PHAN Dieu Linh

NGUYEN Bao Tran

M1 S1 2020-2021

ENVIRONMENTAL INNOVATION
PROJECT PAPER ON
GREEN BONDS
AND
SOLAR POWER PLANT IN MOROCCO

3rd January 2021

Table of Contents

I) Introduction ............................................................................................................3
II) Green Bonds ..........................................................................................................3
1. Green Bond Overview .......................................................................................3
2. Criteria by World Bank .......................................................................................3
III) Project Evaluation .................................................................................................4
1. Noor Solar Power in Morocco............................................................................4
1.1. Background ............................................................................................4
1.2. Overview ................................................................................................5
1.2.1. Project Description ...........................................................................5
1.2.2. Project Details ..................................................................................5
1.2.3. Financing..........................................................................................6
2. Project evaluation ..............................................................................................6
2.1. Define eco-innovation ............................................................................6
2.2. Component of business model ..............................................................6
2.2.1. Value proposition .............................................................................6
2.2.2. Business operation ..........................................................................7
2.2.3. Customer aspect ..............................................................................7
2.3. Value proposition ...................................................................................8
2.3.1. Economics........................................................................................8
2.3.2. Social/Cultural ..................................................................................8
2.3.3. Environmental ..................................................................................8
2.4. Potential wider impact............................................................................8
3. Progress evaluation ...........................................................................................9
3.1. Implementation evaluation .....................................................................9
3.1.1. Aiming object ...................................................................................9
3.1.2. Progression ......................................................................................9
3.1.3. Evaluation ........................................................................................10
3.2. Profitability evaluation ............................................................................10
3.2.1. Electric sector in Morocco ...............................................................11
3.2.2. Project’s profitability .........................................................................11
3.3. Risk evaluation.......................................................................................14
4. Forecast ................................................................................................. ... ........15
4.1. Positive...................................................................................................15
4.2. Negative .................................................................................................15
5. Impact of Green Bond........................................................................................16
IV) Conclusion .............................................................................................................16
Bibliography ..................................................................................................................17

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I) Introduction
Facing climate change, individuals and businesses are becoming more concerned about
environmental issues and engaging in sustainable activities, environmental innovations have
driven the market in recent years. This type of innovation are organizational implementations and
changes to make positive impacts on the environment by creating an effort in the fight against
climate change. The purpose of this paper is to analyze an environmental innovation as a
financing instrument: the green bonds and the project financed by this type of bond: the NOOR
Solar power in Morocco as well as the impacts and potentialities of this eco-innovation.

II) Green Bond

1. Green Bond Overview
Since the World bank first issued the green bonds in 2008, the green bond market has
grown exponentially. Green bonds are a financial innovation which are used for finance or
refinance only green projects or assets. Thus, they have characteristics of a classic bond (such
as maturity, coupon, price and credit quality of the issuer). Green bonds help increase sustainable
infrastructure investments from institutional investors by improving the liquidity of infrastructure
assets. Green bonds allow issuers to reach different investors and promote their sustainable
credentials. Because of their nature, green bonds attract investors as a straightforward instrument
to integrate social, environmental, governance outcomes into fixed income portfolios. The World
Bank Green Bonds is an example of the kind of innovation the World Bank is trying to encourage
within the "Strategic Framework for Development and Climate Change". The World Bank has
issued over USD 13 billion equivalent in Green Bonds through more than 150 transactions in 20
currencies.
An investor might favor green bonds over other alternatives for several reasons. First of
all, similar to other bonds, green bonds have been welcomed as an ideal fixed income investment
opportunity over a fixed time, in fixed periodic installments. They offer transparency and
disclosure of the funded project. This helps the investor keep on track with the project, make it
more predictable and less risky than other options. A unique feature of the green bond is that
investors are keen to be associated with green bond issuances. Investors use green bonds to
communicate to their stakeholders their commitment to supporting climate-focus activities. The
main investors of green bonds are from Europe, Japan and America.

2. Criteria by Word Bank

Eligible projects supported by the Green Bond program are selected by World Bank
environment specialists and meet the World Bank's green bond eligibility criteria for low-carbon
and climate resilient development. All selected projects must go under a rigorous review and
approval process to ensure that the projects are eligible for financing by World Bank Green Bond
project. These include early screening to identify the potential environmental or social impacts,
designing policies and concrete actions to mitigate such impacts, reviewing the project pipeline in
order to obtain the approval of the Bank's Board of Executive Directors - a resident Board with 25
chairs representing its member countries. Some examples of eligible mitigation projects are Solar
and wind installations, Carbon reduction through reforestation and avoided deforestation.

