Language: ENGLISH Original: French

PROJECT : OURZAZATE SOLAR POWER STATION - PHASE I

COUNTRY : KINGDOM OF MOROCCO

PROJECT APPRAISAL REPORT Date : APRIL 2012

Appraisal Team

Team Leader Ibrahima KONATE ONEC.1 3418

Youssef ARFAOUI ONEC.3 2308

Members

Tanja FALLER ONEC.2 2268

Succès ASSYONGAR

MASRA ONEC.1 3541

Rachel ARON ONEC.3 2792

Awatef FOURATI ONEC.3 3854

Laurette DADE ORPF.2 2298

William DAKPO ORPF.1 3887

Wadii RAIS MAFO 6165

Vladimir FAGBOHOUN GECL 3635

Sylvestre TAPE FTRY 2574

Sector Division Manager Zakou AMADOU ONEC.1 2211

Resident Representative Amani ABOU-ZEID MAFO 6161

Sector Director Hela CHEIKHROUHOU ONEC 2140

Regional Director Nono MATONDO FUNDANI ORNB 2054

Peer Reviewers

Mahib CISSE ONEC

ONEC

3961

3917 Elise AKITANI

Nigambaye NDOUNDO ONEC 2725

Ousmane FALL OPSM.2 3820

Adama MOUSSA ONEC.1 2897

Sandrine ALISSOUTIN ONEC 3811

Malik FARAOUN OPSM 2383

TABLE OF CONTENTS

1 STRATEGIC THRUST AND RATIONALE ................................................................... 1

1.1 Project Linkages with Country Strategy and Objectives ........................................... 1

1.2 Rationale for Bank’s Involvement ............................................................................. 2

1.3 Aid Coordination ....................................................................................................... 2

2 PROJECT DESCRIPTION ................................................................................................ 3

2.1 Project Description and Components......................................................................... 3

2.2 Technical Solutions Adopted and the Alternatives Explored .................................... 4

2.3 Project Type ............................................................................................................... 4

2.4 Project Costs and Financing Arrangements ............................................................... 4

2.5: Project Cost Estimates by Component and Source of Finance (in EUR Thousand) ...... 5

2.5 Project Area and Beneficiaries................................................................................... 6

2.6 Participatory Approach .............................................................................................. 7

2.7 Bank Group Experience and Lessons Reflected in Project Design ........................... 7

2.8 Key Performance Indicators ...................................................................................... 8

3 PROJECT FEASIBILITY ................................................................................................. 8

3.1 Economic and Financial Performance ....................................................................... 8

3.2 Environmental and Social Impacts .......................................................................... 10

4 PROJECT IMPLEMENTATION .................................................................................... 12

4.1 Implementation Arrangements................................................................................. 12

4.2 Project Monitoring ................................................................................................... 15

4.3 Governance .............................................................................................................. 16

4.4 Sustainability............................................................................................................ 16

4.5 Risk management ..................................................................................................... 17

4.6 Knowledge Development......................................................................................... 17

5 LEGAL FRAMEWORK ................................................................................................. 18

5.3 Legal Instrument ...................................................................................................... 18

5.4 Conditions Associated with the Bank’s Intervention............................................... 18

5.5 Compliance with Bank policies ............................................................................... 20

6 RECOMMENDATION ................................................................................................... 20

Annex I. Comparative Socio-economic Indicators of Morocco .................................... 1

Annex II: Bank Group’s Active Portfolio Status in Morocco as of End-January

2012............................................................................................................................ 1

Annex III: Development Partner Operations in Morocco by Sector ......................... 1

Annex IV: Electricity Supply and Demand Projections ............................................ 1

Annex V: Map of Project Area .................................................................................. 1

