under discussion in Ministry of Electricity and Water (MEW) and • No less than six percent (6%) and no government, as Kuwait is planning for more than twenty four percent (24%) renewable and conventional energy of the shares shall be allocated and projects which will require private offered to public authorities. investment. • No less than twenty six percent (26%) The new PPP Law (Law 116 of 2014) was of the shares shall be offered to the published on the 17th of August 2014 winning investor (i.e. the winning and came into force in full on the 29th bidder). This percentage may be of March 2015 upon the publication reduced by ten percent (10%) which of its Executive Regulations which is to be offered to the initiator of a were issued by Decree 78 of 2015. project if there is one. Law 116 of 2014 establishes the Kuwait Authority for Public Partnerships • Fifty percent (50%) of the shares shall (KAPP) which is responsible for be allocated and offered for public (amongst other things) supervising subscription of all Kuwaiti citizens. the procurement of Public – private partnerships (PPP) projects – including The executive regulations of the power projects. This authority replaces PPP law elaborate on the method of the Partnership Technical Bureau procurement of projects under the (PTB). PPP system.
Developing renewable energy projects – A guide to achieving success in the Middle East 49 With respect to power projects in accordance with the provisions of the particular however, Law 39 of 2010 law. The shares of the project company (as amended by Law 28 of 2012 and (or companies) in such case shall be Law 19 of 2015) and its Executive allocated as follows: Regulations specifically regulate the structure and procurement of such PPP 1. A percentage not exceeding twenty power projects. Where Law 39 of 2010 four percent (24%) of the shares shall as amended is silent, reference will be be allocated to the government and made to Law 116 of 2014 (the general governmental entities. PPP Law). 2. A percentage of not less than twenty In this regard, Article 2 of Law 39 six percent (26%) of the shares of 2010 (as amended), provides shall be offered for sale in a public that the authority appointed by the auction (to the winning bidder). Council of Ministers shall establish one or more joint stock companies, 3. Fifty percent (50%) of the shares with the objective of construction, shall be allocated for public implementation, operation, subscription by all citizens. management and maintenance of power generation and water desalination plants in Kuwait in
3.5. Governing Laws
Counterparties and In all likelihood, however, a choice of governing laws foreign law would not be upheld in Kuwait to the extent a substantive term is deemed to violate Kuwaiti public Kuwaiti law freely permits the parties policy. to an agreement to select foreign governing law and normally Kuwaiti Courts will interpret such agreement in accordance with the foreign law chosen.
50 Developing renewable energy projects – A guide to achieving success in the Middle East Dispute resolutions/ authorising the individual signing the considerations agreement on behalf of the company to bind the company to arbitration. As a general rule, the parties to an agreement may agree to refer disputes Additionally, the place of arbitration to either the courts (either foreign or should be a country which is party local) or to arbitration (either foreign to the New York Convention on the or local) for resolution. Even though Recognition and Enforcement of foreign courts may have jurisdiction Foreign Arbitral Awards (1958). While under the agreement to resolve Kuwait is a signatory to the New York disputes, the Kuwaiti Courts could Convention, its ratification only applies (in certain circumstances) assume to awards made in countries which are jurisdiction in the event of a dispute also signatories. under the agreement but would apply the foreign law chosen to the extent With respect to PPP Projects, pursuant such law does not contradict Kuwaiti to Article 29 of the PPP Law, the public policy. project agreements shall be subject to the provisions of the PPP Law and However, Article 173 of Kuwait’s its Executive Regulations, as well as Civil and Commercial Procedural the provisions of applicable laws in the Law provides in part that the Kuwaiti State of Kuwait. The project agreement Courts shall not have jurisdiction will therefore likely be subject to to hear disputes which have been Kuwaiti Law. The Project agreement agreed to be referred to arbitration. shall regulate the mechanism for Kuwaiti Courts have become dispute resolution and in this regard more comfortable with the idea of Article 29 of the PPP Law provides that arbitration, both local and foreign, Kuwaiti courts shall have jurisdiction and should give effect to arbitration over all the disputes arising from clauses provided for in agreements. such agreements. However, with the Supreme Committee’s prior approval, In order to enforce an arbitral award in disputes may be settled through Kuwait against a Kuwaiti entity, it must arbitration. be confirmed (prior to concluding the agreement with an arbitration clause), The place of arbitration that: (1) the articles of association of should be a country the company permits the individual which is party to the signing the agreement on the New York Convention on the Recognition and company’s behalf to bind the company Enforcement of Foreign to arbitration, or (2) the shareholders Arbitral Awards (1958). of the company must pass a resolution
Developing renewable energy projects – A guide to achieving success in the Middle East 51 Kuwait
Investment treaty protection Kuwait is a contracting party to the ICSID Convention and the New Kuwait has entered into 82 Bilateral York Convention on the Recognition Investment Treaties (BITs) that are and Enforcement of Foreign currently in force. These include BITs Arbitral Awards. with China, France, Germany, India, the Netherlands, Singapore, and Kuwait treaties generally provide Switzerland. Other treaties have been investors with a range of dispute signed and may come into force, while resolution options, and generally others are under negotiation. require a ‘cooling off’ period for negotiations between an initial notice In addition, Kuwait is party to several of dispute and the commencement regional investment agreements, of arbitration. Some Kuwait including the Agreement on treaties (including the BITs with the Promotion, Protection and Guarantee Netherlands and India) require an of Investments among Member States investor to elect between local courts of the Organization of the Islamic and international arbitration in the Conference (the OIC Agreement) event of a dispute. and the Unified Agreement for the Investment of Arab Capital in the Arab Kuwait BITs generally share the State (the UAIAC). These treaties also common substantive protections provide investors with substantive of fair and equitable treatment, full rights, and while the position is not as protection and security, most favoured certain as in relation to BITs, Arbitral nation treatment, and protection from Tribunals have interpreted both the expropriation; many BITs (including OIC Agreement and the UAIAC as those with China, India and the containing a standing offer which Netherlands) also contain an ‘umbrella allows investors to enforce those rights clause’, which requires the State to through investment treaty arbitration. observe obligations entered into in respect of investments made by the Kuwait is not a party to the Energy investor, which can offer additional Charter Treaty. Although it has Treaty protection in relation to Observer status in that organisation, breaches of contract committed by the that does not allow investors to State or State parties associated with invoke the investor – state arbitration an investor’s investment. provisions in the Treaty.
52 Developing renewable energy projects – A guide to achieving success in the Middle East However, all Kuwait BITs offer different • Decree No. 194 of 2011 ratifying the degrees of investor protection, and Memorandum of Understanding impose different requirements for for co-operation in areas of oil, gas, an investor and its investment to new and renewable energy sources qualify for protection. Accordingly, between the government of the if an investor wishes to access State of Kuwait and the government investment protections for a clean of the People’s Democratic energy investment in Kuwait, it Republic of Algeria. should consider not only whether a treaty is in place between Kuwait and • Decree No. 159 of 201 ratifying the the investor’s home State, but also Memorandum of Understanding consider the terms of the potentially for Power (Electricity) Co-operation applicable treaty or treaties to evaluate between the government of the whether its investment will be covered State of Kuwait and the government by one or more treaties. Careful of the Arab Republic of Egypt. structuring of an investment can allow an investor to maximise its protection These agreements basically provide under international investment for an agreement between the two protection instruments. parties to co-operate in the electricity/ power/oil and gas/renewable energy Legislation implementing sectors by way of provision of technical, consultancy and training energy treaties support and the exchange of human resources and expertise, the objective In addition to bilateral investment being the improvement of efficient treaties, there are also a number of power use and the development of bilateral agreements concerning alternative power sources, including renewable energy and the renewable energy sources. development/co-operation in the same entered into by the Kuwait government with other governments. Kuwait has entered into Decrees relating to these 45 BITs, other treaties have been signed and agreements include: may come into force, while others are under • Decree No. 55 of 2011 ratifying negotiation. the agreement between the government of the State of Kuwait and the government of the French Republic in the areas of environment, sustainable development and Developing renewable energy projects – A guide to achieving success in the Middle East renewable energy. 53 Kuwait
Shagaya Phase One7
3.6. Investment Considerations
Setting up a business The income tax rate in Kuwaiti law generally provides that Kuwait at the time of foreign companies conducting writing is 15%. business in Kuwait must – except in limited circumstances – do so either through an agent or through a Kuwaiti “partner”. This is generally facilitated There are exceptions to the restrictions through the establishment of a Kuwaiti prescribed in the law including: company with Kuwaiti participants. The Kuwaiti participant • GCC entities; must own at least 51% of the capital of the company (Articles 23 and 24 of Law • wholly owned by GCC individuals No. 68 of 1980, the Commercial Law). / entities, which are permitted to establish and wholly own a local
7 Courtesy: CSP Today 54 Developing renewable energy projects – A guide to achieving success in the Middle East Kuwaiti entity or set up a branch Development assets – real through which they may carry on estate, security business (with a few limitations) in Kuwait; As a general premise, non- Kuwaitis may not – except in limited • foreign companies licensed to circumstances – own real estate in operate in the Kuwait Free Trade Kuwait. Freehold ownership of real Zone; and estate is generally limited to nationals of Kuwait or corporate entities wholly • foreign companies establishing owned by them. There are, however, a local entity under Law 116 of exceptions to this general rule which 2013 promoting direct investment include: in Kuwait . • GCC nationals as well as corporate There are typically restrictions on the entities wholly owned by them who percentage participation of foreigners may own land (freehold) in Kuwait; however recent legislation including the Kuwait Direct Investment Law • foreign states may own real estate and the new PPP Law have made properties for purposes of their provision for possible majority foreign diplomatic missions; ownership. • companies incorporated under the Tax structuring Kuwait Direct Investment Law; and
Corporate income tax • Kuwaiti companies for purposes of Foreign entities doing business in building their head offices, etc. Kuwait (whether through an agent or as shareholders in a local entity), are However, all nationalities may enjoy the subject to income tax. benefit of a lease (ownership based on a contract between the landowner/ Rates of corporate income tax freehold owner and a leasee). If such lease is for more than 10 years, it may The income tax rate at the time of be registered at the Land Register writing is 15%. which is held at the Ministry of Justice.
Developing renewable energy projects – A guide to achieving success in the Middle East 55 Kuwait
The law is less straightforward with Leases on State owned respect to buildings or fixtures land are not registered erected on the land. More recent in the same manner developments in the law, including the as leases on privately new PPP Law, Law 116 of 2014 provide owned land. for the possibility of separation of assets belonging to the project and Leases on State owned land are those that belong to the developer. however not typically registered in the This may open the door further to same manner as leases on privately differentiating between the land and owned land. With State owned land, fixtures and may therefore permit the the lease contract signed and stamped mortgage of fixtures. In this regard, by the relevant government authority Article 23 of the PPP Law provides (typically the Ministry of Finance that the investor / developer or the “MOF”) is evidence of such lease and project company may, for the purpose records of the same are maintained at of financing the implementation of the Kuwait Municipality and the State the project, mortgage or grant in kind Real Estate Department of the MOF. security on any assets they own from among the assets comprising the Leases granted by the State for project. However, those assets that industrial development are managed belong to the project and that will be by the Public Authority for Industry (PAI) transferred to the State at the end of and these agreements are signed by the term of the agreement term may the PAI. not be granted as security either.
Security Generally, under Kuwait law a mortgage/pledge over specific movable Land is typically a common source of assets may be taken by virtue of a security granted to the financers of a possessory mortgage while a business project. However, as a general rule, premises mortgage may be used as a the mortgage of any real property type of “blanket” security interest over belonging to the State that may have all movable assets on the business been leased to an investor (or project premises. owner) may not be mortgaged or granted as any form of security.
56 Developing renewable energy projects – A guide to achieving success in the Middle East Project companies Payment structures will typically have the right to receive certain payments under the There is no legislation regulating the project contract which payment structures for the energy may serve as a source of generated by such PPP projects. This collateral. is typically provided for in the project agreement. However, given the Project companies will typically have the Ministry of Electricity (MEW) mandate right to receive certain payments under (with respect to the production and the project contract which may serve as distribution of power nationwide), such a source of collateral. projects would likely have to sell their power to the MEW (the off taker) which Insurance proceeds over project would then on-sell to the consumers. assets may provide another source of Only the MEW has authority to grant grid security. However, much will depend on connection and regulates the process. the nature of the particular insurance coverage, and whether the counterparty Payment will likely be based on the would view insurance proceeds as production cost and the negotiated unit merely a transmutation of project assets price. MEW will pay for what is delivered from tangible into monetary form. to the National Grid which is owned and managed by the MEW. The project investor may generally pledge its shares in the project company Smaller projects may be able to sell to as security. However, other matters one large client directly (e.g. to one of concerning Kuwaiti law, including the the government owned oil company Companies Law will have implications facilities) depending on the licensing on the ability of the investor to pledge its and approval granted to such projects. shares as collateral. If security is granted, the security documents would typically Permitting be governed by local law. As general rule assets of the State Any form of renewable energy project cannot be attached and can therefore would most likely have to be licensed not be provided as security. and regulated by the (MEW). At the time of writing there are no specific laws or regulations governing renewable power At the time of writing projects. there are no specific laws or regulations governing renewable power projects.
Developing renewable energy projects – A guide to achieving success in the Middle East 57 Kuwait
3.7. Support Mechanisms
Bidding processes Any consultants wishing to provide consultancy services to governmental entites must register with the Projects which are procured by Kuwait Consultants Selection Committee (CSC). Government entities, including MEW, are typically governed by the Public Projects that are being structured as Tenders Law (Law 37 of 1964). Any public private partnerships (PPPs) may procurement made by the Kuwait however be procured under: Government entities which are in excess of KD5,000 must be conducted through • Law 116 of 2014 concerning the Central Tenders Committee (CTC) in partnerships between the public and accordance with the CTC procedures. private sector Pursuant to the Public Tenders Law, a • Law 105 of 1980 on State Properties foreign corporate bidder that has not set Systems (as amended); up a local legal entity would be required to appoint a local agent and submit • Law 39 of 2010 on the establishment certain supporting documentation with of joint stock companies to undertake its bid for tender, along with its price the building and execution of electric quotation and technical proposal. power plants, water desalination; and any laws amending the above.
58 Developing renewable energy projects – A guide to achieving success in the Middle East Article 9 of the PPP Law however As the government will retain control provides that projects procured under of the project process, the power project the PPP Law will be exempt from the will require a number of approvals, Public Tenders Law and that such during its construction and operation projects will be procured pursuant to the phases, from various authorities such PPP Law and its executive regulations. as the: The law and regulations will provide the rules and procedures for the submission • Ministry of Electricity and Water; of proposals and their technical and financial evaluation and the competent • Ministry of Commerce and Industry; authority to undertake such evaluation. • Kuwait Municipality; and KAPP is expected to publish a Project Guide book that outlines the • Environment Protection Authority procedures for the procurement of the PPP projects generally.