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 The lifecycle of a project financed by World Bank green bond follows six stages:
1. Country Partnership Framework
2. Identification
3. Preparation, Appraisal and Board Approval
4. Implementing and Supervision
5. Implementing and Completion
6. Evaluation
The World Bank supervises the implementation of all the green bond projects they
support. Regular reports must be submitted by the implementing government agency on project
activities, including a mid-term review of the project process. With World Bank financing, the
projects are periodically funded, allocated in an amount equal to the disbursements of the whole
process with little to no disruption.

III) Project evaluation

1. Noor Solar power in Morocco
1.1. Background
Morocco is located in North Africa, covering a land mass slightly larger than California. Its
population of 34 million (2014) is relatively young—over 45 percent is under the age of 24—and
is growing at 1.4 percent annually. The country has capitalized on its proximity to Europe and
relatively low labor costs to build a diverse, open, market-oriented economy with low inflation rates
(under two percent). Morocco’s GDP grew at 2.7 percent in 2014 and its per-capita income growth
in recent years has contributed to eliminating extreme poverty and significantly reducing poverty—
the World Bank estimates that poverty rates fell from 8.9 to 4.2 percent between 2007 and 2014—
although disparities persist, and employment remains low. Morocco’s energy needs far exceed
its oil and gas production. As a result, Morocco was the largest energy importer in the Middle East
and North Africa (MENA) region, depending on non-domestic sources for over 97 percent of its
domestic energy demand. The country imports approximately 91% of its energy needs to meet
its national demand for electricity (2014). Over the past decade, the total energy consumption has
increased by about 5% per year.
The kingdom of Morocco is implementing a national strategic objective to improve security
in energy supply and provide widespread accessibility at reasonable cost. The country has
introduced a sustainable development policy that shares a role in the long-term environmental
strategy. The National Energy Strategy (2010-2020) adopted in March 2009 and is recently
updated to 2030. One of the nation's objectives is to massively increase the proportion of
renewable energy in energy consumption. These objectives can be met by reducing the country's
dependence on energy imports, including increasing use of renewable sources for electricity
production. The diversification of energy sources will contribute to reduce the effects of power
production and enable Morocco to meet its national and international commitments in the fight
against the effects of climate change. Under the environmental policy, the Integrated Solar Energy
Programme, known as the 2000 MW NOOR Programme was launched in November 2009 in
Ouarzazate. The country expects the proportion of electricity produced from renewable resources
in the total installed electrical energy to be 42% in 2020 and 52% by 2030. Morocco currently
generates 28 percent of its energy from renewable energy sources and plans to achieve the set

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targets through a combination of solar, wind and hydropower generation. Under the Moroccan
Solar Plan (MSP—now referred to as Noor), the country plans to develop 2,000 megawatts (MW)
of solar capacity by 2020.

1.2. Overview
1.2.1. Project Description
The Ouarzazate solar power plant (OSPP) is a 582MW concentrated solar power (CSP)
complex located in the municipality of Ghessate, Ouarzazate Province, Morocco.

Also referred to as Noor Ouarzazate power project, the OSPP is made up of three-phases. The
first phase includes the 160MW Noor Ouarzazate I CSP plant, while the second phase comprises
the 200MW Noor Ouarzazate II and the 150MW Noor Ouarzazate III projects. The third and final
phase involves the construction of the Noor Ouarzazate IV photovoltaic (PV) plant.

The Noor Ouarzazate I CSP plant has been operational since February 2016, while the Noor
Ouarzazate II and III CSP plants commenced operations from January 2018 and December 2018,
respectively. Construction of the NOOR IV PV power plant was commenced in April 2017.

OSPP is set to become the largest multi-technology green power production facility in the world,
upon commissioning. It will generate enough power required for up to 1.3 million homes, while
offsetting more than 800 000 tons (t) of CO2 emissions a year.

1.2.2. Project Details

Noor Ouarzazate I CSP plant is equipped with 500,000 SENER trough cylindrical
parabolic troughs, extending in 1,112 acres. Operational since February 2016, the first phase
delivers up to 520GWh of energy a year.

The Noor II features SENERtrough®-2 parabolic trough collectors, while the Noor III CSP
plant is proposed to use the central tower technology with salt receivers.

