By John Hamilton, Director, African Energy and Cross-border Information
The government is advancing rapidly with its plan to build more than 4GW of solar photovoltaic (PV) generation in partnership with foreign investors. At a well-attended presentation in Algiers on 1 March, Sonelgaz released a surprising amount of detail about its intentions.
Minster of energy Noureddine Bouterfa first announced the 4,050MW programme in mid-January (AE 340/4). The dissemination of a detailed plan just over one month later is unusually rapid by Algerian standards. The programme is divided into three lots of 1,350MW, which will be developed over several years. It envisages the creation of build, own, operate projects with 20-year power purchase agreements (PPAs) between project companies and the offtaker, which will be Sonelgaz transmission subsidiary Opérateur Système in partnership with Sonatrach.
How partners will be selected and whether the PPA price will be negotiated or decided competitively is still “fuzzy”, according to one observer. When asked for specifics on this point, officials “fudged the issue”, he said. Investors will probably be asked to submit expressions of interest. However, this may not result in the creation of a shortlist of bidders, but instead to a dialogue period lasting four to six months in which officials will refine their plans and documentation. Some 70% of the cost of projects in the energy component is expected to be provided by non-recourse debt finance and 30% from equity.
As expected, the programme has an energy and an industrial component. Contracts to build, own and operate the solar PV projects will be issued back-to-back with contracts for the construction of factories for manufacturing PV cells and inverters. Private sector investors will hold 49%, Sonatrach 40% and Sonelgaz 11% of the energy component joint ventures. Private Algerian companies will be limited to a maximum 6% stake. Joint ventures under the industrial component will be 51% owned by Sonelgaz and Entreprise Nationale des Industries Electroniques, a subsidiary of state-owned electrical component manufacturer Elec El-Djazaïr. The Ministry of Industry and Mines will designate partners.
Participation will be open to all entities. If the investor is not a manufacturer of solar PV equipment, it must form a joint venture with both a manufacturer of PV cells and of inverters. The industrial element will involve the creation of two or more businesses for producing this equipment. The Ministry of Energy has put Sonelgaz subsidiary Compagnie de l’Engineering de l’Electricité et du Gaz in charge of preparing the tender. An executive decree defining the conditions and procedures has been finalised but has not yet been published in the Official Journal.
Nine sites have been identified, in El-Bayadh, Laghouat, Djelfa, M’sila, Biskra, Bechar Ghardaia, Ouargla and El-Oued.
John Hamilton is a panellist at CbI Meetings’ MENA Investment Exchange: Energy meeting.