Developing renewable energy projects – A guide to achieving success in the Middle East 59 Chapter 4: Qatar
Qatar Overview Area 11,586 km2 Population 2.2 m (2015) GDP (PPP) Total: $306.6 b (2014) Per capita: $137,200 (2014)
CO2 Emissions Total: 109.13 m tons (2012) Per capita: 48.50 tons (2011)
Source: CIA Factbook, EIA
Qatari Power Sector (2014) Installed capacity 11,015 MW Peak demand 6,740 MW Peak demand growth 12.3% Installed capacity requirement by 2020 18,715 MW
Source: Qatar Tribune, EIU
Retail Price Levels (2015) US cents Local Currency (Fils) Power Min 2/kWh 7/kWh Max 6/kWh 22/kWh Fuel Petrol 27/litre 100/litre Water Min 121/m3 440/m3 Max 258/m3 940/m3
Source: KAHRAMAA, Numbeo
60 Developing renewable energy projects – A guide to achieving success in the Middle East Key Bodies referred to: CSEE Chevron Center for Sustainable Energy Efficiency GCC Gulf Cooperation Council KAHRAMAA Qatar General Electricity & Water Corporation MEC Ministry of Economy and Commerce MEI Ministry of Energy & Industry MMAA Ministry of Municipal Affairs and Agriculture MMUP Ministry of Municipality and Urban Planning MoE Ministry of Environment MoF Ministry of Finance MoJ Ministry of Justice QEWC Qatar Electric and Water Company QEERI Qatar Environment and Energy Research Institute QFC Qatar Financial Center QICA Qatar International Center for Arbitration QP Qatar Petroleum QSTP Qatar Science and Technology Park SCENR Supreme Council of Environment and Natural Resources
Key Terms used: BOO Build-own-operate BOOT Build-own-operate and transfer EPC Engineering, procurement and construction GDP Gross Domestic Product ICC International Chamber of Commerce IPP Independent power producer IWPP Independent water and power producer O&M Operation and management PPA Power purchase agreement PV Photovoltaic PWPA Power and water purchase agreement
Developing renewable energy projects – A guide to achieving success in the Middle East 61 Qatar
4.1. Context and Key Drivers
Qatar is the largest supplier of liquefied natural gas globally and also a major Qatar produces over oil supplier with its small population 2 million barrels of oil per day, with reserves of enjoying one of the highest GDP per 25.24 billion barrels. capita levels. On the downside, Qatar also has one of the world’s highest emissions per capita in the world. • Meet growing demand: The To reduce emissions and meet its rising electricity consumption per capita domestic energy demand, Qatar has in Qatar is 19,000 kWh which is started developing a renewable energy almost six times the world average. programme. The first step aims for The annual growth rate of peak load 2% of installed capacity to come from demand is above 12%. Demand for renewable energy by 2020. electricity will continue growing with the growing population, especially Similar to the other oil producing due to increasing workers for the countries in the Middle East, the key FIFA Word Cup related projects. drivers for developing renewable energy Qatar currently produces 9,000 MW. in Qatar include the following: Around 6,500 MW of this is used to meet domestic demand and the rest • To free up oil and gas for more is exported to Bahrain and Kuwait. profitable uses:Qatar produces More electricity generation demand over 2 million barrels of oil per day, could increase the need and case for with reserves of 25.24 billion barrels. renewable energy. Projections show that current oil reserves will provide supply for a • Leverage the advantageous further 23 years. Qatar’s natural geography and climate: Qatar gas consumption has increased by also has great solar resources with 80% in the past five years driven by high global horizontal irradiance of increasing demand of electricity around 2,140 kWh/m2/year.8 and water. Electricity provided by renewable energy would free up • Address environmental problems: oil and gas used domestically, and Qatar emits over 48 tons of CO2 per increase international exports. capita which is the highest in the world. Renewable energy will be required as part of the solution to lower these emissions. 62 Developing renewable energy projects – A guide to achieving success in the Middle East Kahramaa Solar Project9
4.2. Market Readiness
Qatar deregulated its power and per kWh. Low electricity tariffs make water markets in 2000, leading to the renewable energy less competitive privatisation of electricity generation and limit investment in renewable and water production services. This energy projects. Qatar is now thinking has provided opportunities to private to decrease the subsidy of gas to investors and international developers domestic industries. This will create to grow Qatar’s power generation and a more favourable environment for water production. renewable energy investment.
However, the power market is still • Limited policies and regulations: dominated by the state-owned utility Qatar currently has no renewables Qatar General Electricity & Water legislation in place governing issues Corporation (KAHRAMAA). To achieve such as a feed-in tariff or grid access. a significant scaling up of renewable energy deployment, Qatar – like • Emerging institutional setting: other countries in the region – still Qatar does not have a dedicated faces barriers to renewable energy renewable energy agency. However, deployment that need to be addressed. there are renewable energy units at the national utility KAHRAMAA • Subsidies for conventional power and the Qatar Petroleum Company. sources: Power is heavily subsidised The Qatar Environment and Energy in Qatar. Qatar citizens (around 13% of Research Institute (QEERI) (launched the population) receive free electricity, in 2011) aims to develop knowledge and expatriates and companies to address critical energy and pay heavily subsidized rates. The environmental challenges. industrial tariff is just 1.9 US cents
8 IRENA Developing renewable energy projects – A guide to achieving success in the Middle East 9 Courtesy: Qatar Foundation 63 Qatar
• Limited region-specific R&D and talent pool: There are several Qatar has set a research centres in Qatar such renewable target of 2% of installed capacity by as QEERI, the Chevron Center 2020. for Sustainable Energy Efficiency (CSEE) and the Qatar Science and Technology Park (QSTP). More local expertise will still be needed, ideally through local, specialised education and training.
4.3. Current Project Status
Qatar has set a renewable energy target of 2% of installed capacity by 2020. To help achieve this, a 200 MW solar power project developed by KAHRAMAA is planned to be fully operational by 2020 according to the local press.
Key Renewable Energy Facts
Installed Capacity 41 MW
Pipeline Capacity 230 MW
Targets by 2020 2% by 2020
Implied Capacity 900 MW
Source: EIU, REN21
Current Renewable Energy Projects Status
Project Technology Status Size Location
KAHRAMAA – Solar Energy PV Main 220 MW Duhail Power Plant Contract Bid
KAHRAMAA – Solar Energy PV Main 10 MW Duhail Power Plant Contract Bid
Source: MEED
64 Developing renewable energy projects – A guide to achieving success in the Middle East 4.4. Regulatory Policies
Qatar currently does not have a formal KAHRAMAA’s goal of being a leading renewable energy policy framework, but global utility in the next few years also the State has a long history of successful bodes well for creating an environment financing of conventional power projects, for investment in the sector that is lower particularly in the oil and gas sector. in risk. Qatar is expected to play an active As with any other jurisdiction, concrete role in the roof-top sector. Although projects with defined payment terms there is no formal Government policy and ones that operate within a clear on solar rooftop systems, we expect to and transparent regulatory framework see many showcase real estate projects should be able to access a multitude of adopt a solar component as we have financing sources. seen in several cases including the Qatar National Convention Centre and the QSTP.
4.5. Governing Laws
A developer will have to enter into a number of contracts in order to develop a renewable energy project in Qatar. Below we set out the counterparty to each of the key contracts:
Contract Counterparties Governing Law
Real Estate Contract Selling landowner/landlord Qatar
Joint venture agreement With Strategic National Qatar Investors usually including QEWC and a QP- related party
PPA / PWPA Likely to be KAHRAMAA Qatar
EPC contract Third party contractor Negotiable
O&M contract Third party contractor Negotiable
Finance documents Bank/finance provider Negotiable
Developing renewable energy projects – A guide to achieving success in the Middle East 65 Qatar
Funding agreements often adopt English law but there is no legal reason It is usual practice in why this should be the case where Qatar for the main project documents to be the project is funded by Qatari banks governed by the law of and the funding is secured against the State of Qatar. assets in Qatar. There is no requirement in Qatar to use either conventional or Islamic funding structures and it is not These rules were introduced due to unusual to see funding structures that the complexity surrounding the legal combine both. structure in Qatar. There are two separate legal jurisdictions in Qatar, the Under Qatari law, the agreement State of Qatar and the Qatar Financial struck between the parties to a Center (QFC). The QFC has its own laws contract is binding on them unless governing arbitration of commercial the subject matter is illegal or some disputes in relation to contracts that other mandatory provision of Qatari have concluded under QFC law law applies. Therefore, the choice of however it is uncommon for law made by the parties to a contract international contracts to be concluded should be enforceable under Qatari under QFC law. law. However, the courts in Qatar have wide discretion and power and Contracts involving international may take jurisdiction over a dispute companies increasingly provide for or apply Qatari law even though that disputes to be resolved through runs contrary to the position agreed in arbitration proceedings, seated in Qatar, the contract. conducted in the English language with the ICC rules being those most Dispute resolutions/ commonly adopted. considerations Investment treaty protection Whilst the local courts are the default jurisdiction for the resolution of disputes Qatar has entered into 18 Bilateral in Qatar, the Qatar International Investment Treaties (BITs) that are Center for Arbitration (QICA) has currently in force. These include BITs published its own Arbitration Rules with China, France, Germany, India, which were introduced in order to find Korea, Russia, and Switzerland. an appropriate mechanism to resolve disputes both between local companies and international companies.
66 Developing renewable energy projects – A guide to achieving success in the Middle East The purpose of investment treaties is to provide favourable conditions for Qatar treaties generally inward investment and cross-border provide investors with economic co-operation, and reciprocal a range of dispute protection of the foreign nationals’ resolution options. investment. In return, they provide investors with certain substantive rights and protections, and, importantly, give Qatar is not a party to the Energy investors the right to enforce those Charter Treaty. Although it has rights through an investment treaty Observer status in that organisation, arbitration against the State – a key that does not allow investors to protection in itself. Protection under invoke the investor-state arbitration one or more investment treaties can provisions in the Treaty. reduce the business risk associated with cross – border investments, and Qatar is a contracting party to the improve an investor’s position in any ICSID Convention and the New York subsequent dispute connected with Convention on the Recognition and those investments. Enforcement of Foreign Arbitral Awards. Qatar treaties generally In addition, Qatar is party to several provide investors with a range of regional investment agreements, dispute resolution options, and including the Agreement on generally require a ‘cooling off’ Promotion, Protection and Guarantee period for negotiations between of Investments among Member States an initial notice of dispute and the of the Organization of the Islamic commencement of arbitration. Some Conference (the OIC Agreement) Qatar treaties also require an investor and the Unified Agreement for the to exhaust local remedies before Investment of Arab Capital in the Arab commencing investment arbitration, State (the UAIAC). These treaties also while others (including the India/ provide investors with substantive Qatar BIT) require an investor to elect rights, and while the position is not as between local courts and international certain as in relation to BITs, Arbitral arbitration in the event of a dispute. Tribunals have interpreted both the OIC Agreement and the UAIAC as containing a standing offer which allows investors to enforce those rights through investment treaty arbitration.
Developing renewable energy projects – A guide to achieving success in the Middle East 67 Qatar
Qatar BITs generally share the breaches of contract committed by the common substantive protections State or State parties associated with of fair and equitable treatment, full an investor’s investment.. protection and security, most favoured nation treatment, and protection from Accordingly, if an investor wishes to expropriation. However, Qatar BITs access investment protections for a offer different degrees of investor clean energy investment in Qatar, it protection, and impose different should consider not only whether a requirements for an investor and its treaty is in place between Qatar and investment to qualify for protection. the investor’s home State, but also To give one example, some BITs consider the terms of the potentially (including the Germany/Qatar and applicable treaty or treaties to evaluate Korea/Qatar BIT) include an ‘umbrella whether its investment will be covered clause’, which requires the State to by one or more treaties. Careful observe obligations entered into in structuring of an investment can allow respect of investments made by the an investor to maximise its protection investor, which can offer additional under international investment Treaty protection in relation to protection instruments.
4.6. Investment Considerations
Setting up a business The State of Qatar The State of Qatar currently has an currently has an AA AA rating from Standard & Poor’s. rating from Standard The Government has made public its & Poor’s. intention to secure an AAA rating.
Foreign participation in business There are various corporate entities which activities in Qatar is allowed in almost may be applicable to a developer setting all sectors of the national economy with up a presence in Qatar. The most the exception of banking and insurance commonly used forms are limited (to the extent excluded by a Decision of liability companies and branch offices, the Cabinet of Ministers), commercial but there are also other options which agency and real estate trading have certain advantages and could be sectors amongst other areas such as reviewed in further detail at the time of any specific types of security services and investment decision. manpower agencies.
68 Developing renewable energy projects – A guide to achieving success in the Middle East Type of business Maximum Minimum Requirements foreign capital shareholding requirements
Branch of foreign 100% – • Generally linked to carrying out company a specific Government/quasi government contract
Limited liability 49%* QAR 200,000 company
Article 68 49%** - • Can be used for joint ventures company where the Government is a joint venture partner • High level of freedom in respect of its articles of association
QSTP entity 100% • Tax advantages • Must have commitment to research and development • Probably not suitable for a transmission company
Qatar Financial 100% Activity • Tax advantages Centre (QFC) dependent • Separate legal system based on entity common law • Whilst traditionally focused on the finance sectors, QFC is expanding its remit to cover • a wide range of business-to – business services, SPVs and holding companies • Probably not suitable for a transmission company, but consideration should be given to this option at the time of investment
Free zone 100% • Tax advantages entity*** • Limited to certain sectors.
* A foreign shareholding of up to 100% is available if an exemption from the MEC has been obtained, which can be a lengthy process. This is only available for certain sectors, but the list includes energy and the development of natural resources. ** Can be increased by consent of the Council of Ministers. *** Investment free zones are still in the early development stages. Aside from the QSTP none are operational in Qatar. It is not clear what rules and regulations will apply to the establishment of companies in these investment free zones or indeed when it will be possible to establish companies in them. Developing renewable energy projects – A guide to achieving success in the Middle East 69 Qatar
Tax Structuring Foreign companies Corporate income tax doing business in Qatar Foreign companies doing business are subject to tax. in Qatar are subject to tax. Tax is imposed on foreign entities operating in Qatar, regardless of whether they operate through a branch or in a Dividends joint venture with a locally registered Dividends are generally not taxed. company. Tax is assessed on the share of profits applicable to foreign shareholders Rates of corporate income tax according to the annually audited financial statements. Income Corporate income is generally subject distributed from profits that have to tax at a standard rate of 10%. already been subject to Qatar taxation will not be subject to double taxation Withholding taxes in the hands of the recipient where Withholding taxes were introduced these are included in the investment from 1 January 2010. income of a taxpayer. Dividends paid by an entity that has a tax Capital gains exemption are tax-exempt in the hands of the recipient. Capital gains are aggregated with other income and are subject to tax at the regular corporate income tax rate. Supply and installation contracts However, capital gains on the disposal Profits from “supply only” contracts of real estate and securities which do whereby the supply activity is not form part of the assets of a taxable performed from outside Qatar are activity and are derived by natural exempt from tax because the supplier persons are tax-exempt. trades “with” but not “in” Qatar.
Performing construction works with EPC contracts in Qatar may render the revenues arising outside Qatar taxable unless the contract clearly includes a split of revenue between work done inside and outside of Qatar.
70 Developing renewable energy projects – A guide to achieving success in the Middle East Retention of final payments The land structure is an important part of All ministries, Government the bankability aspects departments, public and semi-public of a project and, as establishments and companies are such, would need to be required to retain a final payment of established early on in the procurement process. 3% of the contract value until a tax clearance from the tax administration is presented. Although foreign developers can take leases of property, leases are Retention shall apply on payments not registrable at the MoJ (where made to Qatar temporary branches the register of title is held). Leases (i.e. branches whose registration are sometimes registrable with the is valid only for the duration of a authorities responsible for the area particular contract) with a valid where industrial projects are located. commercial registration and tax card in Qatar for a specific project or contract. Non-resident entities with no A number of power and water projects commercial registration and tax card in in Qatar have been concluded on the Qatar, shall be subject to withholding basis of the grant of an Emiri decree to tax instead of retention. the project company giving the project company the right to use the site for the purposes of the project. We would Development assets – real anticipate that renewable power would estate, security be treated in a similar way. Lenders may prefer the grant of an Emiri decree Unless the project company is 100% giving a usufruct right because this right Qatari owned, the company will not is registrable on the title of the land. be able to own land unless the land is granted to that company through a specific order issued by His Highness the Emir through an “Emiri decree”. Even where an Emiri decree is granted, the right granted is likely to be a usufruct right (a right to use a property and to enjoy the benefits of it) rather than a freehold right. A foreign entity can, however, take the benefit of a lease although there are limitations on the length of term.
Developing renewable energy projects – A guide to achieving success in the Middle East 71 Qatar
As a general rule, the procuring authority will have identified the site There are significant where the project is to be constructed. restrictions on the The developer will need to carry out ownership of land in Qatar by foreign entities. due diligence over the proposed site in the usual way and should seek the assistance of the procuring authority in understanding who owns the land that KAHRAMAA may license third has been allocated to the project and parties to carry out any of the works what the intended method of granting listed above, in accordance with the land rights to the project company applicable laws and regulations, and will be. Obtaining an Emiri decree in compliance with the terms and can be a lengthy process and, if one is conditions specified in the licence required, the developer should seek itself. In short, a developer would assurances from the procuring authority require, at the very least, a licence to that the process has been commenced set up and operate from KAHRAMAA as soon as is appropriate. under this law. This includes connections to the grid. Permitting Any industrial project in the GCC, including Qatar, requires a licence KAHRAMAA has the sole right to carry from the Ministry of Energy & Industry out: (MEI) in the relevant country. Whilst there are no particular regulations • works for the connection of electric applying specifically to solar energy current and water to buildings and in Qatar, it is likely that an industrial facilities; licence will be required for setting up a renewable energy power plant. • any additions, amendments or alterations thereto; and
• all works for the connection or disconnection to the public network.
We interpret the laws in this area to cover all power plants, including renewable energy projects, given they would be connected to the Qatari national electricity grid.