Commissioned in January 2018, the Noor-2 CSP plant is installed with more than 100 rows of
thermo-solar cylindrical parabolic troughs. It uses a dry-cooling system, which minimizes water
consumption for cooling the mirrors.

The consortium of NOMAC, a subsidiary of ACWA Power, and MASEN is responsible for the
operation of the second phase projects of the solar complex.

The $862m Noor Ouarzazate III CSP plant, which began commercial operations in December
2018, comprises 7,400 HE54 heliostats to capture the sunlight. It features a power tower and a
molten salt storage system, which enables the production of electricity for 7.5 hours even without
solar radiation. In addition, it features SENER’s integrated control system for the receiver and
solar field.

The Noor I, II, and III CSP plants use Siemens SST-700 and SST-900 model steam turbines and
a generator.

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 1.2.3. Financing

International financial institutional, multilateral development banks and donors (including

grants and concessional loans providers), in particular, have played an important role in financing
renewable energy projects in Morocco. The first phase of Ouarzazate NOOR I (160 MW CSP)
attracted several key actors, including the World Bank Clean Technology Fund (CTF), the
European Investment Bank (EIB), KfW Development Bank and the African Development Bank
(AfDB), etc. With very attractive financing conditions, the involvement of such institutions has
contributed in bringing the price down. Climate finance, especially Green Bond, also plays a role
in deploying low carbon technologies. In particular, the CTF has contributed in financing RE
projects through money raised by issuing Green Bond. A CTF CSP MENA Investment Plan was
initiated in 2009 and is implemented jointly by the World Bank and the African Development Bank
with a contribution of 750 million US dollars from the CTF, providing concessional financing.

The African Development Bank provided €100m ($128m) towards the development of Phase I of
the Noor Ouarzazate solar complex. It also received $100m from Climate Investment Funds. The
co-financiers include the French Development Agency (AFD), European Investment Bank (EIB),
World Bank, Clean Technology Fund (CTF), Neighborhood Investment Facility (NIF) of the
European Union (EU), Kreditanstalt Fur Wiederaufbau (KFW) Bankengruppe, and the German
Ministry of Environment (BMU). KfW Bankengruppe financed 659 million dirhams (approximately
$65m) for the Noor Ouarzazate IV project. In June 2018, the World Bank approved an additional
funding of $100m for the Noor-Ouarzazate CSP project.

2. Potentialities evaluation

2.1. Define eco-innovation

Noor Solar power is considered as an “Environmental technology” as follow the definition
classified by Kemp and Foxon. It was agreed that measurement technologies for measuring
pollution, resource use and environmental quality, and “green energy technologies” are also to be
viewed as environmental technologies. Green energy technologies are not explicitly mentioned in
the definition of environmental technologies as “all technologies and processes to manage
pollution (e.g. air pollution control, waste management), less polluting and less resource-intensive
products and services and ways to manage resources more efficiently (e.g. water supply, energy-
saving technologies)” but they should be viewed as being part of it.

2.2. Component of business model

2.2.1. Value proposition
Cheaper and cleaner energy, no fuel, no noise, no waste
The NOOR program aims to produce at least 2,000 MW of electric power from solar
energy by 2020. It will improve Morocco’s energy security of supply to sustainably reduce the
kingdom’s dependence on the outside world and diversify production sources through the use of
renewable energies by raising the share of these energies in the electricity mix up to 42% by 2020
compared to less than 15% currently. Eventually, NOOR will save annually one million tons of oil
equivalent and avoid the emission of 3.7 million tons of CO2.