Tables

Table 2.1: Project Components and Costs 4

Table 2.2: Project Alternatives and Reasons for Rejection 4

Table 2.3: Cost Estimates by Component 5

Table 2.4: Project Financing Plan by Source of Financing 5

Table 2.5: Cost Estimate by Component and Source of Financing 5

Table 2.6: Cost Estimate by Source of Financing and Expenditure Category 6

Table 2.7: Disbursement Schedule 6

Table 4.1: Main Project Milestones 16

i

Exchange Rates

August 2011

UA 1 1.599 USD

UA 1 1.12132 EUR

UA 1 12.5216 MAD

Fiscal Year

1 January – 31 December

Weights, Units and Measures

T Tonne = 1000 kg kW kiloWatt = 1000 Watt

GW GigaWatt = 1 000 000 kW or 1 000 MW kWh kiloWatt-hour = 1,000 Wh

GWh Gigawatt-hour = 1 000 MWh MVA MegaVolt Ampere = 1 000 kVA or 1 000 000 VA

TOE Tone of oil equivalent MW MegaWatt = 1 000 000 W or 1 000 kW

kV kiloVolt = 1 000 Volt MWh MegaWatt-hour = 1 000 kWh

kVA kiloVolt Ampere = 1 000 VA tCO2 Tonne CO2 = 1,000 kg of carbonic gas

Acronyms and Abbreviations

APA Advance Procurement Action MDB Multilateral Development Bank ACSP African Carbon Support Project MEMEE Ministry of Energy, Mines, Environment and Water Resources ADB African Development Bank MENA Middle East and North Africa ADF African Development Fund MIC Middle-Income Country AFD French Development Fund MTR Mid-Term Review AFESD Arab Fund for Economic and Social Development MV Medium Voltage AWF African Water Facility NDP National Development Plan BD Bidding Documents NIF Neighbourhood Investment Facility CDM Clean Development Mechanism ONE National Electricity Authority CSP Concentrated Solar Power ONEC Energy, Environment and Climate Change Department CTF Clean Technology Fund OPsCOM Operations Committee EIB European Investment Bank PAR Project Appraisal Report ESIA Environmental and Social Impact Assessment PCR Project Completion Report ESMP Environmental and Social Management Plan PIU Project Implementation Unit EU European Union RBCSP Results-Based Country Strategy Paper GDP Gross Domestic Product RMC Regional Member Countries GPRSP Growth and Poverty Reduction Strategy Paper SEF Special Emergency Fund HV High Voltage SME Small and Medium-sized Enterprises ICB International Competitive Bidding SPC Solar Project Company KfW

Bankengruppe German Development Agency UA Unit of Account LV Low Voltage UNFCCC United Nations Framework Convention on Climate Change MAFO Morocco Field Office WB World Bank

MASEN Moroccan Agency for Solar Energy

ii

PROJECT INFORMATION SHEET

Client Information Borrower MASEN Executing Agency MASEN

FINANCING PLAN

Source Amount

(EUR Million) Instrument

ADB 168 Project loan CTF/ADB 70.12 Project loan World Bank 140.25 Loan for financing of operating costs CTF/WB 68.02 Project loan

EIB 100 Project loan AFD 100 Project loan KfW 100 Project loan NIF 30.15 Grant MASEN/FDE/SPC 265.78 Contribution to the project; construction of

related infrastructure TOTAL FINANCING 1042.32

Comprising financing of power station

and related infrastructure (including

contingencies)

902.07

and operational support 140.25

TOTAL PROJECT COST 1042.32

FINANCIAL INFORMATION ON LOANS ADB CTF Loan currency EUR USD

Interest type Floating base rate with a free fixing

option NA

Base rate (floating) 6-month EURIBOR NA Contractual margin 0.60% NA

Funding margin

Margin on Bank’s cost of borrowing

in relation to six-month EURIBOR.

This margin is reviewed on 1

January and 1 July every year

NA

Administrative costs

NA At Borrower’s choice: 0.1% per year

of the undisbursed loan amount,

payable every six months; or 0.25% of

the loan amount payable as a single

tranche

Service commission NA 0.25% per year on the disbursed loan

amount not repaid Maturity 20 years 40 years Grace period 5 years 10 years

DURATION AND MAIN MILESTONES Approval of Concept Note June 2011 Project approval April 2012 Effectiveness 31 July 2012 Last disbursement 31 December 2014 Completion 30 June 2015 Final Repayment 31 December 2032

iii

PROJECT SUMMARY

1. Project Overview: The Ouarzazate Solar Power Station Project – Phase I will

enable Morocco to honour its national and international commitments. It is part of the