72 Developing renewable energy projects – A guide to achieving success in the Middle East These types of projects also usually may be required from the Ministry of require prior approval from the Environment (MoE). Supreme Council of Environment and Natural Resources (SCENR) in Qatar. KAHRAMAA issued In addition, a building permit issued by its tender for the EPC the planning department of the MMAA Contract for Duhail Solar PV Power Plant. may be needed and an environmental approval (or letter of no objection)
4.7. Support Mechanisms
Bidding processes Unless rules and regulations are introduced to deal specifically with Currently there are no formal rules the procurement of renewable energy or regulations which expressly apply projects, we anticipate that the to how a renewable energy project procurement process will be run on would be procured in Qatar. In some a similar basis to a power and water power and water projects the MoF has project or a water project. These are provided a Government guarantee procured by KAHRAMAA using a (guaranteeing liabilities under the PPA procurement strategy that complies with or equivalent agreement) to specific both the tender law and KAHRAMAA’s projects, therefore ensuring their internal tender regulations. For a bankability. It is feasible that a similar substantial solar project, one could approach may be taken for large scale anticipate any procurement being renewable energy projects. conductedon an open, international basis and that project would be At the time of writing, KAHRAMAA structured on a BOO or BOOT basis. issued its tender for the EPC Contract for Duhail Solar PV Power Plant. It Land to be utilised in the project would is clear that the present intention is probably be identified by KAHRAMAA for the procurement of renewable and details of the site would be included energy projects to be carried out by in the documentation issued as part of KAHRAMMA. the tender process. Land would also need to be land zoned by the MMUP for industrial use and it is likely that any such land would be owned by the Government or by a Government entity.
Developing renewable energy projects – A guide to achieving success in the Middle East 73 Chapter 5: Saudi Arabia
Saudi Arabia Overview Area 2,149,690 km2 (2015) Population 27.8 m (2015) GDP (PPP) Total: $1,610 b (2014) Per capita: $52,300 (2014)
CO2 Emissions Total: 642.65 m tons (2012) Per capita: 23.15 tons (2011)
Source: CIA Factbook, EIA
Saudi Power Sector (2015) Installed capacity 68,854 MW Peak demand 62,260 MW Peak demand growth 10.2% Installed capacity requirement by 2020 81,615 MW
Source: Gulfbusinesss, EIU
Retail Price Levels (2015) US cents Local Currency (Halala) Power Min 1/kWh 5/kWh Max 7/kWh 26/kWh Fuel Petrol 13/litre 50/litre Water Min 3/m3 10/m3 Max 240/m3 900/m3
Source: SEC, NWC. Arabnews, Numbeo
74 Developing renewable energy projects – A guide to achieving success in the Middle East Key Bodies referred to: ECRA The Electricity Co-Generation Regulatory Authority KACARE King Abdullah City for Atomic and Renewable Energy KAUST King Abdullah University of Science and Technology LMA Labour Market Authority MoA Ministry of Agriculture MoI Ministry of Interior Kingdom of Saudi Arabia MOMRA Ministry of Municipal and Rural Affairs MOPM Ministry of Petroleum and Mineral Resources MoT Ministry of Transport MWE Ministry of Water and Energy NGC National Grid Company NWC National Water Company PME Presidency of Meteorology and Environment SEC Saudi Electric Company SEPC Sustainable Energy Procurement Company SWCC Saline Water Conversion Corporation
Key Terms used: GCC Gulf Cooperation Council IPP Independent power producer IWPP Independent water and power producer KSA Kingdom of Saudi Arabia MENA Middle East and North Africa PPA Power Purchase Agreement
Developing renewable energy projects – A guide to achieving success in the Middle East 75 Saudi Arabia
5.1. Context and Key Drivers
Saudi Arabia boasts the world’s largest Saudi Arabia boasts oil reserves and is home to the fourth the world’s largest oil largest concentration of natural gas reserves and is home to the fourth largest resource in the world. concentration of natural gas resource in the The country currently produces world. approximately 12 million barrels of crude oil per day, of which about 3 million • Meet growing demand: Saudi barrels are consumed domestically. Arabia’s power sector is the biggest in the region with installed generating With the rapid increase in population capacity of over 61GW in 2014. and industrial growth, the country’s Saudi Arabia is planning to double domestic consumption continues to its capacity to 120 GW by 2032 by rise and is expected to reach 7 million developing solar and nuclear power barrels per day by 2030. As 80% of Saudi generation. Peak power demand has Arabia’s revenue is dependent on oil been growing at 7-10% a year in the exports, the amount available for export last decade. will continue to decrease, having by consequence, a significant impact on • Drive economic diversification Saudi Arabia’s revenues. and create jobs: The current rate of unemployment in Saudi Arabia The key drivers for the development of stands at 5.7%. The government renewable energy in Saudi Arabia are believes renewable energy can similar to those of other GCC countries contribute to reducing this, engaging and include: and developing the younger talent pool. The key focus of the Kingdom’s • To free up oil and gas for more renewable energy plan is therefore profitable uses:Saudi Arabia’s to develop local expertise and domestic consumption of encourage the development of a hydrocarbons is rising rapidly leading local supply chain which will create to significant impacts on its export employment opportunities for its revenues which in turn are directly young and growing population. dependent on oil exports although this now needs to be considered in the context of the recent oil price depression.
76 Developing renewable energy projects – A guide to achieving success in the Middle East • Leverage the advantageous The Saudi Arabian Saudi appetite for solar also geography and climate: rests on a desire to exploit Arabia has the greatest potential for an infinite natural resource renewable energy in the MENA region. that can be sold at world There is high potential for renewable market prices whilst also energy development, namely in solar creating infrastructure owing to generally high direct normal that will be used by future generations. irradiation of 2,500 kWh/m2/year.10 The Kingdom has high wind potential with net wind speed of over 7m/s in some creating infrastructure that will be used areas and and the availability of space by future generations. to develop large utility scale plants. In this regard, the most important • Address environmental problems: ‘driving force for making atomic and Saudi Arabia is one of six GCC renewable energy an integral part of countries that are in the top 15 per a national sustainable energy mix’ in capita emitters of carbon dioxide the Kingdom is the King Abdullah City in the world, mostly due to a high for Atomic and Renewable Energy reliance on heavy fuel oil to generate (KACARE). electricity. Established by Royal Decree in April 2010, KACARE is mandated to design Saudi Arabia understands the economic and facilitate the procurement process, and social gains achievable through the advance and implement policy and transition to renewable energies and regulation development and also create it is widely acknowledged that sector a legal and commercial structure for diversification can add value at a local both renewable energy and nuclear level through knowledge creation, energy sectors. It has sought to employment and economic resilience. undertake these activities through the creation of a Sustainable Energy Further, the Saudi Arabian appetite for Procurement Company (SEPC) and solar also rests on a desire to exploit National Grid Company (NGC). an infinite natural resource that can be sold at world market prices whilst also
10 IRENA Developing renewable energy projects – A guide to achieving success in the Middle East 77 Saudi Arabia
5.2. Market Readiness
Although Saudi’s energy generation Further rounds were to be announced mix is almost wholly dominated by thereafter. fossil fuels, the Saudi market is still seen as having the potential to attract The Introductory Round was to consist investments in clean energy. The country of five to seven projects at pre- hosts several major Independent Power packaged sites identified by KACARE Producers (IPPs) and Independent Water which could be easily connected to the and Power Producers (IWPPs) delivered grid. It is understood that these pre- under long-term Power Purchase packaged sites would be supplied with Agreements (PPAs) that are proven to the required real estate rights needed be bankable and have already attracted by a project, along with the consents billions of dollars of domestic and and permits required to build and international investment. As the private operate and a grid connection. sector gets more involved in power generation, a process of introducing Following the introductory round, market based tariffs is encouraged by developers would be permitted to the government to lower the subsidies find their own sites, in which event they which were worth US$40 bn in 2013. would be responsible for obtaining their own development assets. KACARE unveiled ambitious plans to develop 54 GW of renewable energy Unlike in other jurisdictions, the by 2032. This is an extremely ambitious renewable energy projects envisaged by target considering there are currently the White Paper were to be developed no utility scale operational renewable on a build-own-operate model by the energy projects in the Kingdom. In developer, who will enter into a 20 year 2013 KACARE released a white paper PPA with the SEPC. detailing the proposed competitive procurement process for the Kingdom’s Not much has formally progressed renewable energy plan and also initial in Saudi since the launch of the aspects of the required infrastructure White Paper and there has been and regulatory framework. more speculation than action in the market. Notwithstanding this, The White Paper details the first market participants keep Saudi in three procurement rounds, being an focus because it has the potential to introductory round of 500–800 MW, a deliver significantly. There are mixed first round of 2,000–3,000 MW and a views on the potential impact of a second round of 3,000–4,000 MW. sustained depressed oil price on the Saudi renewables market.
78 Developing renewable energy projects – A guide to achieving success in the Middle East Whilst some believe it will reduce the renewables programme because of the Saudi appetite for renewables because need to export oil rather than to utilise of the impact on funding, others are it internally, coupled with the need of the firm view that this will cause to create employment which a local Saudi Arabia to positively reconsider a content requirement could help deliver.
5.3. Current Project Status
The Kingdom has already deployed Saudi Aramco’s KAPSARC II project will and completed a variety of renewable extend their existing solar plant from 3.5 energy projects and there will no doubt MW to 5.3. be many sub 1MW projects taking shape in 2015. Saudi Aramco was awarded the Mecca Municipality 100MW solar project and KAUST solar power plant was the the SEC changed its expressions of first solar infrastructure project in the interest in the country’s first CSP plant Kingdom consisting of two rooftop solar — Duba 1, near Tabuk — which aims installations with a capacity of 1MW to provide 550 megawatts (MW) of each installed on the north and south electricity to the national grid to an EPC laboratories of the university. tender in 2014.
The King Abdullah Petroleum Studies As this report went to print, the Saudi and Research Center, built by Saudi Electricity Company (SEC) signed a Aramco, includes solar panels with a SR4.5 billion contract with General capacity of 3.5MW. Electric to establish the Kingdom’s first fossil fuel and solar power plant Solar Frontier completed the 1MW CPV near the Red Sea port of Dhuba in the power plant at the Nofa Equestrian Tabuk region. The 600MW integrated Resort, near Riyadh. solar combined cycle (ISCC) plant will primarily burn natural gas, but will also generate 50MW from solar energy to increase fuel efficiency. It is estimated that 25 Saudi engineers and 80 technicians will be trained to run the plant, and 30-35% of the construction materials will come from sources within the Kingdom.
KACARE master plan11
Developing renewable energy projects – A guide to achieving success in the Middle East 11 Photo courtesy: Hilson Moran 79 Saudi Arabia
Key Renewable Energy Facts
Installed Capacity 17MW
Pipeline Capacity 125 MW (not including 2 GW for K.A.CARE Round 1)
Targets 54 GW by 2032
Implied Capacity 160 MW by 2020
Source: EIU, REN21
Current Renewable Energy Projects Status
Project Technology Status Size Location
SEC – Duba Integrated Solar CSP Execution 600 MW Duba Combined Cycle (ISCC) Power (CSP: 20-30 Plant Phase I MW)
Saudi Aramco – KAPSARC PV Complete 3.5 MW Riyadh
KAPSARC II PV Complete 1.8 MW Riyadh
SEC – Farasan Island Solar PV Complete 500 kW Farasan Project Island
KAUST PV Complete 2 MW Thuwal
North Park PV Complete 10 MW Dhahran
Tabuk KJC CPV PV Execution 1 MW Tabuk
Source: MEED
5.4. Regulatory Policies
Whilst the White Paper published of issues that must be addressed to by KACARE included details of a attract investors. competitive procurement process, comprising of three tendering rounds For example, the White Paper does not for the creation of 7 GW capacity of outline how renewable energy will be renewable energy, it failed to provide subsidised or how the establishment of details or clarification on a number a supply chain will be incentivised.
80 Developing renewable energy projects – A guide to achieving success in the Middle East As matters currently stand, there are a number of regulatory, institutional KACARE was established and capability challenges, as with to foster renewable other GCC countries, that need to be energy development addressed. and R&D.
These include: • Emerging institutional setting: • Subsidies for conventional power The entities that will lead renewable sources: Subsidies for conventional energy initiatives are still nascent energies remain high in Saudi Arabia and have yet to establish the and act as an obstacle to the private required capabilities and sector’s development of renewable partnerships to achieve their goals. energy sources. There is also a distorting effect on consumption • Limited region-specific R&D due to an electricity tariff system that and talent pool: KACARE was makes power in the Kingdom among established to foster renewable the cheapest in the world. energy development and R&D. It is still early days and results are yet • Fragmented power generation to materialise. The localisation of sector: The fragmented nature of capabilities and technologies is seen the Kingdom’s power generation as a top priority by Saudi Arabia sector raises questions about Saudi in common with many other Gulf Arabia’s energy strategy and the governments. regulation of the electricity sector. The largest source of electric power • Limited infrastructure is SEC with SWCC and Saudi Aramco readiness: The grid is also not who also own and develop their own ready to accommodate the extra conventional power stations. input derived from renewable energies. Saudi Electric Company • Emerging policies and is responsible for the grid regulations: The Kingdom is still infrastructure in the country and in the process of establishing a there will need to be significant regulatory framework to support co-ordination between SEC and power supply from renewable KACARE. sources and grid connections. As mentioned in section 4.3 above, there has been little progress with the White paper and the KACARE programme.
Developing renewable energy projects – A guide to achieving success in the Middle East 81 Saudi Arabia
5.5. Governing Laws
Counterparties and governing laws
Contract Counterparties Governing Law Real estate contract Selling landowner/landlord KSA
Grid connection agreement National Grid Saudi Arabia KSA
PPA SEPC KSA
Shareholders agreement SEPC/Public Investment Fund KSA
EPC contract Third party contractor Negotiable
O&M contract Third party contractor Negotiable
Finance documents Bank/finance provider Negotiable, but likely to be KSA if a local bank
Whilst parties to an agreement retain hearing cases and therefore contractual their freedom to choose the applicable interpretation by the Courts will follow law, provided that one of the parties is the applicable principles of Sharia law. not Saudi, Saudi law does not have a concept of conflict of laws. Local Counsel rely on judicial practice and their own knowledge of legal Saudi Arabian law, and the applicable practice as applied to similar cases or in principles of Sharia law, applies to similar circumstances in the past. Saudi contracts which are not codified. courts do not follow a precedent system There is no all-embracing theory of and therefore, the judge presiding contract law which applies to all types of over a case is not bound by decisions contracts. in similar, previous cases and thus has the discretion to issue a decision that he Therefore whilst the Saudi courts feels is adequate and appropriate, even generally respect the foreign law if this goes against previous case law clause, it is possible that a Saudi court decisions. may on its initiative assume jurisdiction applying Saudi law to the exclusion of the party’s intentions. Further, unlike other jurisdictions, foreign law will not be applied by Saudi courts when
82 Developing renewable energy projects – A guide to achieving success in the Middle East In view of the substantial freedom of contract that is afforded under Sharia Saudi Arabia has law, contracting parties should afford entered into 17 Bilateral
careful consideration to the preparation, Investment Treaties (BITs) that are currently review and negotiation of contractual in force. arrangements in Saudi Arabia.
Investment treaty protection In addition, Saudi Arabia is party to several regional investment agreements, including the Agreement Saudi Arabia has entered into 17 on Promotion, Protection and Guarantee Bilateral Investment Treaties (BITs) that of Investments among Member States are currently in force. These include of the Organization of the Islamic BITs with China, France, Germany, India, Conference (the OIC Agreement) Korea, Singapore, and Switzerland. and the Unified Agreement for the Other treaties have been signed and Investment of Arab Capital in the Arab may come into force, while others are State (the UAIAC). These treaties also under negotiation. provide investors with substantive rights, and while the position is not as certain as The purpose of investment treaties is in relation to BITs, Arbitral Tribunals have to provide favourable conditions for interpreted both the OIC Agreement inward investment and cross-border and the UAIAC as containing a standing economic co-operation, and reciprocal offer which allows investors to enforce protection of the foreign nationals’ those rights through investment treaty investment. In return, they provide arbitration. investors with certain substantive rights and protections, and, importantly, give Saudi Arabia is not a party to the Energy investors the right to enforce those Charter Treaty. Although it has Observer rights through an investment treaty status in that organisation, that does not arbitration against the State – a key allow investors to invoke the investor- protection in itself. Protection under one state arbitration provisions in the Treaty. or more investment treaties can reduce the business risk associated with cross-border investments, and improve an investor’s position in any subsequent dispute connected with those investments.
Developing renewable energy projects – A guide to achieving success in the Middle East 83 Saudi Arabia
Saudi Arabia is a contracting party to Many Saudi Arabian the ICSID Convention and the New treaties (including the BITs with France, India, York Convention on the Recognition Korea, and Swizterland) and Enforcement of Foreign Arbitral require an investor to Awards. Saudi Arabian treaties generally elect between local provide investors with a range of dispute courts and international resolution options, and generally require arbitration in the event of a dispute. a ‘cooling off’ period for negotiations between an initial notice of dispute and the commencement of arbitration. Accordingly, if an investor wishes to Many Saudi Arabia treaties (including access investment protections for a the BITs with France, India, Korea, and clean energy investment in Saudi Arabia, Swizterland) require an investor to elect it should consider not only whether a between local courts and international treaty is in place between Saudi Arabia arbitration in the event of a dispute. and the investor’s home State, but also consider the terms of the potentially Saudi BITs generally share the common applicable treaty or treaties to evaluate substantive protections of fair and whether its investment will be covered equitable treatment, full protection by one or more treaties. Careful and security, most favoured nation structuring of an investment can allow treatment, and protection from an investor to maximise its protection expropriation. However, Saudi BITs offer under international investment different degrees of investor protection, protection instruments. and impose different requirements for an investor and its investment to qualify for protection. To give one example, some BITs (including the BITs with Korea and Luxembourg) include an ‘umbrella clause’, which requires the State to observe obligations entered into in respect of investments made by the investor, which can offer additional Treaty protection in relation to breaches of contract committed by the State or State parties associated with an investor’s investment.