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 2.2.2. Business operation
a) Key activities
Investing heavily in R&D to meet the growing demands for cost-effective and
environment-friendly energy sources. By using new technology, the solar power
plant Noor is mainly equipped with the advanced Concentrating Solar Power
(CSP) generation
b) Key Partner
A good cooperative relationship with the industrial park management committee
and leaders of enterprises and institutions can help attract more customers. As
such, they are both customers and partners. Other partners include financial
institutions, such as banks, design and construction companies, insurance
companies, and grid companies. Energy-saving service companies acquire
financing from banks or other financial institutions to invest in the PV system
construction. They must also cooperate with professional design and construction
companies to install and maintain the PV system, and need to work with bonding
companies and insurance agents to ensure the smooth completion of the project
and minimize risks. The power produced by the PV system first satisfies customer
requirements; excess power is sold to the grid company. Moreover, strong support
by the government facilitates the EMC model; because of this, energy-saving
service companies need to keep a close and lasting partnership with them.
c) Key Resources
Material/ Energy: Morocco has taken advantage of its geographical position and
environment to gain an edge in the field of renewables, especially solar energy.
The average incident solar radiation varies between 4.7 and 5.6 kWh/m2/day with
a number of hours of sunshine that varies from 2700 hours/year in the North of
Morocco to more than 3500 hours/year in the South.
Financial: They must get financial support from banks or other financial institutions.
Therefore, the cooperative relationship with banks and other financial institutions
is an indispensable resource. Financed by the money raised by World Bank Green
Bond.
2.2.3. Customer aspect
a) Customer Segments
The main segment of customers is industrial and commercial enterprises. This
model is especially favored by customers like industrial parks and economic
development zones, where there is large power consumption, and the roof is
centralized and connected, resulting in high utilization. Other sub-customers are
schools, hospitals, and hotels.
b) Channels
The sales team, composed of salespeople, plays an essential function in
promoting this model. Energy-saving service companies often establish
cooperation by hosting conferences or forums with powerful economic
development zones or industrial parks The government is likely to recommend this
model to public institutions and enterprises, to further spread the use of clean
energy like solar power.

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 c) Customer Relationships
In this model, energy-saving service companies establish direct contacts with
enterprises by signing contracts.

2.3. Value proposition

Environmental innovation in general brings a lot of value. The core value proposition of
renewable energy is to provide cheaper and cleaner energy.
2.3.1. Economics
The production of electricity from solar sources by the NOOR Ouarzazate II plants
helps to increase the proportion of renewable energies according to Morocco's national
strategy. Electricity generated from Renewable energy-based system innovation will be
cheaper in the future, thus consumers can buy electricity at a lower price. This also
benefits the local industries as the costs for operation is noticeably reduced. National
electricity and Drinking water authority (ONEE) is one of the main beneficiaries of the
NOOR Ouarzazate II solar power plant: help to satisfy electricity at peak times (5 p.m. to
10 p.m. in winter and 6 p.m, to 11 p.m. in summer). The plant helps to enforce the positive
impact of solar energy on Morocco's trade balance, which reduces foreign currency
exchange by avoiding the import of fossil fuels (coal, fuel oil, and gas) to produce the same
amount of electric power generated per year by the NOOR Ouarzazate II plant.
2.3.2. Social/Cultural
Electricity will become more ensured and accessible to the locals. Since the
commissioning of NOOR Ouarzazate II in 2018, the power plant has supplied electricity
power to 700 000 people in a country where access to electricity is almost universal, with
more than 99,64% RER by the end of 2018. In addition, the project creates a green image
for the country. The number of temporary jobs created by the project during the
construction phrase reached its maximum level in January 2017 with 4063 workers, 2%
of those are women. The proportion of Ouarzazate region comprised almost 40% of the
total number of workers.
2.3.3. Environmental
For the environment, NOOR Solar Power liberates Morocco from importing
energies. As a result, it avoids extraction of natural resources and reduces carbon
footprint. Benefits from the plant also link with the reduction of greenhouse gas emission.

2.4. Potential wider impact

The second-order effects of the project also extend to the same three aspects. It links to
many economic activities such as in the Primary sector, Manufacturing and Industry sector. Local
companies will continue to benefit from maintenance contracts for installations and other services.
This results in an effective local industrial integration. NOOR will also attract foreign investors to
Morocco. The plant has created many permanent jobs for the locals. In 2018, the number of onsite
permanent jobs created for operation and maintenance of the NOOR Ouarzazate II was 81. The
project also has female recruitment to ensure that women can participate. All staff are highly
trained which may help them participate in the global deployment of CSP, contributing to the
global learning curve.

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On the other hand, the use of large areas of land for the Noor‐Midelt solar power facilities will
inevitably affect native vegetation and wildlife in many ways, including loss of habitat; interference
with rainfall and drainage; and potential direct contact causing injury or death (flying birds).
The construction of the plant will inevitably generate dust which can be significantly hazard during
windy conditions. However, these potential impacts are evaluated, and mitigation measures are
proposed.

