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WEEKLY REVIEW: SCATEC SOLAR CONTINUES AFRICAN EXPANSION

25 April 2017

Norwegian independent solar power producer Scatec Solar further cemented its footprint in Africa last week when it signed 25-year power purchase agreements (PPAs) with the Egyptian government for a 400 MW (DC) solar portfolio worth $450 million.

Scatec Solar is providing up to $70 million in equity for the six 50 MW (AC) solar projects in the Ben Ban region, which are all certified under Egypt’s landmark 2 GW feed-in tariff programme.

The remaining equity will be provided by Norwegian investment firm KLP Norfund Investments and unnamed Egyptian developers, with the potential for more partners to be added to the equity consortium before financial close.

Scatec Solar chief financial officer, Mikkel Tørud, told CEP last week the vast majority of the portfolio would be advanced in conjunction with developers already on the ground in the Middle East and North Africa region.

"We have already partnered with a number of developers so basically we have one project of the six which is fully controlled by ourselves then the five others are in partnership with local developers," he said.

Debt financing of up to $350 million for the solar portfolio will come from a club of banks led by the European Bank for Reconstruction and Development (EBRD).

The successful signing of the PPAs sends a clear signal that Egypt’s FiT program is back on an even keel after stalling temporarily last year due to an arbitration dispute between the government and international financing institutions.

The government was resolute that any arbitration issues related to the projects should take place in Cairo while multilaterals like the EIB, EBRD and IFC insisted that it must occur in Geneva or they could not fulfil their commitments to provide financing.

Tørud told CEP the dispute was successfully resolved some months ago.

 “In August last year the government of Egypt announced revised terms under the feed-in tariff programme so they took the tariff down from US 14 cents to US 8.5 cents and then they also accepted offshore arbitration as a part of the PPA terms so that’s been on the table for quite some time now,” he said.

Oslo-based Scatec Solar has also committed to advancing a number of projects in other parts of the African continent as it seeks to capitalise on the region's burgeoning solar market.

In recent times it has inked deals comprising:

- a joint development agreement with African Development Bank-backed fund Africa50 and Norwegian state-owned private equity fund Norfund for a 100 MW solar project in Nigeria;

- a $25 million loan from the African Development Bank for a 33 MW solar project in Mali;

- a 25-year power purchase agreement with Electricidade de Mozambique for a 40 MW solar project in Mozambique.

Outside Africa, Scatec's pipeline contains projects in Brazil, Malaysia and Bangladesh, with a recent private placement of new shares to fund its backlog raising almost $45 million.

The share raise generated interest from existing Scatec shareholders and new “high quality institutional investors”.

Robust 2016 financial results also place Scatec in good stead with the company recording consolidated revenues in 2016 increasing to $130.3 million [+23%] and a growth in EBITDA from 2015 of $537 million.


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