84 Developing renewable energy projects – A guide to achieving success in the Middle East 5.6. Investment
Setting up a business
In order to secure land to develop a renewable energy project (whether through the purchase or lease of the land), foreign developers must first establish a legal business presence in Saudi Arabia.
Set out below is a brief description of the types of legal structures available.
Type of Maximum Minimum capital Requirements business foreign requirements shareholding
Branch of 100% SAR 500,000 • Set up for a specified number of foreign years company • Scope limited to activities undertaken by parent company • Investment licence for foreign shareholder • Commercial registration certificate
Limited liability 100% (75%13) SAR 500,000 • Set up for a specified number of company12 (SAR years 20,000,00014) • Minimum of two shareholders • Investment licence for foreign shareholder • Commercial registration certificate • “Industrial licence” required from Saudi Arabian General Investment Authority for renewable projects
12 Before incorporating a company in the Kingdom, the Foreign shareholder(s) must obtain an investment licence from SAGIA and a commercial registration certificate from the MCI. 13 Where the company undertakes trading activities, the maximum permitted shareholding is 75%. 14 The initial capital requirement is SAR 20,000,000 for an entity undertaking trading activities.
Developing renewable energy projects – A guide to achieving success in the Middle East 85 Saudi Arabia
Tax structuring Capital gains tax is not Corporate income tax applicable to a resident Generally, companies are taxed Saudi shareholder. at 20%.
It is worth noting that non-Saudi partners in companies are subject to Supply and installation contracts tax rather than the actual companies Profits from “supply only” operations themselves. For corporate income tax by non-residents to the Kingdom are purposes, non-Saudis do not include exempt from income tax because GCC citizens. the non-resident supplier trades “with” but not “in” the Kingdom. The The share of profits attributable to provision of associated services, such interests owned by GCC as maintenance or training, would not nationals are subject to Zakat (further be exempt. explained below). The share of profits attributable to interests owned by non-GCC nationals and non-GCC entities in a company or partnership are subject to income tax.
Capital gains In general, capital gains are treated as ordinary income and taxed at the regular corporate tax rate. Capital gains tax is not applicable to a resident Saudi shareholder.
86 Developing renewable energy projects – A guide to achieving success in the Middle East Withholding tax (including non – resident GCC nationals and entities) that do not have A Saudi resident entity or a permanent a legal registration or a permanent establishment of a non-resident establishment in Saudi Arabia. Tax is are required to withhold tax from withheld at the following rates: payments made to non-residents
Asset group Rate %
Rent, payments made for technical and consulting services, payments for air 5 tickets, payments for freight or marine shipping, payments for international telecommunications, dividends, interest and insurance or reinsurance premiums
Remittance of post-tax profits of a branch office and undistributed profits 5 attributable to an outgoing shareholder
Royalties and payments made to head office or an affiliated company for services 15
Management fees payments 15
For other services 15
Zakat to permissible uses. One key challenge is the fact that it is very difficult to Zakat is a religious levy on Saudis obtain approval from the relevant LMA and companies that are wholly or to change the permitted use of zoned partially owned by Saudi or GCC land which has been allocated for a nationals. It is levied at a flat rate of different use. 2.5%, and is chargeable on the total of the taxpayer’s capital resources and Once an appropriate portion of land income that are not invested in fixed has been identified, the developer assets. Complex rules apply to the must ascertain who the owner of the calculation of Zakat liabilities. land is, obtain the approval of the landowner and, where land belongs to Development assets – real the Government, obtain prior consents estate, security from the relevant authorities. This must be undertaken for all access rights An important factor is identifying necessary to develop, construct and appropriate land for the proposed operate the project. project. Saudi land is zoned according
Developing renewable energy projects – A guide to achieving success in the Middle East 87 Saudi Arabia
Provided that the requirements have been adhered to, there are four principal ways in which a foreign developer may try and secure their rights to land:
Conditional • Full purchase price only paid after specific time period purchase • Developer required to pay a non-refundable deposit • Termination/break clause • Payment of full purchase price if land is adequate • Landowner not able to negotiate or contract with any third party
Conditional lease • Lease of land, including during due diligence period • Termination provisions (period of advance notice) • Clause preventing landlord from terminating contract • Landowner not able to negotiate or contract with any third party
Outright purchase • No option in place • Landowner free to contract with any third party during due diligence period
Lease with right to • Lease for specific period of time purchase • Right to purchase exercisable after a certain period
Security Payment structure A bank interest can be: It is possible to structure payments so that these are triggered by certain • stated in writing on the title deed; milestones, or to otherwise defer part of the total payment until financial • recorded in the contract; or close. Deferring the entire payment until financial close may not be • registered on the land itself in the enforceable under Sharia law. name of bank as title holder until all repayments have been made.
88 Developing renewable energy projects – A guide to achieving success in the Middle East Permitting • MWE • PME Developers will need to obtain a • NWC number of approvals and consents. • LMA The SEPC website provides a list of • Saudi Aramco/MOPM (for land the main consents and approvals that located in the Eastern Province of will be required under the KACARE Saudi Arabia) regime. Some of the key approvals may need to be obtained from the Obtaining all of the required permits following: can be expected to take at least two to four calendar months and it • KACARE, when relevant is recommended that the approvals are sought early in the development • Landowner for the lease or purchase process. of the land • MOMRA
• MoA Obtaining all of the • MoT required permits can be expected to take at least • ECRA two to four calendar • Civil Defense Directorate of the MoI months. • Saudi Telecom Company
Developing renewable energy projects – A guide to achieving success in the Middle East 89 Saudi Arabia
5.7. Support Mechanisms
Bidding processes The Kingdom commenced an IPP program in 2007 to meet the huge In 2000, the Kingdom restructured the growth in demand from both the power sector through the establishment residential and industrial sectors and of SEC whereby all the regional has successfully procured a number of electricity companies were brought plants since that date. together as a single entity, although there are plans to unbundle the sector in SEC runs the procurement process the near future. A regulatory body, the to identify a developer, which will Electricity Co-Generation Regulatory typically hold around 50% of shares Authority (ECRA) , was in the project company, with SEC established along with other measures owning the remainder. The developer’s for improving the investment responsibility includes the design, environment in order to attract private financing, construction, commissioning, capital into IPP projects. testing, ownership, operation and maintenance of the IPP.
Saudi Aramco Rooftop PV System15
15 Courtesy: PV magazine
90 Developing renewable energy projects – A guide to achieving success in the Middle East During the procurement process, As noted above, KACARE was SEC provides detailed instructions in finalising a program for procuring up terms of the financing of the project. to 54 GW of renewable energy over Requirements as to the source of multiple competitive rounds. If this senior debt, the minimum debt is implemented as envisaged, SEPC, component of the project cost, the a separate standalone Government- composition of committed facilities, guaranteed entity will be responsible the number of Saudi financing for administering the procurement and parties and the requirements under executing and managing the power bond financing are detailed in the purchase agreements. The proposal request for proposal along with clear evaluation criteria will include price instructions on what can constitute a and non-price factors. non-compliant proposal.
Typical bidding process flow chart
SEC and Expression developer RFP sent to of interest establish share pre-qualified of project developers company (usually 50% apiece)
Request for qualifications Shortlisting (technical based on and financial levelised cost capabilities) of electricity issued to and interested RFP criteria developers
Developing renewable energy projects – A guide to achieving success in the Middle East 91 Chapter 6: United Arab Emirates
UAE Overview Area 83,600 km2 (2015) Population 9.4 m (2014) GDP (PPP) Total: $617.1 b (2014) Per capita: $66,300 (2014)
CO2 Emissions Total: 257.941 m tons (2012) Per capita: 48.50 tons (2011)
Source: CIA Factbook, EIA
UAE Power Sector (2012) Installed capacity 27 GW Peak demand 19 GW Peak demand growth 7.3% Installed capacity requirement by 2020 45,202 MW
Source: Ontaria-sea, UAE Ministry of Energy, BMI
Abu Dhabi Retail Price Levels (2015) US cents Local Currency (Fils) Power Min 0/kWh 0/kWh Max 9/kWh 32/kWh Fuel Petrol 53/litre 195/litre Water Min 0/m3 0/m3 Max 270/m3 990/m3
Source: ADDC, Numbeo
Dubai Retail Price Levels (2015) US cents Local Currency (Fils) Power Min 6/kWh 23/kWh Max 10/kWh 38/kWh Fuel Petrol 53/litre 195/litre Water Min 210/m3 770/m3 Max 276/m3 1012/m3
Source: DEWA, Numbeo
92 Developing renewable energy projects – A guide to achieving success in the Middle East Key Bodies referred to: AADC Al Ain Distribution Company ADDC Abu Dhabi Distribution Company ADRSB Regulatory and Supervision Bureau of Abu Dhabi ADWEA Abu Dhabi Water and Electricity Authority ADWEC Abu Dhabi Water and Electricity Corporation DEWA Dubai Electricity and Water Authority DIAC Dubai International Arbitration Centre DIFC Dubai International Financial Centre DSCE Dubai Supreme Council for Energy DRSB Regulatory and Supervision Bureau of Dubai FEWA Federal Electricity & Water Authority ICC International Chamber of Commerce ICSID International Centre for the Settlement of Investment Disputes IRENA International Renewable Energy Agency KACARE King Abdullah City for Atomic and Renewable Energy LCIA London Court of International Arbitration Masdar Abu Dhabi Future Energy Company PJSC MoL Ministry of Labour TAQA Abu Dhabi National Energy Company PJSC TRANSCO Abu Dhabi Transmission & Dispatch Company UAE
Key Terms used: BOO Build-own-operate BIT Bilateral Investment Treaty EPC Engineering, procurement and construction IPP Independent power producer IWPP Independent water and power producer PPA Power purchase agreement RFP Request for proposal
Developing renewable energy projects – A guide to achieving success in the Middle East 93 United Arab Emirates
6.1. Context and Key Drivers
The UAE is a federation of seven independent Emirates. Economic The annual economic development and government policy is growth rate has been around 5-7 per cent managed both at the federal level and at in both Abu Dhabi and that of the individual Emirate. Dubai.
This chapter mainly focuses on the Emirates of Abu Dhabi and Dubai as The drivers for these developments have these represent the majority of the included the following: population, land mass and current ambitions for renewable energy within • To free up oil and gas for more the UAE. profitable uses: There is increasing focus on renewable energy namely Both of these Emirates have also solar energy, to mitigate gas shortage been behind the majority of and free oil for more profitable uses. renewable energy developments in the Although the UAE has the seventh UAE to date. largest reserves of natural gas in the world, dry gas production is Generally there are other engineering, comparatively low. The UAE thus procurement and construction (EPC) became a net gas importer in 2008 opportunities in Northern Emirates and and imports via the Dolphin pipeline in off grid areas. Of note is a 40MW solar from Qatar. PV project in Ras Al Khaimah (RAK), which held an RFQ stage in March 2014. • Meet growing demand and benefit It is a standalone Solar IPP being co- from load tailoring: The annual developed by Utico on a design, build, economic growth rate has been own, finance, operate basis but at the around 5-7 per cent in both Abu Dhabi time of writing we understand there and Dubai. Not surprisingly, regional is an intention for it to be connected electricity consumption is growing at to the grid. The plant will also power approximately 8% a year. Solar power a desalination plant for which there generation in particular fits well with was a contract award in 2015, and the the UAE’s power demand patterns and expected technology is PV. there is great potential for distributed generation.
94 Developing renewable energy projects – A guide to achieving success in the Middle East • Drive economic diversification and The UAE has the sixth largest oil create jobs: There is a high strategic reserves and the seventh largest gas focus in Abu Dhabi on diversifying reserves in the world. It also relies on the economy into sectors that are imported gas for the production of less dependent on oil and gas to some of its electricity. In 2008, the UAE ensure long-term security of energy began to look at alternatives to gas-fired supply. The UAE is also focusing on generation, indicating that gas could no the localisation of technologies and longer be relied upon to meet all future capabilities to create jobs for a young power capacity. and fast growing population. Currently, by global standards the UAE • Leverage the advantageous renewable energy market is still small geography and climate: There is even though it is the first GCC state high potential for renewable energy to take actions towards a low carbon development, namely in solar owing future and is looking to take a regional to generally high solar irradiation leadership in this area. Looking ahead, which is 2,120 kWh/m2/year and the the UAE renewable market is expected availability of space to develop large to continue to grow rapidly supported utility scale plants. by Government targets, initiatives and recent project development activity. • Address environmental problems: The UAE is one of six GCC countries The UAE government announced the that are in the top 15 per capita plan to increase its clean energy to emitters of carbon dioxide in the 24% of the energy mix by 2021 in its world, mostly due to a high reliance INDC (Intended Nationally Determined on gas to generate electricity and Contribution) submission for the potable water, and energy intensive UNFCCC Conference of the Parties practices. (COP 21) in Paris in December 2015.
Developing renewable energy projects – A guide to achieving success in the Middle East 95 United Arab Emirates
Abu Dhabi Abu Dhabi seized an opportunity to be a Although it has the bulk of the UAE’s regional “first mover” and placed renewables oil and gas reserves, Abu Dhabi has on the Gulf political for some time been at the forefront agenda. of renewable energy development in the GCC.Long term gas contracts with This leadership has continued with Qatar provide excellent rates, but for the establishment of an annual only half of Abu Dhabi’s current energy international conference series targeting needs, leaving it heavily dependent renewable energy (the World Future upon its more expensive domestic sour Energy Summit), but most importantly gas. Sensibly the Emirate has responded through the hosting of the International to this challenge and through the Renewable Energy Agency (IRENA), an launch of the Masdar initiative in 2006, inter-governmental agency dedicated to Abu Dhabi seized an opportunity to the promotion of renewable energy. be a regional “first mover” and placed renewables on the Gulf political agenda. The development of renewable energy Abu Dhabi Future Energy Company projects to date has largely been driven (Masdar) is a subsidiary of the Mubadala by Masdar: Development Company, which is wholly owned by the Abu Dhabi government. • It has developed its own 10 MW Masdar is guided by The Abu Dhabi PV project to provide electricity to Economic Vision 2030, a programme Masdar City as well as a 1MW rooftop that drives new sources of income scheme. for the Emirate and strengthens its knowledge-based economic sectors. • It has recently commissioned the Shams 1 solar power project. This is Masdar has four business units that are a 100 MW CSP project based on the interconnected and a research arm that build, own, operate (BOO) model complements their work. The business similar to that used by the Emirate in units are Masdar Capital, Masdar the conventional power sector. The Clean Energy, Masdar Special Projects project company, which is 60% owned and Masdar City. Masdar Institute, an by Masdar, sells energy to ADWEC independent, research-driven graduate under a long-term, bespoke PPA. university, rounds out the organisation.
96 Developing renewable energy projects – A guide to achieving success in the Middle East • It is developing carbon capture and Both Emirates have signalled their sequestration projects that seek to interest in developing roof top solar add value to the national economy programmes and Dubai launched its while also reducing industrial carbon “Shams Dubai” net metering scheme emissions in 2015 (see section below).
• In September 2014 it re-issued an EPC The regulations for implementing a tender for a 100MW solar PV project scheme in Abu Dhabi are yet to be after changing a requirement that drafted. The exact capacity figures 50% of panels had to be of Masdar’s are yet to be announced but are own manufacture. This project has anticipated shortly. not progressed further, but ADWEA has announced that a tender for a Abu Dhabi has recently granted a 350MW solar PV IPP will be launched number of solar generation licences to in early 2016. As such it appears that various test sites and off-grid schemes future IPPs in the Emirate will be led by at institutions including schools, the ADWEC/ADWEA. judiciary and the Al Ain Zoo for on-site rooftop solar projects to be developed • Internationally, Masdar Clean Energy by site owners. We understand that a has invested in high-profile, utility- further 28 licences are pending. scale renewable energy projects like Torresol Energy, a joint venture To facilitate this, the Bureau has in Spain with SENER that operates established a regulatory framework 120 megawatts of concentrated with the two distribution companies, solar power plants, and the London Abu Dhabi Distribution Company Array, a 650-megawatt offshore wind (ADDC) and Al Ain Distribution farm in the Thames Estuary. It is also Company (AADC), to allow for the implementing wind farms in Egypt, private installation and generation of Jordan and Oman. electricity using PV. The framework includes a special Self-Regulating Licence and an inspection program for all would-be self-generators.