3. Progress evaluation
3.1. Implementation evaluation
3.1.1. Aiming object
The program aims to develop a minimum capacity of 2,000 MW by 2020 in order to secure
power supplies for the population and productive sectors of the economy. The three-plant Noor-
Ouarzazate CSP complex expects to achieve over 500 megawatts (MW) installed capacity,
ultimately supplying power to 1.1 million Moroccans by 2018. It is expected to reduce carbon
emissions by 760,000 tons per year which could mean a reduction of 17.5 million tons of carbon
emissions over 25 years.
Word Bank has set a specific timeline for completion of the project. Following the guideline,
Noor I, the first 160 MW solar power station, came into commercial operation by early 2016.
Subsequent power stations, Noor II and III, expect to generate a total capacity of 350 MW and
average estimated cumulative production of over 1,100 GWh per year by 2018.
3.1.2. Progression
a) Noor I
The Noor Ouarzazate I plant was commissioned in late 2015. The first synchronization
of the plant to the electricity grid was carried out on 25 November 2015. The initial date of
commercial operation was deferred until 20 January 2016, when the performance tests
were successfully carried out, with retroactive effect as of 31 December 2015. The plant
was officially inaugurated on 4 February 2016 by His Majesty King Mohamed VI. All
the certificates of initial tests were issued by the Independent Engineer and 31
December 2015 was confirmed as the Initial Commercial Operation Date (ICOD).
Thus, all the activities involved in the development of the Noor Ouarzazate I power
plant were completed and it entered the operation phase on 1 January 2016.
In two years of operation (January 2016 to December 2017), the Noor Ouarzazate I
plant produced and delivered 814 GWh to the national electricity grid, including 163
GWh (20%) atpeak hours and 651 GWh (80%) outside peak hours, and prevented the
emission of about 428 thousand tons of CO2eq.
b) Noor II
The initial commercial operation date (ICOD) of the NOOR Ouarzazate II power
plant, initially set for 27 August 2017, could not be met due to several factors,
particularly difficulties related to transportation and logistics of heavy equipment (five-
month suspension of authorizations to transport heavy equipment as a result of severe
weather conditions on 26 October 2016 which caused significant damage to several
structures in the region). Following MASEN's acceptance of force majeure claimed by
APO II, the date was postponed to3 February 2018, deemed to be the new required
initial commercial operation date (RICOD) for the power plant. The initial synchronization

9
of the plant to the power grid took place on 10 January 2018. The plant's initial
commercial operation date was 24 April 2018, following successful completion of
performance and reliability tests conducted in March 2018 and 24 April 2018 when the
thermal energy storage system started working again. Some conditions were waived,
e.g. certain atmospheric emissions and noise tests(these tests were successfully
completed on 26 and 29 September 2018). The Initial Commercial Operation
Certificate, confirming the initial commercial operation date (ICOD) of NOOR Ouarzazate
II on 24 April 2018, was issued by the Project Company on 18 September 2018.The
ICOD Agreement defining the terms of the ICOD declaration was signed on 27
December 2018.
In 2019, the NOOR Ouarzazate II Power Plant produced and supplied 636 GWh to the
national grid, of which 173 GWh (27%) during peak hours and 463 GWh (73%) during off-
peak hours. The total estimated production of the plant for 2019, based on
meteorological data (measurements) including solar irradiation data, was 697 GWh,
corresponding to 94% performance. The plant avoided the release of 390 000tonnes
of CO2eq into the atmosphere in 2019.
c) Noor III
The CSP tower mirror field was commissioned in March 2018. In September 2018 the
CSP tower unit was first synchronized to the power grid... As updated, Noor III remains
behind schedule (12 months delay) with construction having advanced to 99.5 percent in
end June 2018 (vs. 95.9 percent six months earlier). Performance tests were finalized in
October 2018. In December Noor III completed a 10-day reliability test demonstrating that
the project can provide continuous rated power even in the absence of sunlight. The Noor
III plant has come to operational status in December 2018 and has exceeded performance
targets for the first few months of operations
3.1.3. Evaluation
Despite some delay due to weather conditions, the project’s physical implementation was
highly satisfactory and the targets for all the output indicators were achieved. The
equipment delivered and installed complied with the technical specifications and met the
required international quality standards. The equipment was assembled in accordance
with accepted standard sand within the agreed deadlines.
Besides, The Project is to be implemented by an Agency that has been created with this
specific purpose, with the support of the highest political authority of the Kingdom, and in
close cooperation with the ONEE. The potential for implementation thus appears very
high.
In conclusion, the project is progressing satisfactorily towards project development
objectives and implementation. The NOOR Ouarzazate Concentrated Solar Complex
(comprising three NOOR plants) has entered full operational phase since October 2018.
The overall complex reached a total generation of 599 GWh for the first semester of 2020,
which can be considered to power a little more than 1 million people in Morocco. The
project reached 71 percent of expected energy generation in the first semester of 2020.
Manpower on site for the three plants reached 233 people (100 percent local, and 10
percent women).
3.2. Profitability evaluation