Moroccan Solar Plan designed under Morocco's energy strategy and, on a larger scale, it

forms part of the Concentrated Solar Power (CSP) Investment Plan of the Middle East and

North Africa Region (MENA). This investment plan was prepared with countries of the

region under the aegis of the ADB and the World Bank. It will enable participating countries

to contribute their solar resources to the global effort to combat the effects of climate change,

while significantly increasing the world’s installed CSP capacity. Implementing this project is

a major step towards attaining Morocco’s clearly stated ambition to master large-scale solar

energy production so as to help curb green-house gas emissions and create a local industry

capable of providing locally-manufactured inputs to the solar energy programme. Morocco's

solar energy programme is expected to create jobs locally. Eventually, it will enable Morocco

to sell green energy to Europe at profitable rates and earn foreign exchange. This will have a

positive effect on its trade balance.

2. Needs Assessment: In 2009, the Kingdom of Morocco adopted a new energy

strategy, whose pillars included developing the national renewable energy potential by

increasing its share within the national energy mix from 33% in 2009 to 42% in 2020.

Furthermore, demand for electricity in Morocco grows at an average rate of 6% per year, a

trend fuelled by population growth and the country’s economic development needs.

Furthermore, the Kingdom is committed to achieving the universal electrification rate.

3. Bank’s Added Value: Since 2009, the Bank has assisted Morocco in the

preparation of its investment plan under the Clean Technology Fund (CTF), focusing on the

country's ambitious plan of installing 2000 MW of solar energy capacity by 2020. Hence, the

Bank is responsible for channelling part of the concessional “climate” funds earmarked for

the Moroccan solar energy plan. In June 2011, the CTF Committee approved financing of

USD 197 million for the project, with USD 100 million to be obtained through the ADB. The

project will enable the Bank to consolidate its role as a key player in Morocco’s energy sector

in general and in renewable energy in particular, and to support the green growth of the

Kingdom's economy.

4. Knowledge Management: The project is one of the innovative schemes that

support large-scale clean energy production initiatives and that have a transformative effect

on the economies of beneficiary regional member countries. The knowledge acquired from

this project will accelerate the implementation of the Moroccan green growth vision and open

up opportunities for replication by several African countries. Consequently, it is consistent

with the Bank’s strategic vision to develop Africa’s energy sector by promoting universal

access based on low-carbon growth. Lastly, this project is one of the deliverables of the

Bank’s climate change action plan.

iv

RESULTS-BASED LOGICAL FRAMEWORK

• Country and Project Name : Morocco – Ouarzazate Solar Power Station Project

• Project Goal : Initiate the development of CSP technology by carrying out Phase 1 of the Ouarzazate Power Station (125 to 160 MW) • Commencement Date : July 2012 • Completion date : December 2014 • Design team : I. KONATE, Y. ARFAOUI, T. FALLER, S. ASSYONGAR

RESULTS CHAIN PERFORMANCE INDICATORS

MEANS OF

VERIFICATION RISKS/ MITIGATION MEASURES Indicator

(including CSI) Baseline

Situation

Target

Impact

Increase in the share of

renewable energies in

Morocco’s energy supply

Percentage of

production capacity

from renewable

sources 33% (2009) 42% (2020)

Reports • Reports from the

Ministry of energy

• ONE progress reports

• MASEN activities

• Project status

• Bank supervision

Technological risk: This risk stems from the fact that there is no single-module solar complex of this dimension in the world. Mitigation measure:

MASEN is assisted by a Technical Adviser, and some technical discussions took place during the pre-qualification phase prior to the bidding process.

MASEN is engaged in experience-sharing with similar on-going projects in the world that could be especially beneficial to the subsequent phases.

Financing risk: During the operational phase, the Government could encounter difficulties in financing the production cost differential. Mitigation measure: This risk is mitigated by the Government's strong commitment and the support of Moroccan authorities. It is unlikely that the

Government will shirk this commitment, and certain donors have already taken measures to assist the Moroccan Government in bridging this gap,

particularly by including a feed-in tariff component in their financing. Furthermore, this risk is mitigated for the entire project by donor coordination

instituted at the very beginning of the study phase and by the fact that MASEN seeks to secure all financing before engaging in the final selection of the

developer.

