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Jordan - Continuity, Innovation and SEMED

  • Jordan
  • Energy and infrastructure

07-06-2012

The Previous Phases - Pre Phase 3

 

The EBRD first launched thfe Sustainable Energy Initiative ("SEI") in 2006 at its annual meeting. As a result of the SEI, the EBRD has become one of the main options for obtaining project finance for renewable energy projects.

The SEI's objectives are to: (i) provide project finance for renewable energy projects where there is clear evidence that energy savings will be made and carbon emissions reduced; (ii) participate in renewable energy policy dialogue; and (iii) provide expertise to renewable energy projects in relation to project preparation and implementation and capacity building.

The EBRD's SEI financing from 2006 to the end of 2011 totals 8.8 billion euros, spanned across 464 renewable energy projects. It is estimated that this investment will eventually equate to the reduction of 46 million tonnes of carbon dioxide per year.

Phase 3 - The Approach


On 18 May 2012, the EBRD launched phase 3 of the SEI ("SEI3"), which covers the initiative during the period 2012 - 2014. The strategy of the SEI3 combines continuity with innovation, by building on the progress made during phases 1 and 2 whilst innovating in order to advance further.

The SEI3 will continue to be based on the EBRD's business model i.e. private sector focused and market-orientated. Although, given the complications with the economy, the heightened climate change challenge and energy security concerns, it has become clear that the SEI3 may be the most difficult of the phases. In addition, one of the main features of the SEI3 is the expansion of its operations into the southern and eastern Mediterranean ("SEMED") region i.e. Egypt, Jordan, Morocco and Tunisia - who, amongst others, are seen as vulnerable to the impacts of climate change.

Financing Approach


It is anticipated that the SEI3 will use the following principles as part of its approach:

  • direct provision of finance by EBRD for private or public sector projects (with a particular focus on the private sector);
  • use of subsidies where necessary; and
  • use of carbon finance where possible.

Development Directions


The SEI3 is reported to comprise of the following two main development directions:

  • further development of the SEI's energy efficiency and climate change mitigation activity; and
  • acknowledging the rising temperature and focusing on climate change adaptation as a result (including in the SEMED region).

Phase 3 - The Aim


Using the approach set out above, the SEI3's targets are as follows:

  • financing target of 4.5 to 6.5 billion euros; and
  • target annual carbon emission reduction range of 26 to 32 million tonnes of carbon dioxide.

The EBRD and SEMED


As mentioned above, the EBRD is planning to invest in Egypt, Jordan, Morocco and Tunisia - exemplifying its increasing desire to expand its geographic role beyond Europe. The EBRD has plans to open offices in each of the four countries. It has not yet opened its office in Jordan, as agreements are currently being finalised. However, it is anticipated that 10 non-legal staff will be employed in this office, with lawyers from the London office being utilised alongside external local counsel. From a high-level staffing perspective, the EBRD has appointed a managing director for the SEMED region and is hiring employees with experience in this region.

It is reported that discussions will take place with the new countries regarding what the arrangement will entail, as the experiences of eastern Europe (where the SEI has primarily operated to-date) may not be applicable given the differences between such regions - politically and economically.

Mustapha Kamel Nabli - governor of the Central Bank of Tunisia - is reported to have reminded the EBRD's chief economist (Erik Berglöf) that the liberalisation of the east European markets occurred during a time of world growth, whereas the economies of most countries have experienced recessions in recent years (including those in the SEMED region). Nabli also added that it was the benefits of privatisation (which is a focus of EBRD) that led to the recent revolution in Egypt - due to such benefits only being utilised by those privileged enough.

The EBRD has acknowledged that the plans in the SEMED region are only in their infancy, and have therefore accepted that a consultative approach will be required. This is evidenced by EBRD's desire to secure employees who have experience in the SEMED region and its indication that it will be launching its Legal Transition Programme (“LTP”) in the SEMED region.

The EBRD’s LTP is an initiative put in place to improve the investment climate in the countries in which it operates by helping to create a predictable legal environment. Until this year, the LTP has been focusing on countries in central and eastern Europe. However, given the EBRD’s interest to expand into the SEMED region, the LTP’s activities going forward will reflect this interest.

Going Forward


With the combination of financing and operational strategies, it appears that the SEI3 will allow the EBRD to remain as a key player in sustainable energy financing, whilst continuing to provide its expertise to renewable energy projects.

With regard to the SEMED regions, it will certainly be interesting to witness how the balance will be struck with the EBRD, given the differences highlighted to-date between the SEMED regions, and those regions that the EBRD has previously operated in. The LTP is sure to assist in making this process more straightforward.

About Eversheds


Eversheds has 45 offices in 28 jurisdictions across the UK, Europe, Middle East, Africa and Asia. Our Middle East offices are based in:

Abu Dhabi, Dubai (the United Arab Emirates), Amman (Jordan), Baghdad (Iraq), Doha (Qatar) and in association with Dhabaan and Partners in Riyadh (Saudi Arabia).

To discuss the content of this article or learn more about Eversheds in the Middle East please contact:

Michelle T Davies
Head of clean energy and sustainability

Intl:+44 29 2047 7553
michelletdavies@eversheds.com

Tim Armsby
Partner
Intl:+971 2 494 3630
timarmsby@eversheds.com

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