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3.2.1. Electric sector in Morocco
a) Demand
When the first Noor plant came into implementation in 2016, the Moroccan
electricity sector was characterized by a high degree of energy dependence. Over
90% of Morocco’s energy supply comes from abroad through imported coal, gas,
oil, oil products and electricity. Given the lack of hydrocarbon sources, Morocco
faces fiscal pressures as its balance of payments is disadvantaged by importing
fossil fuels. For the electricity sector only, oil purchases account for 24 % of total
imports, nearly 50 % of the trade deficits and 10-12 % of its GDP.
About one third of the total primary energy consumption is devoted to electricity
generation, a 2.9% increase on the previous year. The following table sums up the
key numbers characterizing the electricity market.
Table 1 - Electricity market figures (2016)
ITEM VALUE (2016)

Electricity Demand 35 414.5 GWh

Electricity Demand Growth Rate 2.91%

(2015/16)

Electricity Demand per capita 997.59 KWh

Total Electricity Generation 30 839,8 GWh

Total Installed Capacity 8261.7 MW

Peak daily demand 6 050 MW

Peak daily Demand Growth (2015/16) 3.2%

Rural electrification rate 99.13%

Source: ONEE (Activity book 2016)
b) Electricity price
The electricity tariff system determines a pricing structure that varies according to
level of consumption, time of day and type of meter. As the government seeks to
reduce subsidies and therefore tariffs have increased by regional but still remain
below generation costs. Rural customers have the possibility to participate in a
prepaid system based on pre-paid meters. In 2019, the price of electricity is $0.131
per kWh for households and $0.120 for businesses which includes all components
of the electricity bill such as the cost of power, distribution and taxes

3.2.2. Project’s profitability

a) Cost and financing
The total project cost net of taxes and customs duties is estimated at EUR
1,752.04 million, comprising EUR 1,138.83 million in foreign exchange (65%) and

11
 EUR 613.21 million in local currency (35%). Its distribution per power plant is
EUR 1,009 million for NOOR II and EUR 743.04 million for NOOR III. This cost
includes an overall provision of about 9% (of which 4.5% for operational
contingencies and 4.5% for price escalation).
MASEN raises financing for Noor project from international development
agencies, eventually to re-lend it to the developers. This helps reduce the cost of
debt and, by extension, in view of the security provided, the eventual cost of
electricity to end-consumers. Morocco follows the BOOT (Build-Own-Operate
Transfer) approach, which allows for developers to apply 3.5% debt instead of
7.5% from commercial lending. Within this scheme, MASEN chooses developers
offering the lowest bids (no exceptions). The most impactful business
opportunities in the solar energy occur within these sub-markets:
- Low and medium voltage PV
- Energy efficiency
- Grid integration
- Smart grids.

Financial Performance: The project's financial rate of return (FRR) was

calculated taking into account the investment costs net of customs duties and
taxes, as well as the operational and maintenance costs. Project income will
come from the sale of energy by MASEN to ONEE, being on average USD
0.12/kWh (HVVHV electricity rate). Indeed, the project will generate returns on
investment based on a kWh rate that guarantees minimum profit for the equity
capital of the project companies.

b) Project’s outcome
The table below is a brief of information regarding of Noor project

Noor Ouarzazate Noor Ouarzazate II Noor Ouarzazate Noor Midelt

I Operational Operational III Phase I
Operational In progress

Installed 160 MW 200 MW 150 MW 800 MW

capacity

Annual 618 GWh 600 GWh 500 GWh 1 886 GWh

electricity
production

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 Applied Solar Solar concentrators Solar tower with 7- Concentrated
technology concentrators with with 7-hour heat hour heat storage solar power
3-hour heat storage (CSP)
storage photovoltaic (PV)

CO₂ reduction 280,000 tons 300,000 tons 222,000 tons 600,000 tons

Project cost $787 million $1036 million $807 million $2497 million

Electricity $0.18 /kWh $0.15 /kWh $0.16 /kWh $0.07 /kWh

price

Although the price of solar power electricity is high in comparison to the average price of
electricity in Morocco, the profitability is still considerable. Since the Moroccan electricity
sector is characterized by a high degree of energy dependence with over 90% of
Morocco’s energy supply coming from abroad through imported coal, gas, oil, oil products
and electricity. Solar power can be a key for a stable energy which helps Morocco reduce
the independence of aboard suppliers.