Fiduciary risk: The initial fiduciary risk is deemed high for this project. Although MASEN, the borrower, has the advantage of being a structure whose

organization and financial management system are being established, the SPC that would implement the project has not yet been set up. Consequently, its

capacity to ensure the sound financial management of the project cannot be ascertained at this stage. Furthermore, the complexity of the project requires a

mechanism for the joint management of mobilized resources, and this constitutes an additional risk for the Bank. Mitigation measure: Fulfilment of the following conditionalities will curb the residual risk down to a moderate and acceptable level. Apart from the

effective creation of the SPC and the fiduciary responsibility clauses of the agreements to be signed between MASEN and CSP (especially the loan

agreement) and which will have to be approved by the Bank, it will be necessary for the Bank, prior to any disbursement, to ensure or obtain proof that the

State has created the Entity responsible for project implementation (CSP) and that the Borrower (MASEN) has finalized an accounting and financial

management mechanism, which the Bank deems satisfactory for project commencement.

Contribution of

Ouarzazate I power

station to the energy

mix - 1.5 % (2020)

Mitigation of climate change Reduction of the rate

of CO2/year - 240 000 t (2015)

Effects

Technological development Industrial integration - 30% (2015)

Trade balance improved Profits from electric

power sales

Jobs created

Number of jobs:

+ During the

construction phase:

+ During the

operational phase:

-

-

800

50

Outputs

New infrastructure created Solar power station

operational

Additional capacity

installed

01 (2011)

-

02 (2014)

125 to 160 MW Implementation risk: MASEN is a newly-created entity with no real experience in monitoring and implementing such complex projects. Mitigation measure: This risk is mitigated by the quality of management, assistance from leading consultants, various studies by the Bank and other

donors on MASEN’s capacity to implement the project. These studies determined its technical assistance, technical consultancy or capacity-building needs.

Furthermore, during the project implementation phase, MASEN will be assisted by a Consultant, who will ensure fulfilment of all disbursement conditions

and availability of all legal and contractual documents. Furthermore, the two-stage selection procedure for the developer will mitigate this risk because it

ensures that all bidders have an adequate understanding of the project. Additional energy supply Quantity of additional

energy - 370 GWh (from

2015) Energy storage mechanism

created Unit operational 00 (2011) 01 (2014)

Key

Activities

Components Financial Resources (EUR Thousand) A: Construction of Energy Infrastructure & Project Administration and Management

Construction of the solar farm; Construction of the generator; Construction of the energy evacuation mechanism; Site development; Construction of storage facilities; Related infrastructure; ESMP implementation, compensation and indemnities;

Local development plan; Environmental monitoring; IEC; Project account audit services; Environmental and social audit services;

Operational and maintenance equipment; Project management; management tools/IT tool.

Training of MASEN staff (workshop and seminar)

902 070

B: Operational Support

Contribution to financing the differential between the production costs of the solar power station and the production costs of ONE

by MASEN

140 250

v

PROJECT IMPLEMENTATION SCHEDULE

T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4 T1 T2 T3 T4

Board Presentation and Approval

Signing of Loan Agreements

Loan Effectiveness

Fulfilment of Disbursement Conditions

WORKS PROCUREMENT

Advance Procurement Actions

Submission of ANO BD Stage 1

Launching of BD Stage 1

BD Period Stage 1

Bid evaluation 1 (15 days)

Technical discussions and BD Stage 2

Launching of BD Etape 2

BD Period Stage 2

Bid evaluation 2

Reception of draft contract

ANO Draft Contract

Signing of contrat

WORKS

Power station works

Works line

ESMP SUPERVISION - IMPLEMENTATION

PROJECT AUDIT

END OF PROJECT

ACTIVITIES 2011 2012 2013 2014 2015

REPORT AND RECOMMENDATIONS FROM MANAGEMENT TO THE BOARD

OF DIRECTORS ON A PROPOSED ADB LOAN AND A CTF LOAN TO MASEN

IN THE KINGDOM OF MOROCCO

Management submits the following report and recommendations on a proposed: (i) ADB loan of

EUR 168 million; and (ii) a CTF loan of USD 100 million to MASEN, to finance the Ouarzazate

Solar Power Station Project - Phase I.

