Public-Private Partnership Stories Jordan: Tafila Wind Farm Jordan’s power sector is unsustainably dependent on imported fuel. It suffers from high wholesale electricity prices and electricity demand continues to grow at 8 per- cent per annum. Current financial losses in the power sector are one of the largest pressures on the Jordanian budget. At the same time, Jordan has plentiful wind and solar resources but has been struggling to harness these over the past decade. IFC played a unique role in this project by engaging early with a private sector part- ner, EP Global Energy (EPGE), to advise on the development of the project, including the financing package and a set of bankable project agreements. This allowed for an IFC investment of $69 million and mobilization of a further US$152 million in private sector financing. The Jordan Wind Power Company (JWPC), owned in part by EPGE, Masdar and In- fraMed Investments, signed a power purchase agreement with the government of Jordan and reached financial close in November 2013. Completion of the new 117MW facility is expected in September of 2015. The Tafila wind project is the first private wind project to reach financial close in the Middle East and North Africa region out- side of Morocco. This series provides an overview of public-private partnership stories in various infrastructure sectors, where IFC was the lead advisor. This landmark transaction is Jordan’s first wind farm and sets the IFC Advisory Services in stage for the roll-out of its long pipeline of wind and solar parks over Public-Private Partnerships 2121 Pennsylvania Ave. NW the next few years. Washington D.C. 20433 ifc.org/ppp BACKGROUND government would pay for different types of renewable power. Jordan currently imports around 96 percent of its energy needs, In the developers’ expression of interest, the land required accounting for over 20 percent of GDP, which has created for the project and the proposed size and type of facility had considerable pressure on the government’s budget. As home to to be identified. For expressions of interests acceptable to the 6.3 million people, and with population growth and demands government, MOUs were issued, which provided developers from increasing numbers of Syrian refugees, the government has with an exclusivity period of 24 months, during which time they been focused on decreasing reliance on imported fuels through need to develop the project, sign project agreements with the increasing domestic renewable energy production. Jordan passed government, and reach financial close. Developers are expected the Renewable and Energy Efficiency Law, which, among other to submit generation proposals, containing detailed technical and things, enabled the Ministry of Energy and Mineral Resources financial information on the proposed project, within six months (MEMR) to conduct a direct proposals process to develop a of signing the MOU. After acceptance of the generation proposal, number of renewable energy projects. MEMR is authorized to sign PPAs and developers then have a further six months to reach financial close. EPGE signed a Memorandum of Understanding (MOU) with the MEMR on June 4th, 2011, providing exclusive rights to develop In the first round of direct proposals, facilities larger than 10MW its chosen site, for a period of 24 months. During this period, were accepted, and many of these facilities are now close to EPGE was responsible for the development of a bankable project, signing project agreements. A second round, where projects must including carrying out all technical and environmental studies be 50MW or larger, was announced and the government is in the negotiating, a power purchase agreement (PPA) and a guarantee process of announcing the short list of developers who will receive agreement with the government. MOUs for project development, under the process described above. A third round, expected to be for projects of 100MW or IFC’S ROLE larger, has also been announced and expressions of interest are expected to be received in the near future. IFC engaged very early in the transaction, signing a mandate letter with EPGE, in December 2011, at a time when the developer had only a six-page MOU. Under the terms of the mandate, IFC leveraged both its investment and advisory teams to support EXPECTED POST-TENDER RESULTS EPGE in structuring the project agreements and assisting in • Winner of Project Finance International’s Middle negotiations with the government of Jordan, as well as mobilizing the project’s entire debt package. The project agreements Eastern Renewables Deal of the Year 2013 award. negotiated with the Jordanian authorities are now the basis of • Investment mobilized: This $287 million project is Jordan’s renewable energy contractual structure for the current supported by $221 million in loans. IFC is providing a round of 12 renewable energy projects under negotiation and will $55 million A Loan, a $14 million C Loan, B loans of also be the template for subsequent rounds of projects. $59 million (in which the participants are Europe Arab Bank and FMO) and mobilizing $93 million in parallel TRANSACTION STRUCTURE loans from EIB (counter-guaranteed by EKF) and OFID. As envisioned by the direct proposals process, renewable projects IFC also provided interest rates swaps for the entire in Jordan take the form of build-own-operate projects. The client, debt package. EPGE, has acquired the necessary land for the development of the project and will then design, build operate and maintain • Number of people who benefit: Improved access to the project. At the end of the 20 year PPA, the project company power for 72,000 annually. Reduced greenhouse gas is required to return the site to its original condition. The emissions of 224,000 tons of CO2 annually. government provided support through a guarantee of offtaker • Government benefits: Will provide domestic power to payment obligations as well as certain tax and customs incentives the grid at a price 25 percent below current wholesale for renewable energy projects. electricity prices. BIDDING 02/2014 The Tafila project was the first project to be undertaken through the direct proposal process. Specifically, the government invited developers to submit expressions of interest for the development of renewable projects indicating the maximum tariffs that the