In consideration of production cost, Noor I, II used CSP technology while Noor III used
solar towers and Noor Midelt focused on PV (Solar photovoltaics). According to the latest
cost data from the International Renewable Energy Agency (IRENA), the global weighted-
average levelized cost of electricity (LCOE) of utility-scale of concentrating solar power
(CSP) fell 47% between 2010 and 2019 to USD 0.182/kWh. The cost of electricity from
CSP will potentially fall into the USD 0.07/kWh to USD 0.08/kWh range, with potential for
this to fall even further. Between 2010 and 2019, the global weighted-average LCOE of
newly commissioned utility-scale solar PV fell 82%, to USD 0.068/kWh in 2019. The price
of renewable electricity tends to decrease in the future due to the application of new
technology.

The project economic rate of return (ERR) was calculated based on the cost/benefit
method for a period of 28 years (3 years of construction and 25 years of operation of the
plant). The economic costs were estimated on the basis of investment costs, net of taxes,
adjusted for conversion factors (equipment, works and services needed to construct the
plant) and project operation, maintenance, administration and management costs. Project
revenue is that mainly 17 from the sale of electricity to MASEN, which is then resold to
ONEE. At project appraisal, the ERR ranged between 1 and 3% considering a discount
rate of 10%, depending on whether electricity sales are valued at the selling price to ONEE
or the long-term marginal cost of the system. Project ERR just meets the minimum
required. From an economic point of view, the project was therefore not justified, but its

13
contribution to the development of solar energy and the fight against climate change
justified the support provided by various donors, including the Bank and the Climate
Investment Fund. However, the project’s economic and financial model highlights, for the
private developer, a minimum rate of return in line with good market practises. The
project’s internal financial rate of return (IFRR) was calculated taking into account
investment costs, net of customs duties and taxes, and operating and maintenance costs.
Project revenue is that from the sale of electricity by MASEN to ONEE, at basic electricity
sale rates applicable in Morocco. Since the selection of the private consortium responsible
for the design, financing and construction of the Noor Ouarzazate plant and its operation
and maintenance for a period of 25 years is based on the most economical product kWh
price, the project will in fact generate a return on investment based on a kWh tariff
guaranteeing a minimum of profitability for the project company’s equity funds. The project
will also boost the positive impact of the solar resource on Morocco’s trade balance, which
will be able to make savings in foreign exchange because of the expected reduction of
imports of fossil fuels (coal, fuel oil, gas). Other positive externalities of the project come
from: (i) benefits related to the reduction of greenhouse emissions; (ii) enhanced reliability
of electricity supply to productive sectors to improve the competitiveness of national
enterprises; and (iii) the valuation of industrial integration measures and job creation

3.3. Risk Evaluation

Government of Morocco:
- Electricity market risk caused by low fossil-fuel prices driving wholesale electricity
prices below the benchmark set in the PPA between MASEN and ONEE.
- Budget shortfall risk, resulting in the Government being unable to provide the solar
subsidy. The ability of the Government to provide the necessary subsidies
depends on the value of the fossil-fuel subsidies displaced by the power that the
CSP project generates and has a significant impact on the government budget.
- Reputational risk, if the Government is no longer able to fund the viability gap,
forcing MASEN to default on the PPA commitment.
- Storage technology failure risk, which would undermine the achievement of fossil-
fuel subsidy savings.
- Indirect risk of reduced solar irradiation levels, which would impact the amount of
fossil fuels displaced.
Project Company Consortium
- Construction delay risk, resulting in financial penalties paid to MASEN.
- Risk that MASEN will terminate the PPA and exercise the put option in the
Shareholder Agreement if the developers fail to deliver the project on time.
- Risk of capital shortages during construction.
- Exogenous risk, such as oil-price spikes, changes of government policy on fossil-
fuel subsidies that would affect the electricity price on the national grid, and
changes of government policy towards renewable energy.
- Production risk caused by reduced solar irradiation levels resulting in lower than
projected production output.
IFIs