1 STRATEGIC THRUST AND RATIONALE

1.1 Project Linkages with Country Strategy and Objectives

1.1.1 In November 2011, Morocco organized legislative elections that led to the formation of a

new Government. Like its predecessor, the new Government maintained the same strategic thrusts,

defining them in its economic and social development programme and focusing on the

implementation of broad strategic reforms and sector policies that target large-scale infrastructure

projects. The programme seeks to boost Morocco’s competitiveness and preserve its macroeconomic

viability in order to generate sustained growth that produces a lasting improvement in living

conditions for the people. The programme uses an integrated participatory approach, and is

essentially based on the correlation between responsibility and accountability; furthermore, it centres

on the following five pillars: (i) acceleration of growth to 5.5%; (ii) making Morocco an investment

and export platform; (iii) improvement of governance so as to fight against corruption and cash

economy; (iv) making regionalization a vector of development; and (iv) intergenerational solidarity

for sustainability of development. The 2012-2016 Country Strategy Paper currently being finalized

(scheduled for distribution to the ADB Board of Directors on 14 March) targets support for

development of "green" infrastructure as one of its focus areas. Supporting implementation of the

energy strategy is one of the key activities.

1.1.2 The project therefore falls within this focus area, since it will help to address the growing

demand for electricity while contributing to environmental protection and mitigation of climate

change. Its implementation will promote energy infrastructure development and create new

industries, especially "green" industries.

1.1.3 The project also falls within the implementation of the Kingdom's energy strategy adopted

in 2009, which focuses on improving energy security, mitigating the effects of climate change, and

guaranteeing universal access to energy. In efforts to achieve energy security, sustainable

development and competitiveness, the Moroccan Government has formulated a new energy strategy

based on 5 pillars. The objectives of the strategy are as follows: (i) energy security; (ii) low-cost

electricity supply to all households and businesses; (iii) management of electricity demand; (iv)

promotion of national expertise and development of technological know-how; and (v) environmental

protection and climate change mitigation. To achieve these objectives, the strategy is designed to: (a)

diversify and optimize the energy mix through competitive and tested technology so as to reduce oil

expenditure by 40% before 2030; (b) develop the national renewable energy potential; (c) declare

efficiency improvements a national priority; (d) explore energy resources by stepping up oil

exploration activities, and develop conventional and non-conventional sources of petroleum; and (e)

join the regional energy market through greater cooperation and increased trade with the EU and

other Maghreb countries.

1.1.4 The implementation of this strategy is accompanied by organizational and regulatory

measures aimed at giving the necessary visibility to all public and private sector operators.

2

1.2 Rationale for Bank’s Involvement

1.2.1 The Bank’s involvement in this project is justified by various factors namely: this is a clean

energy project which is the culmination of a long process, it constitutes a priority for Morocco's

energy strategy, and it is in line with the Bank's medium-term strategy.

1.2.2 Implementing this priority project in Morocco’s energy strategy will indeed be a major step

towards achieving the Kingdom’s clearly stated ambition to master large-scale solar energy

production so as to diversify its energy sources, help curb green-house gas emissions, and create a

local industry capable of providing locally-manufactured inputs to the solar energy programme.

Morocco's solar energy programme is expected to create jobs locally. It will eventually enable

Morocco to sell renewable energy to Europe at profitable rates and earn foreign exchange. This will

have a positive effect on its trade balance.

1.2.3 The Ouarzazate Solar Power Station Project I is part of the Moroccan Solar Plan designed

within the broader framework of the MENA Region’s Concentrated Solar Power (CSP) Investment

Plan. This plan was designed under the aegis of the ADB and the World Bank, approved on

10/11/2009, and included in the technical annexes.

