February 21, 2019

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February 19, 2019

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A Victim of Its Own Success: Jordan Re-evaluates

Jordan’s approach to the development of renewable energy generation infrastructure has long been regarded as a template for other governments in the region. Through leveraging its favourable geography and climate for wind and solar generation an aggregate capacity of almost 1 GW of renewable energy has been or is currently under construction to be, added to the grid since the introduction of the Renewable Energy and Efficiency Law in 2012.

Jordan’s position in the vanguard of renewable energy deployment was further cemented last year when its Ministry of Energy and Mineral Resources (MEMR) released a tender for a 30 MW/ 60 MWh energy storage system that would likely be the first energy storage system in the Middle East and North Africa region to be financed on a standalone limited recourse basis.

While this increase in generation capacity is much needed to address the energy demands of Jordan’s growing population and expanding urbanisation, Jordan’s aging grid has experienced technical challenges in absorbing the increased production from these renewable energy projects. It was announced on 29 January 2019 that the Prime Minister’s Cabinet had decreed that all conventional and renewable power generation tenders or direct awards have now been put on hold until studies on the ability of the grid to absorb additional power have been completed, and MEMR has updated its power generation strategy for efficiently upgrading the grid and minimising the cost of power generation.

We understand that there are two primary categories of exceptions to this suspension:

  • Round 3 projects: we understand that this exception is caveated by the requirement that the Round 3 projects demonstrate a reduction of energy costs in Jordan. The amount of such reduction and how such reduction is to be demonstrated has not been specified. Round 3 projects include 150 MW of solar PV and 50 MW of wind. China's Jinko Solar and US-based RAI Energy last year submitted the lowest bids for both the base and alternative proposals for the solar component.

  • Wheeling or net-metering projects with a capacity under 1 MW.

Jordan’s Energy, Water and Environment Association (EDAMA), an NGO established in 2009, reported that MEMR confirmed to them on 5 February 2019 that the suspension of approvals for renewable energy projects would only be temporary, and that MEMR “is biased” to renewable energy project being the only local energy source.

Unsurprisingly, this suspension has been met with some consternation from the private sector, but it was perhaps not entirely a surprise that MEMR would consider re-evaluating its power generation strategy at some point. Technical challenges faced by the grid in absorbing the additional renewable energy generated had been cited as the primary driver for the reduction of the Round 3 capacity from 200 MW to 150 MW in solar and from 100 MW to 50 MW in wind in September 2018. In addition, the deployment of energy storage technology is currently attracting a great deal of interest and attention in the Middle East and North Africa region, and MEMR may be well served in considering how such technology can be most effectively integrated into the grid for the purposes of enhancing electricity interconnection and minimising energy loss.

The biggest concern for the private sector is perhaps not that a suspension has occurred, but that there is currently no visibility as to when the suspension will be lifted. We understand that it is expected that the studies to be commissioned by MEMR will be completed by mid-2019, but there has been no indication as to the period of time that MEMR will then permit itself for the review of those studies and the revision of its power generation strategy in line with the studies’ findings.

© 2019 Bracewell LLP

TRENDING LEGAL ANALYSIS


About this Author

Oliver Irwin Bracewell FInance Attorney
Partner

Oliver advises lenders and sponsors on the development and financing of cross-border projects across a broad range of industries, many of which are the first of its kind in their industry. He has significant experience advising on multi-sourced project financings involving export credit agencies, multilaterals and development finance institutions. He is also a regular speaker at industry conferences.

IFLR1000 has identified Oliver as a “Rising Star” every year since 2013, and he has been ranked by Chambers and Partners each year since 2012, where clients report...

+44.(0).207.448.4228
Laura Capelin Finance Attorney
Senior Counsel

Laura Capelin focuses on asset-based and project finance transactions throughout the Middle East, Europe and the United States, with particular experience in financings related to major power (including renewables) and development projects. Laura advises and negotiates a range of secured and unsecured financial transactions, including structuring and negotiating senior and subordinated debt financings, acquisition and project financings, structured financings and securitizations. Her clients include sponsors and conventional and Islamic financial institutions.     

EXPERIENCE

Recent Notable Matters

Alcazar Energy Partners — solar and wind projects in Jordan and Egypt

RWE Innogy — bid in respect of the Al Abdaliyah Integrated Solar Combined Cycle project in Kuwait

Lenders — support of a bidding consortium (Marubeni and Nebras) in the Fadhili Cogeneration Project in Saudi Arabia

EDF Energies Nouvelles and Nebras Power Q.S.C. — bid for the 800 MW DEWA Solar Phase III IPP of the Mohammed Bin Rashid Al Maktoum Solar Park, Dubai, UAE

RWE Innogy — advising in respect of the Sweihan 350 MW solar IPP in Abu Dhabi, UAE

Lenders — support of a bidding consortium in relation to the Umm Al Hayman wastewater project in Kuwait

Arranger — $2 billion “whole business” securitization, combined the project and property financing techniques, of the residential and tourism development of Blue City in Oman

Major Islamic financial Institution — provision of an Islamic financing facility to an Emirate government, as lender

Members of the Qatari royal family — various Islamic financings secured by real estate located in the U.K.

Sponsor — $1 billion “whole business” securitization of an Irish issuer, collateralized with life settlement policies and SPV interests

CREDENTIALS

Education

Oxford Institute of Legal Practice, L.P.C.
2006

Oxford University, Hertford College, B.A., English Law and German Law
2005 - with honours

Bar Admissions

Solicitor of the Senior Courts of England and Wales

New York

+971.4.350.6848