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Jordan is unique among its Middle Eastern neighbors. It lacks the large oil and gas fields typically found in its neighboring countries, forcing it to import almost all of the energy it consumes. But what Jordan lacks in one resource it makes up in another: sunshine. Bright days are abundant, with some parts of the country enjoying up to 330 sunny days a year.
Jordan is aware of its solar energy potential and eager to harness its promise. To diversify its energy mix—reducing its energy dependence while meeting the growing domestic demand for electricity—the Jordanian government is working with IFC.
Earlier this month, we arranged a $76 million financing package for the construction of a solar plant in northern Jordan that will supply power at 6.9 cents per kilowatt hour. This rate is far below the average cost of electricity in the country and among the lowest for solar energy worldwide.
The financing for the 50-megawatt plant, operated by Fotowatio Renewable Ventures (FRV), includes $21 million from the IFC-Canada Climate Change Program. The plant is expected to start operating in 2018. Its production will be sufficient to power more than 40,000 average homes.
IFC’s investment is the latest in a series of deals to help Jordan boost its domestic energy capacity through renewable power.
In November 2013, we supported the country’s first commercial-scale renewable-power project, the 117-megawatt Tafila Wind Farm, as financier and mandated lead arranger. Less than a year later, we provided a major boost to Jordanian government’s ambitious solar power program, signing seven deals at once. It was the largest-ever private sector-led solar project in the Middle East and North Africa.
Diversification of Jordan’s energy sources hasn’t always been smooth. After recognizing the potential of the sun as an energy source, the country launched an ambitious plan to develop a dozen new solar photovoltaic (PV) plants with the private sector. Despite significant interest in the initiative, securing financing for the individual power plants proved challenging. The plants were small (mostly 10 MW and 20 MW each) and carried relatively high transaction costs.
So IFC designed an innovative financial solution to re-start solar: we offered to arrange debt for all the projects. Seven of them eventually appointed IFC as their lead arranger. The projects were grouped together and came to be known as Seven Sisters.
Through the arrangement, developers were able to share IFC’s structuring expertise, syndication platform, legal advice, and specialist advisers—agreeing to abide by uniform financing terms and a common set of key project documents. All clients benefited from greatly reduced transaction costs.
In October 2014, IFC finalized a $207.5 million debt package to finance construction of all seven plants. The initiative is so far the largest collection of privately-owned solar PV projects ever to be realized in the Middle East and North Africa region.
The program has paved the way for subsequent rounds of competitive renewable energy projects in Jordan. The seven plants are now operational, providing clean, cheaper solar power, and helping the country replace imported fossil fuels.
It’s a sunny forecast, indeed.
To learn more about IFC’s work in Infrastructure, visit: http://www.ifc.org/Infrastructure
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Published in September 2016