1.2.4 The Moroccan solar plan, estimated at USD 9 billion, seeks to construct 5 solar complexes

between 2015 and 2020 to attain a total capacity of 2000 MW. Morocco intends to build on this

experience and achieve its growth, unemployment reduction and sustainable development objectives.

The plan is backed by the Government’s institutional measures, especially a new appropriate

regulatory framework and transformation of electricity sector operators.

1.2.5 After approval of the Ouarzazate Solar Power Station Project by the CTF Executive

Committee in June 2011, the Bank is responsible for channelling part of the concessional "climate"

funds earmarked for the Moroccan solar plan, amounting to USD 100 million.

1.2.6 The project is co-financed by the Clean Technology Fund, the World Bank, the French

Development Agency (AFD), the European Investment Bank (EIB), the German Cooperation (KfW)

and, potentially, other commercial banks and private partners. The Bank’s involvement in the

financing of the project is a continuation of its intervention in operations co-financed with other

donors to support Morocco’s energy sector.

1.2.7 Morocco has a unique comparative advantage due to its proximity to markets that have a

high demand for green electricity, and its electrical interconnection with European countries.

However, the project presented to the Bank for financing is an initial phase, which does not target the

export market.

1.2.8 The project is of strategic importance in the dialogue process on climate change financing

initiated after the Copenhagen, Cancun and Durban conferences. It will serve as a pilot project for

mobilizing concessional financing in partnership with multilateral and bilateral institutions, including

funds specialized in financing initiatives that combat the effects of climate change. The Bank is

providing Morocco with all the required assistance under the UNFCCC’s Clean Development

Mechanism (CDM).

1.3 Aid Coordination

1.3.1 The Moroccan Government has made significant efforts to coordinate aid. Hence, it plans to

establish a Geographical Information System (GIS) for real-time monitoring of the operations of

various technical and financial partners (TFPs), by geographical zone, sector and amount. Donor aid

is relatively well aligned on the Government’s strategic priorities, and there is no parallel project

3

implementation unit. The projects financed by the Bank and other major TFPs in Morocco are

mainly implemented by Ministries and public establishments. In the energy sector, there is a formal

framework for coordinating donor activities, namely the Energy Thematic Group (GTE) created on

the initiative of the German Embassy and the European Commission Delegation.

1.3.2 Several donors operate in Morocco's energy sector, providing loans or grants, namely: ADB,

IBRD, EIB, EU, AFD, KfW, GIZ and AFESD. Specific meetings on the Moroccan solar plan have

been held every month between developing partners and Morocco since 2010. The meetings enabled

the Bank to coordinate its actions with those of other institutions operating in Morocco's energy

sector in general, and in this project in particular.

1.3.3 This project benefits from donors' willingness to monitor it together. Preparation and

appraisal missions have been jointly conducted, and a decision taken to adopt the World Bank's rules

and procedures to ensure harmonization among the various donors of the project.

2 PROJECT DESCRIPTION

2.1 Project Description and Components

2.1.1 The goal of the Ouarzazate Solar Power Station Project is to initiate the development of

CSP technology in Morocco by constructing Phase 1 of the Ouarzazate Complex (125 to 160 MW).

2.1.2 Under the Moroccan solar plan, five complexes will be built in Ouarzazate, Foum Al Oued,

Boujdour, Sebkhat Tah and Aïn Béni Mathar. The Ouarzazate Power Station Project 1 is the first

CTF-supported project for large-scale implementation of CSP technology in the MENA region. The

project components are: (i) construction of energy infrastructure; and (ii) operational support, and

project administration and management.

2.1.3 It should be possible to build a total capacity of 500 MW on the site of the Ouarzazate

complex in successive phases. The first phase is estimated at 125 to 160 MW based on results of the

bidding process for selection of the private partner. The technology adopted for this first phase is the

parabolic trough. The power station design provides for a facility that will store heat for 3 hours to

enhance the station’s performance, and for the injection of its output into the country’s energy mix.