Developing renewable energy projects – A guide to achieving success in the Middle East 97 United Arab Emirates
However, solar and wind power are only are the Abu Dhabi Water & Electricity ever likely to make a minor contribution Authority (ADWEA), its associated to the Emirate’s energy mix. They will lag regulator (Regulations & Supervision well behind another alternative energy, Bureau – RSB), single buyer (Abu Dhabi nuclear. In December 2009, the Emirates Water & Electricity Company – ADWEC), Nuclear Energy Corporation (ENEC) transmission company (TransCo) and contracted with the Korea Electric Power distribution companies (Abu Dhabi Company (KEPCO), to construct four and Al Ain Distribution Companies – 1,400MW nuclear reactors, with the first ADDC & AADC). One of the features due to commence operations in 2017. of the Abu Dhabi power sector is the increasingly important role of ADWEA Whilst not a renewable energy source, in meeting power demand outside of ENEC’s 5.6 GW will deliver 50% of Abu its home emirate. Peak exports by the Dhabi’s ambitious carbon reduction utility doubled in the period 2008-10, targets, and stimulate a high tech reaching 1,737MW. industry in the region.
The principal agencies involved with the production, transmission and distribution of electricity in Abu Dhabi
Masdar City, Abu Dhabi16
16 Photo courtesy: One Planet Living
98 Developing renewable energy projects – A guide to achieving success in the Middle East Dubai Dubai is considering a rooftop solar programme which we Dubai has only 4% of the UAE’s total understand is being fossil fuel reserves and thus relies on ratified by the Executive imports of gas from both Abu Dhabi Counsel in Dubai at the and Qatar for its electricity generation. time of publication. Dubai power tariffs have increased In November 2015 the Emirate of three times as a result of rising traded Dubai unveiled an revised program gas prices and the need to burn more which will see 7% of its power expensive liquid fuels in its power generation come from solar energy by stations to meet rising peak demand. 2020, 25% by 2030 and 75% by 2050. Currently production is 1%. The Dubai The Dubai Electricity and Water Clean Energy Strategy 2050 program Authority (DEWA) is the exclusive is expected to result AED 50 billion of provider of electricity and water new solar investments. services in Dubai. DEWA’s historical
priorities have been to meet rising Developments will be driven through demand through large-scale plants a combination of utility scale projects that deliver value for money at scale. and greater use of roof top solar. However, this is shifting to smaller DEWA will continue to lead with its capacity, cleaner, renewable energy large-scale solar procurement plan schemes that require lower levels of through a combination of EPC and OPEX. It has however undertaken a IPP projects. DEWA now plans to number of renewable energy studies install 5000MW of solar PV at the and commitments were raised Sheikh Mohammed Bin Rashid Al significantly in early 2012 and again Maktoum Solar Park by 2030. Once in 2015. completed this will become the largest solar park in the world. Phase Although not as early to engage with II of the park (a 200MW IPP) set the renewables as Abu Dhabi, Dubai’s lowest global levelised tariff for a PV position has become more active and project and the RFP for phase III was prominent over the past couple of released to prequalified developers in years, reflecting its rising input fuel December 2015. prices and success of its first IPP.
Developing renewable energy projects – A guide to achieving success in the Middle East 99 United Arab Emirates
The Emirate has also announced plans The Emirate has also announced the for solar panels to be installed on the establishment of a AED 500 million roofs of all buildings in Dubai by 2030. Innovation Centre at the Solar park The Emirate launched the regulations and a new free zone called the for a net-metering scheme known as Dubai Green Zone (DGZ). The DGZ “Shams Dubai” in December 2014 is expected to house solar energy targeting large scale roofs/energy companies from around the world. intensive customers (https://new.dewa. gov.ae/en/customer/innovation/smart- initiatives/shams-dubai). It is likely that additional schemes will be launched in coming years. Plans include establishing a AED 100 billion Dubai Green Fund, providing soft loans for investors in the sector.
A model of Dubai Solar Park, UAE17
17 Source: http://gulfnews.com/business/general/uae-gears-up-for-mega-energy- conference-1.1079845
100 Developing renewable energy projects – A guide to achieving success in the Middle East 6.2. Market Readiness
With the UAE being a federation of independent Emirates which have most Multiple R&D groups of the rights of sovereign states, there were established in the past 3-5 years are, from time to time, differences in but results are yet to approaches and policies, especially materialize. energy policy. One consequence of this is that a national energy management and regulatory body currently does not At a National level there are a number of exist, nor is there yet a coherent long- regulatory, institutional and capability term energy strategy encompassing challenges that need to be addressed. renewables. • Subsidies for conventional power For project developers and the sources: Subsidies for conventional private sector players looking to take power act as a barrier on the private advantage of the opportunity renewable sector’s development of renewable energy presents, this has meant a lack energy sources especially in Abu of certainty. With much of the drive Dhabi, although the growing behind developments in the UAE’s sentiment for energy efficiency, renewable energy industry originating partly driven by the recent Green in the governments of each of the Growth Strategy, has started the Emirates, what was needed was clarity public debate about addressing this. on the terms of any PPA or feed-in tariff Dubai has raised prices threefold in structure that would apply to renewable the past three years and now links energy project developments. a portion of the electricity tariff to international prices. It is clear that a federal approach to this is unlikely to be seen in the near future In November 2014 a new electricity with the exception of the Northern and water tariff structure was Emirates where FEWA may take the implemented in Abu Dhabi, under lead. In terms of the PPA the approach which expatriates have seen a used by Abu Dhabi in its conventional significant increase in utility bills, IPP program appears to be the primary while UAE nationals will for the basis for contracting with a joint venture first time have to pay a water tariff. company established between the Under the revised structure, ‘low- private sector and state entity. use’ expatriates will have to pay AED 5.95 water tariff per 1,000 litres
Developing renewable energy projects – A guide to achieving success in the Middle East 101 United Arab Emirates
a day, increased from the current • Emerging policies and regulations: tariff of AED 2.2. Expatriates will also Abu Dhabi is still in the process of be subject to a rise of 40% of their establishing the full set of regulatory electricity tariff, from 15 fils/kWh frameworks to support power supply to 21 fils/kWh, provided that daily from renewable sources and grid consumption is within the respective connections. limits. Consumption beyond the respective limits will be subject to a • Limited region-specific R&D cost reflective tariff. Emiratis will pay and talent pool: Multiple R&D a water tariff for the first time, but groups were established in the at a much lower rate starting from past 3-5 years but results are yet Dh1.7 per 1,000 litres for residents to materialise. The localisation of of apartments consuming up to 700 capabilities and technologies is litres. The electricity tariff for UAE seen as a top priority by the UAE nationals will be increased from 5 in common with many other Gulf 0fils/kWh to 5.5fils/kWh, but only in governments. respect of consumption in excess of 30kWh for residents living in an • Improving infrastructure readiness: apartment, or in excess of 400kWh Abu Dhabi and Dubai utilities have for residents living in a villa. For started to consider and develop the petrol, the subsidy was removed required grid infrastructure and grid from 1 August 2015 and now tied to management abilities to support international prices. As at Jan 2016 large-scale power supply from solar Super is AED 1.69/l and Special energy, or the grid capabilities to AED 1.58/l. support more variability or demand side management.
102 Developing renewable energy projects – A guide to achieving success in the Middle East 6.3. Current Project Status
As stated above, both Abu Dhabi and Dubai have started planning and developing renewable energy projects. Some of the completed and upcoming key projects are listed below and can also be found in (Appendix 3).
Key Renewable Energy Facts Installed Capacity 185MW Pipeline Capacity 270 MW Targets 24% of total energy mix by 2021 Implied Capacity 810 MW MW by 2020 Source: EIU, REN21
Current Renewable Energy Projects Status Project Technology Status Size Location Shuaa Energy 1 – Mohammad Bin PV Execution 200 MW Dubai Rashid Al Maktoum PV Solar Power Plant (IPP) – Phase 2 Masdar – Noor 1 PV Main 100 MW Al Ain Contract PQ CWM / TAQA – Waste-to-Energy Plant Waste to Main 1-2 MW Abu Dhabi Energy Contract PQ Utico FZ – Ras Al Khaimah PV Main 40 MW Ras Al- Contract PQ Khaimah Bee’ah – Waste-to-Energy Facility Waste to Execution TBC Sharjah Energy Bee’ah – Solar Energy Plant PV Main TBC Sharjah Contract PQ Masdar – Sir Bani Yas Island Wind Main 30 MW Abu Dhabi Contract Bid DEWA – Mohammad Bin Rashid Al PV Complete 13 MW Dubai Maktoum Solar Power Plant (Phase 1) Masdar / Abengoa / Total – Shams I CSP Complete 100 MW Abu Dhabi Dubai Municipality – Al-Warsan Waste to Main TBC Dubai Waste-to-Energy Plant Energy Contract PQ Rooftop PV Execution 1 MW Dubai Masdar/ADFEC PV Complete 10 MW Abu Dhabi SunPower Masdar City PV Complete 1 MW Abu Dhabi DEWA – Mohammad Bin Rashid Al PV Main 800 MW Dubai Maktoum Solar Power Plant (Phase 3) Contract PQ Developing renewable energy projects – A guide to achieving success in the Middle East Source: MEED 103 United Arab Emirates
6.4. Regulatory Policies
To facilitate the Abu Dhabi anticipated growth in the roof top sector, two The 100 MW Noor I Solar PV plant and distribution companies the 30 MW Sir Bani Yas wind farm (under have been established, construction) have been procured the Abu Dhabi Distribution Company on an EPC model. At the time of writing, (ADDC) and Al Ain TAQA, the Abu Dhabi national energy Distribution Company company, is awaiting final approval from (AADC). the Abu Dhabi government to build one of the largest waste-to-energy facilities This progress is an integral part of the in the world, aiming to generate 100MW measured approach taken by Abu by 2017. Dhabi in creating a sustainable roof top solar market that is to be capable The recent development of the Shams of feeding excess generation back into I 100MW solar power plant which was the grid. Residential generation is also procured on the basis of ADWEA’s on the agenda and wiring regulations independent power project model, is were published in March 2014 allowing the first such facility in the Gulf region to private property owners to utilise solar have been procured on an IPP basis. generation. The framework also includes a Self-Regulating Licence and inspection Roof top solar generation is also on the program for use by self-generators. agenda and a regulatory framework is being established alongside the Dubai running of a pilot scheme. The pilot scheme included schools, the Abu Dhabi In December 2014 Dubai issued Judiciary and Al Ain Zoo. 28 further Resolution No (46) of 2014 (the licences To facilitate the anticipated “Resolution”) regulating the linkage of growth in the roof top sector, two solar power generating units to Dubai’s distribution companies have electricity grid. The scheme is based been established, the Abu Dhabi on net metering rather than a feed in Distribution are currently under review tariff scheme. It is expected that the at the time of writing; these are mostly Resolution will be the basis for a stable from schools within the scope of the Abu legal framework which will enable much Dhabi Education Council. greater deployment of solar PV across the Emirate.
104 Developing renewable energy projects – A guide to achieving success in the Middle East This Resolution sets the legislative Standards for Distributed Renewable framework regulating the process of Resources Generators Connected to the linkage of solar power generating units Distribution Network, DEWA Connection to Dubai’s electricity grid, with the aim Guidelines for Distributed Renewable of allowing residents and business to Resources Generators Connected to the generate solar power on their rooftops Distribution Network, DEWA Inspection and feed any excess energy back to & Testing Requirements for Distributed the grid, subject to certain conditions. Renewable Resources Generators Residents and business owners who Connected to the Distribution Network, have installed solar energy panels to DEWA Safety Documents for Distributed power their buildings can now feed the Renewable Resources Generators excess power generated back into the Connected to the Distribution Network, power grid. In contrast to what many DEWA Connection Agreement and industry players anticipated, there is no Conditions. For further information, feed-in tariff (FIT) or similar incentive, please see https://www.dewa.gov. and the whole scheme operates on a net ae/smartinitiatives/firstinitiative/ metering basis, whereby the consumer publications/default.aspx offsets imports from the grid with exports from the PV installation DEWA has already completed Phase DEWA has confirmed that under the One of the Sheikh Mohammed Bin scheme there is no time limit to the Rashid Solar Park program through period during which excess generation the construction of a 13 MW ground- can be banked. mounted PV system in March 2013, procured under an EPC model. There is also no requirement under DEWA announced that subsequent the scheme for the consumer to be development will be under an IPP model, the owner of the PV system, Any solar and has recently successfully awarded equipment that will be used for these Phase Two of the Solar Park, a 200MW systems will first need to pass DEWA’s solar plant to a consortium of ACWA certification process to ensure that Power and TSK under an IPP model. The the highest international standards. procurement was very successful for DEWA has a published list of companies DEWA, securing one of the lowest tariff’s qualified to act as consultants or to date for a PV plant of this size of 5.98 contractors for the rooftop programme. US cents/kWh. Phase 3 is now being DEWA has issued a number of procured, which is a 800MW solar PV guidelines and publications to guide project and tender documents were consumers in relation to the rooftop issued in December 2015. Developing renewable energy projects – A guide to achieving success in the Middle East program. This includes the DEWA 105 United Arab Emirates
6.5. Governing Laws
A number of contracts will have to be entered into by the developer with various parties in order to develop a renewable energy project in the UAE. Below we set out the likely counterparty to each of the key contracts based on current regulatory framework:
Contract Counterparties Governing Law
Musataha (Lease) Landlord (ADWEA/DEWA) UAE
PPA ADWEC/DEWA UAE
Shareholders Agreement TAQA/Masdar or another UAE ADWEA controlled entity in Abu Dhabi/ DEWA in Dubai
EPC contract Third party contractor Negotiable
O&M contract Third party contractor Negotiable
Finance documents Banks/finance provider Negotiable
Finance documents are usually governed by English law if finance is obtained from outside the UAE, since it need not be obtained from local banks. The UAE allows both Islamic and non-Islamic financing.
106 Developing renewable energy projects – A guide to achieving success in the Middle East UAE labour law is governed at a federal level, and has mandatory application on any individual working within Employment Law Overview the UAE (outside of the Dubai International Finance Centre). Federal Law No. 8 of 1980 Regulating Labour Relations, as amended (“Labour Law”) governs all employment relations restrictions regarding the termination of in the UAE, other than the employment employment for UAE nationals. arrangements in the Dubai International Financial Centre (DIFC), Abu Dhabi In the UAE employment is linked to Global Market (ADGM) and the immigration. All foreign employees Government. If the employing entity working in the UAE are required to is based in one of the Free Zones then secure a residency visa and work permit additional laws and regulations will through their employers in order to apply to the employment relationship. work and live in the UAE. To obtain The Labour Law covers all UAE their residency visa and work permit, employees, including foreign nationals. employees must enter into a standard The Labour Law is administered and form employment contract which enforced by the Ministry of Labour. must be registered with the Ministry of It issues regular ministerial decisions Labour/relevant Free Zone authority. and administrative circulars for the execution of Labour Law and which There is currently no applicable are supplementary to it. The Free minimum wage in the UAE. However, Zones have their own authority, which there is increasing regulation with administers and enforces that free zone’s regard to promoting the employment of employment regulations and the UAE UAE nationals within the private sector Labour Law. and within specific sectors. In order for a UAE national to be counted towards Emiratisation is the concept of increasing the employing entity’s quota, the UAE the number of UAE nationals employed national must be paid a minimum salary in the workforce and granting those in accordance with the Ministry of UAE nationals additional protections. Labour guidance from time to time. As Emirati employees receive special protection under the law. There are also
Developing renewable energy projects – A guide to achieving success in the Middle East 107 United Arab Emirates
Dispute resolutions/ The UAE has entered considerations into 32 Bilateral Investment Treaties Disputes in the UAE are most commonly (BITs) that are currently resolved by litigation or arbitration, with in force. arbitration generally being preferred by foreign investors. primary dispute resolution mechanism in construction contracts and there are Local court proceedings are conducted several institutions that can be used, in Arabic and parties must be including, the Dubai International represented by a UAE advocate or Arbitration Centre (DIAC), Abu Dhabi in limited circumstances, a specially Chamber of Commerce, DIFC –LCIA, licensed advocate. Whilst the complexity and the International Chamber of of a claim will determine the time taken Commerce (ICC). to achieve a resolution, the process is generally regarded as being fairly Whilst adjudication and other forms of cumbersome and slow in delivering alternative dispute resolution are not as a result. common as in other jurisdictions, there are signs that this concept is developing, Where court proceedings are the with adjudication leading the way as chosen form of dispute resolution, it a quick and effective alternative to is becoming increasingly common for arbitration or court proceedings. construction contracts to be subject to the jurisdiction of the Courts of the DIFC. Proceedings are held in English Investment treaty protection and English common law principles are The UAE has entered into 32 Bilateral applied by internationally renowned Investment Treaties (BITs) that are commercial and civil law Judges. currently in force. These include International investors are attracted BITs with China, France, Germany, to the standards and procedures Korea, Russia, Switzerland, the United employed and the greater clarity that Kingdom, and the United States. is given regarding the process and Abu Dhabi has introduced a similar mechanism in the recently established Abu Dhabi Global Market (ADGM) free zone. Arbitration is regularly seen as a
108 Developing renewable energy projects – A guide to achieving success in the Middle East In addition, the UAE is party to several Dispute Settlement regional investment agreements, including the Agreement on The UAE is a contracting party to the Promotion, Protection and Guarantee ICSID Convention and the New York of Investments among Member States Convention on the Recognition and of the Organization of the Islamic Enforcement of Foreign Arbitral Awards. Conference (the OIC Agreement) UAE treaties generally provide investors and the Unified Agreement for the with a range of dispute resolution Investment of Arab Capital in the Arab options, and generally require a ‘cooling State (the UAIAC). These treaties also off’ period for negotiations between provide investors with substantive rights, an initial notice of dispute and the and while the position is not as certain as commencement of arbitration. Many in relation to BITs, Arbitral Tribunals have UAE treaties also require an investor interpreted both the OIC Agreement to exhaust local remedies before and the UAIAC as containing a standing commencing investment arbitration. offer which allows investors to enforce those rights through investment Substantive Protections treaty arbitration. UAE BITs generally share the common The UAE is not a party to the Energy substantive protections as set out in Charter Treaty. Although it has Observer Appendix 2. Some UAE BITs, including status in that organisation, that does not the Switzerland/UAE and United allow investors to invoke the investor- Kingdom/ UAE BITs, also contain an state arbitration provisions in the Treaty. ‘umbrella clause’. An umbrella clause requires the State to observe obligations entered into in respect of investments made by the investor. Such a clause can provide additional Treaty protections, especially in relation to breaches of contract committed by the State or State parties associated with an investor’s investment.