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 - Management of the likely coexistence of different interest charges, loan tenders
and collateral guarantees across the loan portfolio. European donors avoided this
complication by choosing not to syndicate their contributions, but rather to
contribute through a joint financing package with synchronized loans
MASEN
- Budget shortfall risk, resulting in the Government failing to pay the solar subsidy
to MASEN, and the agency being forced to default on the PPA commitment,
making the project unviable.
- Project management risk increased by the loan conditions of the project and the
IFIs’ right to object to all significant decisions.
- Financial risk, which is partially covered by the SICS loan.
EPC Contractor
- Construction and operational risk, including risk of equipment failure and
associated reduced production and increased costs.
- Storage technology failure risk, causing the plant to be unable to supply peak-load
power, which is currently provided by expensive imported oil.
- Cost overrun and delay risk, due to the size of the project and the decision to use
a relatively new business model (PPP).
Effects of COVID-19 on the progress
The COVID-19 has shut down many projects over the world, causing disrupted supply
chain and restricted national and international travels. These resulted in a significant decline in
activities from installers of solar equipment. Despite the effects of the pandemic, the project
progress is still on track. The sector's employees have taken advantage of the lockdown period
to improve their skill and products. Contractors have worked together to keep On-site workers
safe and Home-stayed staff well-connected, ensure that labor, schedule and budget disruptions
are kept to a minimum. As part of the additional financing, the closing date of Noor Midelt was
extended from December 2022 to June 2024. The Mid -term Review is expected to be
implemented by the end 2021.

4. Forecast
4.1. Positive
Benefits from the project can be increased through a better design and implementation.
In order to benefit from remarkable cost decline and further reduce the cost of energy, MASEN is
testing a new concept of hybrid PV/CSP technology. The technical specifications for the CSP
parts, as well as for the storage, are expected to optimize the overall power system and provide
ONEE with the flexibility required to intermittent RES and meet peak load at minimum cost. A
sensitivity analysis shows that, in the case of lower capital expenditure by 20%, the need for a
financial subsidy level to MASEN from GoM would disappear. Such scenario can be considered
as possible as the cost for both CSP and PV solar technologies are declining.
4.2. Negative
The power plant brings a range of benefits as mentioned above, such as energy security,
the establishment of a domestic manufacturing industry. However, these benefits can be
uncertain in the future as they have not been quantified for inclusion in the economic analysis
baseline. The rapidly growing demand for electricity has given the Moroccan electricity sector a

15
big challenge. Electricity demand growth is estimated to continue at 5.6 percent p.a. until 2030,
with demand reaching 45 TWh in 2020 and 80 TWh by 2030. This requires massive capacity
additions. In the worst scenario, the CSP might not respond to the needs of the electric system of
Morocco.

5. Impact of Green Bond

With Morocco’s future electricity generation capacity firmly dependent on renewable
energy sources, attracting private financing for new projects is critical. Green bonds are an
increasingly viable option to help finance energy production in the kingdom.

For Morocco in particular, green bonds and other financing instruments with an environmental
component might be an essential mechanism for the country to reach its renewable energy goals.
Current government plans aim to have 52% of electricity capacity come from renewable sources.
Furthermore, the kingdom is planning to reduce its carbon emissions by 32%. This would be a
tall order for most countries but will prove especially testing for a nation of over 35m people that
needs high rates of economic growth in order to reduce various inequalities. Renewable energy
projects are expected to account for most of the $45bn in investment that Moroccan authorities
have earmarked for the sector over the coming decade.

For Noor Solar Power project in particular and green project in general, Green Bond provides
long-term financing not currently available in the market and plays a catalytic role in mobilizing
the necessary additional long-term financing from other development financial institutions and
regional banks. It also helps to channel substantial global capital into renewable energy as well
as raise the project’s reputation and attract investment. The project's financial and economic
sustainability, therefore, is ensured by the establishment guaranteeing the financial balance of
the project.

IV) Conclusion
This report provided an overview of impact and potential of Green Bond on financing green
innovation projects and discussed various approaches to the performance of Noor Solar Power
project. As stated before, the green bond market already provides a number of benefits thanks to
the increased availability of more transparent information. These benefits accrue to issuers and
investors, as well as the general public interest.
With the funding of money raised by Green Bond, Masen has successfully developed the Noor
Solar Power project. The project had a positive indirect socio-economic impact – the national
companies involved will be able to draw on their experience and contribute to the creation of a
national economy that is competitive internationally. MASEN will also leverage all the socio-
economic benefits generated by the project, particularly by developing Moroccan expertise in the
field of renewable energies, and solar energy in particular.

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