This will address: (i) cost constraints which would be greater if the storage capacity of project

infrastructure exceeds 3 hours; and (ii) optimal mix imperatives during peak hours with savings on

fuel supplies. With respect to scale, MASEN, in agreement with donors, has stated its intention to

limit Phase 1 to a capacity of 125 to 160 MW based on the pre-qualification phase results for private

bidders. The project will be co-financed by financial partners who will allocate their resources

mainly to energy infrastructure construction and installation activities carried out by the private

developer to be selected. MASEN will finance all preliminary site development works that relate

essentially to water supply, access roads and connection to the electric power grid. This component

also includes costs relating to operation, local development, as well as project management and

monitoring. Furthermore, various measures have been taken to mitigate only the negative impacts.

The second component of this project relates to coverage of the differential between the power

station's production costs and MASEN's sales price to ONE.

2.1.4 The project seeks to initiate CSP development. It will be implemented under a public-

private partnership (PPP) through a Solar Project Company. The project will launch MENA's solar

plan within a context of great expectations from the scientific and industrial community, as well as

significant decline in the cost of this technology.

4

Table 2.1: Project Costs and Components (in EUR Thousand)

No. Name of Component Cost

Estimate Description of Components

A

Construction of Energy

Infrastructure & Project

Administration and

Management

902 070

Solar farm; Generator; Energy transmission facility;

Site development; Storage facilities; Related infrastructure; ESMP

implementation, compensations; Local development plan;

Environmental monitoring; IEC; Project account audit services;

Environmental and social audit services; Operational and

maintenance equipment; Project management; management tools/IT

tool.

Training of MASEN staff (workshop and seminar)

B

Operational Support 140 250

Contribution to financing of the differential between the production

costs of the solar power station and the sale price to ONE

Total Project Cost (in

EUR Thousand) 1 042 320

NB: The exchange rates used are indicated in the introduction to this report (page (i)).

2.2 Technical Solutions Adopted and the Alternatives Explored

2.2.1 With the support of its technical advisers, MASEN analyzed the various solar technologies

currently available. Its analysis was guided by the objectives of: (i) satisfying the system requirements,

and (ii) minimizing production costs. The table below presents the alternatives explored and the reasons

for rejecting them.

Table 2.2

Project Alternatives and Reasons for Rejection

Name Description and Characteristics Reasons for Rejection

Solar tower

power station

The solar collectors are oriented such that

they project all sun-rays onto a common

tower that uses molten salts as motive

fluid.

- Technology still in its infancy

- Unit power limited to 50 MW

Photovoltaic

solar power

station

A farm of flat plate solar collectors that

ensure direct conversion without an

intermediate fluid.

- Unit power limited to 50 MW

- Battery storage essentially

- Coupling with another technology is

difficult to implement

2.3 Project Type

2.3.1 The operation is an investment project that supports the construction of infrastructure which

uses reference technology to combat climate change. The proposed financing instruments are ADB

and CTF loans awarded to MASEN and covered by the sovereign guarantee of the Kingdom of

Morocco. The CTF Executive Board has already approved the MENA solar investment plan and the

allocation of USD 197 million to the Ouarzazate Solar Power Project I. The ADB, in its capacity as

the executing agency of the CTF Trust Fund, is responsible for channelling part of this allocation,

amounting to 100 million. The Bank will use these loans as instruments for financing the investment

costs (CAPEX) of the solar power station to be constructed by the private developer.

2.4 Project Costs and Financing Arrangements

2.4.1 The total project cost, net of taxes and customs duties, is estimated at EUR 1042.32 million,

comprising approximately EUR 607.44 million in foreign exchange and EUR 434.88 million in local

currency. These costs include a provision of 14% for technical and physical contingencies and price

escalation. The costs by component and expenditure category are presented in Tables 2.3 and 2.4

below:

5

Table 2.3

Project Cost Estimate by Component (in EUR Thousand)

COMPONENTS (in EUR Thousand) Foreign

Exchange Local Currency Total

% Foreign

Exchange

Infrastructure (Solar farm, Generator and HTF

system, Storage, Site development) 511 442 294 628 806 070 63

Operating costs (cost differential) 140 250 140 250 -

Base cost 511 442 434 878 946 320 54

Contingencies (physical contingencies, price

escalation) 96 000 - 96 000 100

GRAND TOTAL (in EUR Thousand) 607 442 434 878 1 042 320 58

2.4.2 Project financing arrangements: The project will be co-financed by various donors (CTF,

European Union, AFD, ADB, WB, EIB, and KfW) and other private partners under PPPs. The

national counterpart funds will be provided by the Government of the Kingdom of Morocco through

MASEN and ONE. These funds will essentially cover the construction of facilities located outside

the power station project site (access roads, water supply, and connecting lines to the ONE power

grid).