Developing renewable energy projects – A guide to achieving success in the Middle East 109 United Arab Emirates
6.6. Investment Considerations
Setting up a business Free Zones have Companies are primarily governed by their own rules and UAE federal law, although additional regulations governing local laws and regulations apply on an businesses within them. Emirate by Emirate basis. Free Zones have their own rules and regulations governing businesses within them. although this is not a legal requirement. Power producing companies are often In Dubai it is proposed that DEWA subject to specific regulations governing owns at least 51% of project companies them. In relation to ownership, the participating in generation, with the Commercial Companies Law requires balance held by the private sector. that at least 51% of a company, incorporated on the mainland, must be It is unlikely that a foreign entity would owned by Emirati nationals or wholly be permitted to set up a company which owned Emirati companies. is not compliant with UAE federal law on foreign ownership except in the context Whilst there has been much debate of a government-sponsored project for about relaxing this requirement it was which a bespoke structure is deemed not included in the new Companies Law. necessary and a special exception It has been suggested that it will now made. be addressed in the new Investment Law and that the 51% threshold will be relaxed for certain sectors of business. Under Abu Dhabi’s IWPP program, joint ventures are formed between foreign private companies and the Abu Dhabi Government. Usually 60% of the project company is owned by the Government,
110 Developing renewable energy projects – A guide to achieving success in the Middle East There are essentially four main options available for a foreign entity wishing to do business in the UAE as per the table below
Type of Business Maximum Requirements Foreign Shareholding
Branch of 100% • Which as an extension of the parent is foreign Foreign owned Company • Conduct of business is limited to that of the parent and subject to authorization from the relevant Emirate • Must appoint a UAE service agent
Limited Liability 49% • Simplest form of corporate entity Company • Capital divided into shares • Two partners and at least one manager must be appointed • No minimum capital threshold is stipulated, but the agreed value will depend on the nature of the business
Joint Stock 49% • May be public or private Company • Capital divided into shares and at least three shareholders required • Majority of the board and the Chairman must be UAE nationals • Minimum capital AED 2 million (private) and AED 10 Million (public)
Free Zone 100% • Subject to the relevant legislation in the specific Company free zone, but the forms of entity available are generally similar to those mentioned above • Limited to activities specified for the particular free zone
Developing renewable energy projects – A guide to achieving success in the Middle East 111 United Arab Emirates
Tax structuring may be applied more generally, and it is understood that the 2030 Abu Corporate income tax Dhabi Economic Vision provides for implementing taxes on the mainland Taxation is generally regulated at with the possibility of VAT and an Emirate level. Within Abu Dhabi corporation tax being introduced at low and Dubai, in principle, all corporate levels in the coming years. entities carrying out trade or business are technically subject to tax. However, Pursuant to existing legislation in practice, corporate income tax is companies and branches carrying on a only levied on the oil and gas and trade or business in either Emirate will banking sectors. There are no general be subject to income tax on such trade exemptions in the law; this is merely or business carried out in that Emirate how the practice has evolved. As such, as follows: the risk is always present that tax laws
Taxable Income (AED) Rate %
Lower boundary: Not exceeding:
0 1,000,000 0
1,000,000 2,000,000 10
2,000,000 3,000,000 20
3,000,000 4,000,000 30
4,000,000 5,000,000 40
5,000,000 – 55
Free zones offer a tax free environment for a period set out in their rules and regulations; frequently this is renewable periods of 50 years.
112 Developing renewable energy projects – A guide to achieving success in the Middle East Other taxes
Tax Current position Withholding tax None
Personal income tax None
Capital gains Currently none, although for tax-paying entities capital gains are taxed as part of business profits
VAT Currently none, however this is currently subject to discussions at a federal and GCC level
Social security None imposed on expatriates, but UAE/GCC nationals contribute to retirement/pension funds
Property leasing Annual municipal fees may apply which may be passed on to the tenant
Property sales In Dubai both the buyer and seller must each pay a registration fee of 1% of the value of the land. Only UAE nationals have the right to buy in Abu Dhabi although a 99 year usufruct is possible
Customs Duty Payable on the import of goods into mainland UAE, this is usually 5%
In Dubai, foreigners Development assets – real or foreign owned estate, security companies can only own land in certain Ability to develop own sites designated areas, such areas being In Dubai, foreigners or foreign owned predominantly companies can only own land in certain residential. designated areas, such areas being predominantly residential. Dubai has an established system of title registration For corporate entities, 100% local for completed properties and an interim or GCC ownership composition property register where off-plan sale is required for ownership of land contracts must be registered. Almost all outside of those areas in which foreign property in Dubai now has a registered ownership is permitted. title. Citizens of other GCC member states have land ownership rights akin to those of UAE nationals.
Developing renewable energy projects – A guide to achieving success in the Middle East 113 United Arab Emirates
In Abu Dhabi, UAE nationals and Foreigners (non-UAE companies wholly owned by UAE nationals and non-GCC nationals) are given the nationals may freely buy and sell right to own buildings residential, commercial, investment, in investment zones, but and agricultural land and buildings. non-GCC nationals may Foreigners (non-UAE nationals and not own the underlying non-GCC nationals) are given the right plots of land. to own buildings in investment zones, but non-GCC nationals may not own non-GCC nationals) are given the right the underlying plots of land. Non-GCC or outside of the investment areas, nationals are allowed to enjoy usufruct but recent amendments to property rights over the underlying land pursuant legislation (which are now similar in to agreements of up to 99 years and approach to those in Dubai) are likely musataha rights pursuant to agreements to change this. This is the same for long of up to 50 years. leases including musataha and usufruct.
Real estate transactions in Abu Securing land rights Dhabi must be registered in the Land In light of the above issues, a lease Register if they concern the creation, or musataha are likely to be the most transfer or relinquishment of real or common means of securing land. We derivative property rights. Failure to set out below some key concepts which register renders the disposition void. are commonly utilised to secure land This provision also applies to lease rights or exclusivity prior to a formal land agreements in excess of four years. arrangement being entered into, and In practice, few registrations have their potential application in the UAE: been made in Abu Dhabi either inside Foreigners (non – UAE nationals and
Options for lease or sale • Not commonly used • Not a registrable interest
Break clause in lease • Termination provision exercisable after pre-determined period and typically subject to provisions
Memorandum of • More common form of exclusivity agreement understanding • Deposit payable to landowner, with requirement to sell/ lease by a certain date • Not a registrable interest • No specific performance, only damages • Only valid for a defined term
Irrevocable power of • Not valid in the UAE attorney
114 Developing renewable energy projects – A guide to achieving success in the Middle East Escrow agreement • Purchase/lease amount held in escrow • Release to landowner when conditions fulfilled • Release to developer if conditions are not fulfilled
Checklist for entering into • That the person purporting to lease the land owns title lease • That the prospective tenant is properly set up (e.g. as a company) to lease the land • Whether the lease can be registered • The purported use of the land is permitted and appropriate approvals have been obtained
Security Payment structures In Dubai, the holder of a usufruct or Transfer of title to land in the UAE will lease of between 10 and 99 years may only take place once the entire price mortgage the interest in the property for for the land is paid and a ‘No Objection the term of the usufruct or lease. Only Certificate’ from the developer is registered mortgages are recognised obtained. The latter is normally granted and mortgages can only be granted in only once arrears (such as service respect of property interests that are charges) on the land are settled. Lease capable of registration. payments are typically made annually in advance although some landlords may In Abu Dhabi, mortgages are capable in be willing to accept multiple instalments. relation to freehold, usufruct/musataha with terms of 10 years or more and leases with a term of 25 years or more. The mortgagee must be licensed by the Central Bank. A mortgage which is not registered shall be void.
Developing renewable energy projects – A guide to achieving success in the Middle East 115 United Arab Emirates
Permitting At present the only entity with a licence to Abu Dhabi and Dubai generate electricity by An application must be submitted, by means of a solar plant the parent company for incorporation of is Masdar. a foreign branch, and the shareholders for a limited liability company, to the In the conventional power sector, joint relevant authority in order to incorporate venture companies have taken the form the entity at which point a trade licence of private joint stock companies. It is this will be issued. entity which must apply for a generation
licence. The local authorities may require that the licensed entity take a certain legal At present the only entity with a licence form and/or have a minimum capital. to generate electricity by means of It may therefore be a requirement of a solar plant in Abu Dhabi is Masdar, the authorities that the legal entity be a which has a self-supply licence for the locally incorporated entity, rather than a development of Masdar City and also branch office. This would need to be exports excess capacity to the grid. investigated further in specific cases.
Shams 118
18 Courtesy: Masdar
116 Developing renewable energy projects – A guide to achieving success in the Middle East 6.7. Support Mechanisms
Since the IWPP program The IPP process commenced in Abu Dhabi, nine transactions Abu Dhabi have been successfully Abu Dhabi has had a successful completed with a cumulative power IWPP program for the procurement capacity creation of of conventional plants in place for a around 14GW. number of years. In 1998, ADWEA was established with the authority (amongst other matters) to engage with (b) The off taker and the project the private sector for the production company’s revenue streams are of power and water in the Emirate. Its not directly linked to customer bill subsidiaries include ADWEC, which is payments or subsidies responsible for the purchase and sale (c) Lenders look to the credit worthiness of water and electricity and acts as the of the off taker (as a single entity). government off taker for IWPPs, and TRANSCO which transmits water and The sector is unbundled into functional electricity from ADWEC to distribution entities which are regulated by an companies. Since the IWPP program independent regulator in Abu Dhabi, commenced in Abu Dhabi, nine the ADRSB. All these entities remain transactions have been successfully under Government control at this time. completed with a cumulative power ADWEC, a regulated entity, has the capacity creation of around 14GW. responsibility for developing forecasts of demand and also planning for Abu Dhabi follows a “single buyer capacities that are required for meeting model”, i.e.: the demand. (a) (The off taker assumes the demand The selection of the developer, typically risk in the market; the project as a consortium, is undertaken by company undertakes to provide ADWEA. 100% of the generating capacity and energy produced to the off taker ADWEA releases an RFP to the market under a long-term PPA which contains the relevant draft project agreements in addition to functional specifications and instructions to bidders.
Developing renewable energy projects – A guide to achieving success in the Middle East 117 United Arab Emirates
The selection process is designed to be a two stage process:
STAGE 1: Qualification • Fulfillment of minimum financial and capability criteria
STAGE 2: Technical • Compliant solutions to RFP requirement
Financial • Operation and maintenance plans • Cost basis of certain operating profiles • Finance plan with commitment letters from lenders
Proposals Project company evaluated Negotiations funders enter under RFP with PPA into shareholder ADWEA criteria ADWEA agreement ADWEA/TAQA
Preferred (or power and bidder water purchase selected agreement) ADWEA ADWEA
The project company must also secure The successful procurement of a licence to operate from the ADRSB the Shams 1 project through the and maintain this during the tenure of conventional IWPP model lends itself the PPA or power and water purchase to be repeated for other large scale agreement. It is therefore a regulated renewable energy projects in Abu entity throughout its operation. Dhabi.
118 Developing renewable energy projects – A guide to achieving success in the Middle East Dubai Dubai has established the DSCE to IPPs are expected to provide direction to the energy sector, play an increasing role in Dubai and will be which has representation from various licensed by the DRSB. stakeholders involved in the energy sector. The DSCE has pledged funding to renewable energy development IPPs are expected to play an increasing alongside public-private partnerships. role in Dubai and will be licensed by the DRSB. They will also have to meet DEWA is responsible for the supply technical standards contained in the of electricity within Dubai and hence IWPP Code issued by the DRSB in would be the off taker in this Emirate. 2012. Dubai’s current energy strategy DEWA is based on an integrated utility envisages clean coal and renewable model with ownership of generation, electricity generation coming from IPPs transmission and distribution assets. and the approach followed is similar to As with Abu Dhabi, an electricity and that in Abu Dhabi. DEWA commenced water sector regulator, the DRSB, has tenders in 2014 for two projects on an also been established and is responsible IPP basis, the Hassyn clean coal project for the development of an effective, and a 200MW Solar PV IPP. Contract independent and transparent regulatory awards have since been made and a regime within the Emirate. tender commenced for an 800MW solar PV IPP. Until 2014, the Emirate of Dubai had procured its power and water plants on a traditional basis (eg EPC) although in 2011, DEWA was given the authority to engage with the private sector for the development of IWPPs through joint ventures. Dubai commenced an IWPP program in 2010 with the 1500 MW Hassayan IPP; however, due to a negation of the need for additional capacity, this project was deferred by DEWA although the model is intended to be utilised in the future.
Developing renewable energy projects – A guide to achieving success in the Middle East 119 Appendices
Appendices 120 Appendix 1: Green sukuk to finance low-carbon and climate 121 resilient infrastructure in the Middle East Appendix 2: Renewable energy project financing: 132 environmental and social considerations Appendix 3: An Overview of Investment Treaty Protection 136 Appendix 4: Current Renewable Energy Projects as at 138 January 2016 Appendix 5: References 143
120 Developing renewable energy projects – A guide to achieving success in the Middle East Appendix 1: Green sukuk to finance low-carbon and climate resilient infrastructure in the Middle East
Prepared by the Climate Bonds Initiative for Eversheds Lawyers December 2015 1.1 Introduction The growing sukuk market is well suited to channel capital to fund renewable energy and other climate mitigation and adaptation projects. Sean Kidney Chief Executive Officer Sukuk are tradeable Islamic finance instruments, E: [email protected] consistent with the principles of Shari’ah. Sukuk represent an ownership in underlying assets or Beate Sonerud earnings from those assets. Fixed-income sukuk Policy Analyst with no risk sharing are similar to conventional E: [email protected] bonds and account for the largest share of the sukuk markets, but there are also types of sukuk 40 Bermondsey Street that have equity-type risk-sharing structures. London, SE1 3UD United Kingdom T: +44 (0) 7435 280 312 Green sukuk are a subset of sukuk that fund green assets or projects Green assets and projects can include solar and wind parks, energy efficient buildings, rail and other low-carbon transport projects, climate-resilient water projects and more.1 The potential for a rapidly growing market for green sukuk is increasingly recognised in the markets, as green sukuk tap into two of the fastest growing segments of the financial markets; the sukuk market and the green bond market.
Green bonds are bonds where the proceeds are earmarked for green projects. This is how green sukuk would be structured as well. The green bonds market has shown that this “use of proceeds” structure can work well but that robust and trusted 1 For a full overview of assets classified as climate-aligned, see the Climate guidelines for issuance and standards of what is Bonds Initiative Taxonomy – available green are needed. Green sukuk can benefit from from http://www.climatebonds.net/ the progress the green bond market is making in standards/taxonomy2 this area. Developing renewable energy projects – A guide to achieving success in the Middle East 121 Appendices
1.2 Benefits of sukuk as a financial instrument for green investment
Green credentials arise from From an issuer perspective, green the assets financed, not the Sukuk allows entities issuing entity seeking funding to This means any sukuk issuer that has access a different set of investors, both a pool of green assets to finance can those focused on issue green sukuk, regardless of the sustainable investing green credentials of the overall issuing and those focused on entity. This broadens the pool of Islamic finance. potential issuers, enabling market scale and a faster transition to a low-carbon Green sukuk would have economy. For example, an oil company could issue a green sukuk with funds comparable risk-return to allocated to solar investment, provided non-green sukuk robust management of proceeds From an investor perspective, green were put in place to ensure funds sukuk could have the same risk- are allocated only to the company’s return characteristics of other sukuk green projects. investments, as the credit ratings of the
61 Kuwait Finance House
122 Developing renewable energy projects – A guide to achieving success in the Middle East originator typically determine sukuk of investors representing USD24 ratings. The investor is not directly trillion of assets under management exposed to the green project risk. – coordinated by the Global Investor This characteristic, with the issuer Council on Climate Change, the PRI rather then the investor absorbing the and the UNEP Finance Initiative – made green investment risk, has been a key a statement saying they are ready to factor to the rapid growth of the green invest in climate. The coalition called bond market. on governments to support increased investment in climate solutions.3 Green sukuk could access a broader investor base Marketing of green credentials Green sukuk benefit from tapping to stakeholders into two distinct investor bases. First, Another benefit from issuers of green it can allow Islamic investors to more sukuk is marketing of their green easily address Shari’ah concern for credentials to investors and other environmental protection in their stakeholders. In the green bond market, investment choices. Secondly, green this is cited as one of the main benefits sukuk also has the potential to attract by issuers. non-Islamic investors who otherwise would not have invested in sukuk but invest due to the green credentials.2
The pool of investors looking to address environmental concerns in their investment decisions now accounts for a large share of the market. For example, in September 2014, a coalition
2 Vizcaino (2014): Islamic finance seeks to go green with environment-based products. Reuters. September 2014. 3 Climate Bonds Initiative and UNEP Inquiry (2015): Scaling green bond markets. December 2015. Developing renewable energy projects – A guide to achieving success in the Middle East 123 Appendices
1.3 Global trends signals significant potential for green sukuk
The sukuk market has grown Regional power sector projects tend to rapidly the last 15 years have stable and predictable cash flows, a return-profile typically coveted by The issuance of sukuk the last decades sukuk investors. Stable and predictable The issuance of sukuk the last decades cash flows can increasingly also be has risen steeply, with annual global offered by green infrastructure projects, issuance increasing from just over as the technologies and businesses US$1bn in 2001 to over US$137bn in in this space are maturing. There are 2012. Since then, annual issuance has many green infrastructure projects in decreased slightly, but still remained the Middle East that could be financed 4 at over US$120bn in 2014. This growth by green sukuk, for example projects in the sukuk market has increased the proposed under the clean energy potential for green sukuk to be issued strategies by Abu Dhabi’s and Dubai’s as well. governments in the UAE.6
Sukuk is a proven The green bond market instrument for financing non- proves there is strong investor green infrastructure in the demand for green Middle East The rapid growth in the green bond Sukuk has long been used to finance market has shown in practice that the a variety of conventional, non-green capital markets provide a promising infrastructure projects in the Middle channel to finance green investments. East. Globally, more than US$65bn USD36bn of labelled green bonds of sukuk were issued between 2001 was issued in 2014, up from $11bn in and 2012 to finance infrastructure 2013. Per December 2015, more than projects. Countries in the Middle East USD40bn of green bonds had been accounted for a significant share of issued in 2015.7 this infrastructure sukuk, with UAE accounting for 11.4% of the global total, Labelled green bonds are defined as and Saudi Arabia 10.3%.5 bonds with proceeds used for green projects and labelled accordingly by the The projects financed in UAE and Saudi issuer. The vast majority of these green Arabia included power and utilities.
124 Developing renewable energy projects – A guide to achieving success in the Middle East projects are focused on climate change In Malaysia, there have been several mitigation or adaptation, but there is developments signalling strong interest a small share of the market, which also in developing a green sukuk market. funds green, non-climate projects, such Developments in Malaysia can influence as public green spaces. Per June 2015, developments of green sukuk in the the largest share of labelled green Middle East, as Malaysia is the largest bonds has been issued for renewable market for sukuk globally. In 2014, energy, low-carbon buildings and Malaysia’s Securities Commission industry and transport.8 announced guidelines for the issuance of socially responsible sukuk.10 While Market players are socially responsible sukuk also includes increasingly seeing the social, non-environmental projects, it shows that sukuk investments are potential for green sukuk increasingly incorporating criteria The potential for green sukuk was beyond traditional Shari’ah compliance. discussed at the Global Islamic Finance Forum in both 2014 and 2015. In RAM ratings, a Malaysian ratings agency, 2015, the Forum dedicated a session has announced that they see “great exclusively to Islamic Finance for Green potential” in green sukuk, and one of the Technologies, and the Prime Minister Malaysian banks has also stated that the of Malaysia discussed the concept of country’s Islamic finance sector is ready green sukuk explicitly in his address to to enter the green finance market.11,12 the Forum.9
4 Alvi, I.A. (2015): Global Sukuk Market Trends & Findings from IIFM Sukuk Report 4th Edition citing International Islamic Financial Market Sukuk Database 5 Maierbugger (2013): Sukuk bridge the investment gap in infrastructure. Gulf News. Available from: http:// gulfnews.com/gn-focus/islamic-finance/sukuk-bridge-the-investment-gap-in-infrastructure-1.1160489 6 Samir and Moghul (2013): A ‘greener’ sukuk? Islamic Finance, November 2013 7 Climate Bonds Initiative data 8 ibid. 9 Climate Bonds Initiative (2015) Green Sukuk: Hot Topic at the World Islamic Economic Forum-Malaysia 10 Securities Commission Malaysia (2014): SC Introduces Sustainable and Responsible Investment Sukuk framework. Press release, August 2014. 11 RAM ratings (2014): RAM sees great potential in green sukuk. Press release, September 2014. 12 Mamood (2014): Malaysia’s Islamic finance ready to go green. September 2014.
Developing renewable energy projects – A guide to achieving success in the Middle East 125 Appendices
Development banks are other market In December 2014, the International players that are recognising the Finance Facility for Immunization (IFFIm) potential of green sukuk. Support from issued the first socially responsible development banks was instrumental sukuk, a US$500m, 3-year sukuk with to kick-starting the green bond market proceeds for vaccination programs. back in 2007/2008, and they can also The World Bank Treasury managed the play a role in kick-starting a green fundraising, as the treasury manager sukuk market. for IFFIm. A second sukuk for the same purpose was issued in September 2015, The World Bank, a pioneer in the for US$200m.14 issuance of green bonds, is increasingly considering the use of green 2015 saw a socially responsible sukuk sukuk specifically to finance green issued in Malaysia. The funds from the infrastructure investments in the Middle deal were allocated to education rather East. In 2014, the World Bank entered than environmental projects.15 a partnership with Dubai’s Supreme Council of Energy to develop a funding While not green, these successful deals strategy for Dubai’s green investment indicate a step towards sukuk with non- programme, and specifically mentioned financial criteria going beyond simply green sukuk as a potential instrument to Shari’ah compliance, and set the scene raise finance.13 for green sukuk to follow.
Demonstration deals In 2015, SGI-Mitabu, a consortium of two Australian solar companies, revived in the market: social their plans, first announced in 2012, to responsible sukuk issued and issue sukuk to finance the construction sukuk for renewable energy of a solar power plant in Indonesia. The in the pipeline deal was delayed due to planning issues for the solar project. The deal is planned The first labelled green sukuk has yet for A$150m (US$117m) in the Malaysian to be issued, however, there have been sukuk market, however the deal has not other of relevant deals in the global yet closed.16 sukuk market.
13 World Bank (2014): Dubai Supreme Council of Energy and World Bank Partner to Design a Funding Strategy for Dubai’s Green Investment Program. Press release, April 2014. 14 Bennett, M. (2015) Vaccine Sukuks: Islamic securities deliver economic and social returns. World Bank. Available from: http://blogs.worldbank.org/arabvoices/vaccine-sukuks-islamic-securities-deliver-economic- and-social-returns 15 Khouri, C. (2015): Investors on the hook in first SRI sukuk from Malaysia. Global Capital. Available from: http://www.globalcapital.com/article/rvx3xg2yk9yg/investors-on-the-hook-in-first-sri-sukuk-from-malaysia 16 Y-Sing, L. (2015): Solar Sukuk Marks Australia’s Debut Choosing Labuan Haven. Bloomberg. Available from: http://www.bloomberg.com/news/articles/2015-02-11/solar-sukuk-marks-australia-s-debut-in-malaysia- islamic-finance 126 Developing renewable energy projects – A guide to achieving success in the Middle East 1.4 Suitability for different types of sukuk for different parts of the renewable energy supply chain
The renewable energy supply chain Middle East is set out in the table below. provides opportunities for different The types of sukuk identified as suitable types of sukuk issuance to cover for renewable energy financing are investment needs. An overview of the discussed in further detail in the text. suitability of the different types of sukuk to finance renewable energy in the
Table 1: Types of sukuk in the renewable energy financing chain in the Middle East
Type of Suitability Where in Sukuk renewable energy supply chain
Debt
17 Istisna Yes Construction
Ijara Yes: Most common sukuk in the Middle East18 Operations
Murabaha No: Shari’ah compliance in secondary markets debated, N/A not widely used in the Middle East
Salam No: Short-term tenor, used for liquidity management.19 N/A Shari’ah compliance in secondary markets debated, not widely used in the Middle East.
Equity-style (risk sharing, but no ownership)
Musharaka Yes; Risk-sharing between issuers and investors, higher Construction or return opportunity for investors20 operations
Mudaraba N/A N/A
Wakala N/A N/A
17 Eversheds (2013): Developing renewable energy projects. A guide to achieving success in the Middle East 18 Thomson Reuters Zaywa (2014): Sukuk perceptions and forecast study 2014 19 Islamic Banker (n.d.): Sukuk al-Salam. Available from: http://www.islamicbanker.com/education/sukuk-al-salam 20 Zahid (2014): Bridging Asia’s infrastructure deficit with sukuk. Islamic Finance and Ethics Society. Available from: http://www.the-ifes.org/2014/09/01/bridging-asias-infrastructure-deficit-with-sukuk/
Developing renewable energy projects – A guide to achieving success in the Middle East 127 Appendices
1.4.1 Istisna (Islamic project bond)
Istisna only applies to assets which The renewable are not in existence and which need energy supply chain to be manufactured. With istisna, one provides opportunities party promises to deliver a product for different types of according to certain specifications, Sukuk issuance to cover at an agreed time and at an agreed investment needs. price. This can include any commodity or asset, such as buildings, factories, aircraft or vessels. It can therefore also Istisna is widely tried and tested, so be used for construction of renewable the documentation is fairly standard energy assets, such as solar and wind with general consensus among farms. Istisna can be used to finance Shari’ah scholars and boards. However, construction or capital expenditure. intricacies can exist within the scope of It allows for financing to be paid in the actual asset and its manufacture. instalments before or after delivery of the asset as agreed between the parties.
1.4.2 Ijara (lease-based sukuk)
Ijara is the most common sukuk an SPV is formed to purchase assets, for structure in the Middle East, and can example a solar plant, from the sukuk only be used with existing, real assets issuer. Investors buy the green assets, that are fixed, such as land or office and then lease them back to the issuer, buildings. This makes it applicable to with the lease payments providing the finance renewable energy infrastructure return to the investor. in the operational phase, after construction is finished. The underlying Ijara has fairly standard documentation green asset pool should consist of and general consensus among most assets with a market value at least equal Shari’ah scholars on the structure’s to the sukuk issue amount. Ijara works compliance with Islamic law. on a sale-and buy-back model where
128 Developing renewable energy projects – A guide to achieving success in the Middle East 1.4.3 Musharaka (Islamic joint venture)
Musharaka offers partnerships in risk exposure would vary depending on tangible assets. The asset pool which stage of the renewable energy can be made up of existing assets, project is financed: Risk is higher in the or new assets purchased with the construction phase, and relatively low sukuk proceeds that comply with the in the operational phase. Profit sharing criteria set for the asset pool. The key can be set on a pre-agreed ratio, which difference from istisna and ijara is that can differ from the loss-sharing ratio. the investor also takes a share in losses, An SPV is set up which leases its share on a capital participation basis. This of the assets to the obligor. Return to moves it closer to conventional equity Sukuk holders is made through periodic than bonds, although the investors rental payments. do not have an ownership share in the issuing entity, only the assets, under any Musharaka are tried and tested and were sukuk structure. widely accepted in the Middle East.
Green musharaka sukuk can therefore provide an opportunity for investors with higher risk-return preferences. The
Developing renewable energy projects – A guide to achieving success in the Middle East 129 Appendices
1.5 Kick-starting green sukuk markets: standards, demonstration issuance, and further policy support
Establishing standards for ensure a Shari’ah compliant asset pool. green sukuk – ‘what is green’ Conventional sukuk issuance already has processes in place to ensure There is a need for a green sukuk market transparency with regards to use of to have robust green credentials, as proceeds being Shari’ah compliant. investors want to know that the green The process for ensuring that the sukuk they invest in will have a genuine assets financed with the sukuk comply environmental impact. While there is a with green criteria and Shari’ah can be balance to find between stringency for similar, as both are cases of integrating the green impact of individual issuances non-financial criteria in the issuance and overall scale of the market, ensuring process. some level of environmental ambition in the sukuk issuances is necessary. Standards to ensure Shari’ah compliance Developing clear guidelines and would be the same for green sukuk as standards for what is green, with a normal sukuk issuance; although, it is specific focus on climate, therefore worth noting that the Shari’ah standards establishes the foundation for a green can differ by region, as different sukuk market. scholars interpret Shari’ah differently. The interpretation in the Middle East is The green standards that are being generally stricter than in Asia. developed for the green bond market can also be adapted to work for green Demonstration issuance to prove sukuk issuance. To date, the Climate Bonds Standards and Certification concept to market players scheme is the only tool in the market that Strategic green sukuk issuance from provides science-based standards for trusted and well-known entities plays what assets are defined as green.21 an important role in kick-starting the green sukuk market in its initial stages. Implementing standards to ensure Demonstration issuance can help green credibility of assets in a green engage investors and educate them sukuk issuance can be easier than it about the asset class but with greater has been in the green bond market, as comfort, since the issuer would be a it can build on the processes already well-recognized entity. established in the sukuk market to
21 Climate Bonds Initiative (2014): Standards. Available from: http://www.climatebonds.net/standards
130 Developing renewable energy projects – A guide to achieving success in the Middle East Public entities such as development Next, there are proven support tools bank, municipalities and sovereigns that have been used to further support are well placed to provide initial capital market growth, but their use demonstration issuance to the market. for green sukuk will vary depending Demonstration issuance has been on the policy priorities and fiscal space instrumental in growing the green bond in different countries. This includes market, where development banks strategic public investment in green and municipalities have been active in sukuk, tax incentives and credit providing strategic issuance. enhancement. The fundamental actions and proven market boosters are tools Further public sector support: commonly used in a transition phase demonstration investment, to jump-start general capital market tax incentives and more development. The difference here is that they are being applied specifically to Public sector action is vital to kick-start a facilitate investment in green projects.23 green sukuk market. The need for public sector support is not specific to green; Collaboration: Green Sukuk for any new financial market there is a central role for the government to create Working Group an enabling environment to support Cooperation among key institutions is a healthy and dynamic growth in initial key component of developing a well- stages of the market. functioning green sukuk market. Financial sector players must cooperate with The most fundamental actions are environmental experts to ensure green market – building activities that have bond markets are robust from both an low fiscal impacts, and that have proven environmental and financial perspective. success in supporting new financial A Green Sukuk Working Group has markets. This includes supporting the been established, by The Clean Energy development of standards and providing Business Council of the Middle East demonstration issuance, as mentioned and North Africa, the Climate Bonds above, but also developing pipelines of Initiative and the Gulf Bond and Sukuk green infrastructure projects suitable to Association, to channel market expertise be financed with green sukuk.22 to develop leading practices and promote the issuance of green sukuk.
22 Climate Bonds Initiative and UNEP Inquiry (2015): Scaling up green bond markets for sustainable development – a strategic guide for the public sector. Available from: http://www.climatebonds.net/ resources/publications/scaling-green-bond-markets-sustainable-development Developing renewable energy projects – A guide to achieving success in the Middle East 23 ibid. 131 Appendices
Appendix 2: Renewable energy project financing: environmental and social considerations
The development of all solar and wind Equator principles projects will have both environmental The Equator Principles (EP) consist and social implications, with the scale of ten principles which relate to and nature of such impacts dependent environmental and social assessment on a number of factors including, and management. In addition, they among others, plant size, location, include reporting and monitoring nearest settlements and proximity to requirements for Equator Principles environmental designations. Financial Institutions (EPFIs). This chapter discusses some of the The EPs set a financial industry key international environmental and benchmark, adopted by financial social standards and principles. These institutions, for determining, assessing requirements should be considered and managing environmental and to enable successful delivery of a social risk in projects. renewable energy project which will be acceptable to international lending There are currently 78 EPFIs in 34 institutions. different countries. These financial institutions have officially adopted the In order to deliver a project, work EP standards, and will therefore not should be carried out in accordance provide finance to clients who do not, with the requirements of the key or are unable to, comply with the EPs. standards and principles set out in the following sections. Some of these lenders such as the European Bank for Reconstruction and Development (EBRD) or other international or local financial institutions may have additional standards to be adhered to.
132 Developing renewable energy projects – A guide to achieving success in the Middle East The EPs apply globally and to all IFC performance standards industry sectors, including the solar on social and environmental and wind industries. sustainability The ten EPs are as follows: Equator Principal 3 states that countries not designated as High EP1 – Review and Categorisation. Income OECD countries should EP2 – Environment and Social Assessment. apply the social and environmental EP3 – Applicable Environmental and Social sustainability standards laid down Standards. by the International Finance EP4 – Environmental and Social Management Corporation (IFC). System and Equator Principles Action Plan. These standards have been EP5 – Stakeholder Engagement. developed for the IFC’s own EP6 – Grievance mechanism. investment projects but have set an EP7 – Independent Review. example for private companies and EP8 – Covenants. financial institutions worldwide. EP9 – Independent Monitoring and Reporting. EP10 – Reporting and Transparency.
Developing renewable energy projects – A guide to achieving success in the Middle East 133 Appendices
The IFC Performance Standards Compliance with the IFC Performance on Environmental and Social Standards will not only facilitate Sustainability relate to the following a socially and environmentally key topics: sustainable project but will also facilitate the sourcing of finance Performance Standard 1: Assessment and Management of for the project. In addition, a set of Environmental and Social Risks and Impacts. Guidance Notes, corresponding Performance Standard 2: to the Performance Standards, Labour and Working Conditions. was developed by IFC to Performance Standard 3: offer helpful guidance on the Resource Efficiency and Pollution Prevention requirements contained in the Performance Standard 4: Performance Standards, including Community Health, Safety and Security. reference materials, and on good Performance Standard 5: sustainability practices to improve Land Acquisition and Involuntary Resettlement. project performance. Performance Standard 6: Biodiversity Conservation and Sustainable In addition to Equator Principal 1, Management of Living Natural Resources. which discusses impact assessment Performance Standard 7: Indigenous Peoples. where there are multiple projects Performance Standard 8: Cultural Heritage. located within close vicinity, the cumulative nature of impacts must be considered for both wind and solar projects. Please refer to the IFC Good Practice Handbook on Cumulative Impacts Assessment for further information.
134 Developing renewable energy projects – A guide to achieving success in the Middle East World bank group Local, national and international environmental health and safety environmental and social (EHS) guidelines legislation and regulations The World Bank Group EHS Guidelines As is commonly known, environmental are a set of technical reference and social legislation and regulations documents containing general and vary between countries and specific industry specific examples of good regions, however; the EP and IFC international industry practice. Performance Standards set the minimum acceptable standard for The General EHS Guidelines contain developments worldwide. guidance relating to environmental, health and safety issues which are A large number of countries have applicable across all industry sectors. national legislative requirements which are on a par with or higher than the EP The industry sector EHS guidelines / IFC standards and guidelines. In this contain the performance levels instance, the more stringent national and measures that are generally requirements should be reviewed and considered to be achievable in new adhered to. facilities by existing technology at reasonable costs and are designed to In countries where environmental and be used together with the General EHS social legislation requirements are Guidelines document. less demanding, a project seeking financing by the IFC / EPFI must be Specific EHS Guidelines which are developed in accordance with these recommended for reference include requirements but must also commit to the EHS Guideline for Wind Energy comply with the EP / IFC standards. and the EHS Guideline on Electric Power, Transmission and Distribution.
For further information please contact:
Ms. Bryanne Tait Regional Lead – Energy & Resource Efficiency Advisory, Middle East & North Africa T: +971 56 175 4566 E: [email protected]
Developing renewable energy projects – A guide to achieving success in the Middle East 135 Appendices
Appendix 3: An Overview of Investment Treaty Protection
The purpose of investment treaties for Investment treaties generally confer the States is to provide favourable conditions following substantive protections on for inward investment and cross – border qualifying investors and investments: economic co-operation, and reciprocal protection of its nationals’ investment in • Protection from expropriation: other States. protection from governmental taking of the investment (which may be a In return, States provide investors direct seizure of property but also with certain substantive rights and includes indirect measures which protections, and, importantly, generally result in a substantial deprivation of an give investors the right to enforce those investor’s investment)). rights through an investment treaty arbitration against the State – a key • Fair and equitable treatment: protection in itself. obliges the State to provide fair and equitable treatment. A wide range of Protection under one or more State conduct can potentially breach investment treaties can reduce this standard: examples include the business risk associated with denial of justice, lack of due process, cross-border investments, and denial of legitimate expectations, improve an investor’s position in any lack of stability, lack of transparency, subsequent dispute connected with coercion, lack of good faith, failure to those investments. comply with contractual obligations, revocation, refusal to issue or renew, However, in order to qualify for or delaying in issuing or renewing an protection, an investor must show that operating licence or permit, unilateral it qualifies as an “investor” under the termination of an investment contract, investment treaty, and that its interests in disagreements over contractually fixed the host State qualify as an “investment” tariffs, refusal to negotiate contractual under the investment treaty in question. disputes, closure of investor’s If these conditions are not met, the business following a change in law, investor or their investment will not political statements against foreign be protected. investment/investors, discriminatory refusal to provide financial assistance,
136 Developing renewable energy projects – A guide to achieving success in the Middle East and miscarriage or denial of justice While all almost all investment treaties by domestic courts. This is a key and share the above common features, commonly invoked protection each investment treaty offers different degrees of investor protection, and • Full protection and security: obliges imposes different requirements for an the State to protect an investor’s investor and its investment to qualify for property and provide a secure protection. Some of these differences environment . This is generally invoked are noted within the State chapters of in relation to the physical protection of this guide. an investor’s property and the exercise of the State’s police powers (but can If an investor wishes to access investment in some cases also extend to legal protections for a clean energy protection). investment in the Middle East, it must therefore consider not only whether • Most-favoured nation protection a treaty is in place between the host (MFN): requires the State not to treat country and the investor’s home State, investors or their investments less but also consider the provisions of the favourably than the investors of any potentially applicable treaty or treaties to third State of their investments. This evaluate whether its investment will be protection can entitle an investor protected under one or more treaties, to access favourable protections in and if so, which protections are available. other treaties even where these are unavailable in the treaty between the Careful structuring of an investment host State and the investor’s home can allow an investor to maximise State. A related protection, national its protection under one or more treatment, requires the State not to international investment protection treat investors or their investments less instruments. For example, an investment favourably than the host State’s own can be routed through a company investors and their investments. established in a third State that has entered into an investment treaty with the relevant host State.
Developing renewable energy projects – A guide to achieving success in the Middle East 137 Appendices
Appendix 4: Current Renewable Energy Projects as at January 2016
Country Project Name Technology Status Size Location
Egypt Kom Ombo PV PV Main 200 MW Aswan Contract Bid Egypt Gabal El Zeit Wind Execution 220MW Suez
Egypt Gulf of Suez Wind Main 250 MW Suez Contract Bid
Egypt Gulf of Zayt Wind Execution 120MW Red Sea
Egypt Assiut Barrage & Hydro Execution 40 MW Asyut Hydropower Plant
Egypt Egypt Ministry of Wind Complete 200 MW Red Sea Electricity & Energy – Gabal El Zeit Wind Farm Egypt Kureimat Hybrid PV Complete 20 MW out of Cairo Power Plant: Solar 140 MW Island Package
Egypt Zafarana Wind Complete 545MW Suez
Egypt Naga Hammadi Hydro Complete 64 MW Naga Barrage Hammadi
Egypt Power Plant in PV Execution 100 MW Benban Benban Jordan Jordan Solar One PV Execution 20 MW Mafraq Jordan Falcon Maan for Solar PV Execution 21 MW Maan Energy Jordan Foursan Capital PV Execution 10 MW Aqaba Partners/Shamsuna Power Jordan Adenium Energy – PV Execution 10 MW Maan Zahart Al Salam
138 Developing renewable energy projects – A guide to achieving success in the Middle East Country Project Name Technology Status Size Location
Jordan Adenium Energy – Al PV Execution 10 MW Maan Ward Al Joury
Jordan Adenium Energy – Al PV Execution 10 MW Maan Zanbaq
Jordan Adenium Energy PV Execution 30 MW Maan Capital Jordan MEMR – Wadi Araba Wind Main 25-30 MW Maan Contract Bid
Jordan MEMR – Al Harir, Wadi Wind Execution 300-400 MW Maan Araba and Maan
Jordan Greenland PV Execution 10 MW Maan Alternative Energy/ EJRE/Scatec JV Jordan EJRE / Scatec JV PV Execution 20 MW Maan
Jordan Scatec/Quest Energy PV Execution 10 MW Amman Investment/Kingdom Electricity JV – Oryx
Jordan MEMR – El-Quweira PV Main 75 MW Maan Contract Bid
Jordan MEMR – Maan Wind Execution 66 MW Maan
Jordan Jordan Wind Wind Complete 117 MW Tafilah Renewable Energy LLC – Tafila Wind Farm Jordan SunEdison / MEMR – PV Execution 20 MW Maan Maan Development Area
Developing renewable energy projects – A guide to achieving success in the Middle East 139 Appendices
Country Project Name Technology Status Size Location
Jordan MEMR – Fujeij Wind Complete 70-90 MW Amman
Jordan Shams Maan Power PV Execution 52.5 MW Maan Generation
Jordan MEMR – Azraq Grid PV Complete 2 MW Zarqa Connected PV Solar Plant Jordan First Investment Co PV Execution 23.8 MW Maan for Clean Energy/ MEMR – Maan Devp Area Jordan Mustakbal Clean PV Complete 1 MW Maan Tech – Ma'an Jordan Hofa Wind Complete 1 MW Hofa
Jordan Greater Amman Waste to Main TBD Amman Municipality – Solid Energy Contract Bid Wasste to Energy Facility Jordan WAJ – As Samra Waste to Main TBD Zarqa Biosolids Monofill Energy Contract PQ Project Jordan Kingdom Electricity PV Complete 10 MW Badia Company – The Northern Badia Project
Kuwait KOC – Umm Gudair PV Execution 10 MW Umm Gudair
Kuwait MEW / KISR – Solar Execution 70 MW Shagaya Shagaya Renewable Energy Complex Kuwait MEW / KISR – PV Execution 10 MW Shagaya Shagaya Renewable Energy Complex: Phase 1
140 Developing renewable energy projects – A guide to achieving success in the Middle East Country Project Name Technology Status Size Location
Kuwait MEW / KISR – CSP Execution 50 MW Shagaya Shagaya Renewable Energy Complex: Phase 1 Kuwait MEW / KISR – Wind Execution 10 MW Shagaya Shagaya Renewable Energy Complex: Phase 1 Kuwait KAPP/Kuwait Waste to Main TBD Al-Ahmadi Municipality – Kabd Energy Contract Bid Governorate Municipal Solid Waste Project Kuwait Al Abdaliya power PV Approved 60 MW Abdaliya plant Qatar KAHRAMAA – Solar PV Main 220 MW Duhail Energy Power Plant Contract Bid Qatar KAHRAMAA – Solar PV Main 10 MW Duhail Energy Power Plant Contract Bid
Saudi SEC – Duba CSP Execution 600 MW Duba Arabia Integrated Solar (CSP: 20-30 Combined Cycle MW) (ISCC) Power Plant Phase I Saudi Saudi Aramco – PV Complete 3.5 MW Riyadh Arabia KAPSARC
Saudi KAPSARC II PV Complete 1.8 MW Riyadh Arabia
Saudi SEC – Farasan Island PV Complete 500 kW Farasan Arabia Solar Project Island
Saudi KAUST PV Complete 2 MW Thuwal Arabia
Saudi North Park PV Complete 10 MW Dhahran Arabia Saudi Tabuk KJC CPV PV Execution 1 MW Tabuk Arabia
Developing renewable energy projects – A guide to achieving success in the Middle East 141 Appendices
Country Project Name Technology Status Size Location
UAE Shuaa Energy 1 – PV Execution 100 MW Dubai Mohammad Bin Rashid Al Maktoum PV Solar Power Plant (IPP) – Phase 2 UAE Masdar – Noor 1 PV Main 100 MW Al Ain Contract PQ
UAE CWM / TAQA – Waste to Main 1-2 MW Abu Dhabi Waste-to-Energy Energy Contract PQ Plant UAE Utico FZ – Ras Al PV Main 40 MW Ras Al- Khaimah Contract PQ Khaimah
UAE Bee’ah – Waste-to- Waste to Execution TBD Sharjah Energy Facility Energy
UAE Bee’ah – Solar Energy PV Main TBD Sharjah Plant Contract PQ
UAE Masdar – Sir Bani Yas Wind Main 30 MW Abu Dhabi Island Contract Bid
UAE DEWA – Mohammad PV Complete 13 MW Dubai Bin Rashid Al Maktoum Solar Power Plant (Phase 1) UAE Masdar / Abengoa / CSP Complete 100 MW Abu Dhabi Total – Shams I
UAE Dubai Municipality – Waste to Main TBD Dubai Al-Warsan Waste-to- Energy Contract PQ Energy Plant UAE Rooftop PV Execution 1 MW Dubai
UAE Masdar/ADFEC PV Complete 10 MW Abu Dhabi
UAE SunPower Masdar PV Complete 1 MW Abu Dhabi City UAE DEWA – Mohammad PV Main 800 MW Dubai Bin Rashid Al Contract PQ Maktoum Solar Power Plant (Phase 3)
142 Developing renewable energy projects – A guide to achieving success in the Middle East Appendix 5: References
List of Reference
ADDC (2015), from http://www.addc.ae/en/Tariff%20tables%20English.PDF BMI (2015), Country Power Report CIA Factbook (2015), from https://www.cia.gov/library/publications/the-world-factbook/ DEWA (2015), from http://www.dewa.gov.ae/tariff/tariffdetails.aspx EIA (2015), from http://www.eia.gov/ EIU (2015), Country Industry report – Energy Egyptian Electric Utility and Consumer Protection Regulatory Agency (2015), from http://egyptera.org/en/t3reefa.aspx IRENA (2014), Pan-Arab Renewable Energy Strategy 2030 KAHRAMAA (2015), from https://www.km.com.qa/CustomerService/Pages/Tariff.aspx Kuwait Ministry of Electricity and Water (2015), from http://www.mew.gov.kw/ en/?com=content&id=93&act=view MEED (2014), Mena Renewable Energy Report National Water Company, Saudi Arabia (2015), from https://www.nwc.com.sa/English/Customers/Pages/ TarrifCalculator.aspx Numbeo (2015), from http://www.numbeo.com/gas-prices/ REN21 (2015), Renewables 2015 Global Status Report REN 21 (2013), MENA Renewable Energy Status Report RES4MED (2015), APRICUM Country Profile Saifur Rahman (2012), UAE gears up for mega energy conference, Gulfnews, from http://gulfnews.com/ business/general/uae-gears-up-for-mega-energy-conference-1.1079845, September, 2012 Samir and Moghul (2013): A ‘greener’ Sukuk? Islamic Finance, November 2013 Saudi Electricity Company (2015), from http://www.se.com.sa/SEC/English/Menu/Customers/ Consumption+bills/TarifAndTax.htm UAE Ministry of Energy (2015), from http://dcce.ae/wp-content/uploads/2015/06/SOER_2015_BOOK_ draf t7_171114_pp_V2_ LOW1.pdf Water Authority of Jordan (2015), from http://www.waj.gov.jo World Bank (2015), from http://data.worldbank.org/
Developing renewable energy projects – A guide to achieving success in the Middle East 143 Mohammed bin Rashid Al Maktoum Solar Park
Courtesy: DEWA
144 Developing renewable energy projects – A guide to achieving success in the Middle East Developing renewable energy projects – A guide to achieving success in the Middle East 145 www.eversheds.com www.pwc.com/me ©Eversheds LLP 2016. ©2016 PwC. All rights reserved. Eversheds LLP is a limited liability partnership.