Table 2.4: Project Financing Plan by Source (in EUR Thousand)

Sources of Financing Foreign Exchange Local Currency Total % Total

ADB + CTF 238 120 0 238 120 23%

Other donors 369 322 434 878 808 200 77%

TOTAL 607 442 434 878 1 042 320 100%

Percentage (%) 58% 42% 100%

Table 2.5: Project Cost Estimates by Component and Source of Financing (in EUR Thousand)

Components World Bank ADB

NIF AFD KfW EIB MASEN/

SPC TOTAL

CTF Loan CTF Loan

Infrastructure 902.07

Power Station 68.02 70.12 135 30.15 79 79 79 147.27 687.56

Related infrastructure 88.36 88.36

Interest 30.15 30.15

Contingencies 33 21 21 21 96

Operational

Support 140.25 140.25

TOTAL 68.02 140.25 70.12 168 30.15 100 100 265.78 1042.32

6

Table 2.6

Cost Estimates by Source of Financing and Expenditure Category (in EUR Thousand)

Expenditure Category

ADB CTF(ADB) Other Donors TOTAL

TOTAL Foreign

Exchange

Local

Currency

Foreign

Exchange

Local

Currency

Foreign

Exchange

Local

Currency

Foreign

Exchange

Local

Currency

Works 135 000 - 70 120 - 306 322 434 878

511 442 434 878 946 320

Base cost 135 000 - 70 120 - 306 322 434 878 511 442 434 878 946 320

Physical contingencies

and price escalation 33 000

63 000

96 000 0 96 000

Total Project Cost (in

EUR Thousand) 163 000 - 70 120 - 369 322 434 878 607 442 434 878 1 042 320

Percentage (%) 16% 0% 7% 0% 35% 42% 58% 42% 100%

Table 2.7

Disbursement Schedule by Expenditure Category (in EUR Thousand)

Expenditure Category 2 012 2 013 2 014 Total

Works 189 264 567 792 189 264 946 320

Base Cost 189 264 567 792 189 264 946 320

Physical contingencies and price escalation 19 200 57 600 19 200 96 000

Total Project Cost (in EUR Thousand) 208 464 625 392 208 464 1 042 320

2.5 Project Area and Beneficiaries

2.5.1 The project area will cover an area of 2,500 ha on the Tamzaghten Izerki site belonging to

the Ait Oukrour Toundout ethnic community in Ghessat rural council area. The site is about 10 km

from Ouarzazate town on the national road to Errachedia town. The site is currently a pastoral area

with little fodder supply.

2.5.2 The project will specifically benefit the Government, MASEN, ONE, private partners and

the people of Morocco.

2.5.3 In the project area, the NGO Fondation Ouarzazate, composed of executives and

intellectuals from the sub-region and which operates mainly in the health sector, has already

identified certain necessary social actions that need to be implemented in the project area as support

measures. The project will support local development initiatives. The amount paid by MASEN for

acquisition of the land, which has been deposited in a special account opened in the name of the local

community at the Ministry of the Interior, will be used in financing local development projects.

2.5.4 Furthermore, the project will have positive socio-economic impacts on Morocco and the

region, with clear productivity gains for the productive sectors (services and manufacturing) that will

enhance their competitiveness. Growth will reduce the unemployment rate and increase the

purchasing power of the people. Projected savings on fuel/coal purchases and revenue from carbon

credit sales would generate positive social benefits. Furthermore, infrastructure construction works

will generate real employment opportunities for the youths and market prospects for SMEs and

SMIs. It is projected that 30% of the funds invested in the project will be used in procuring goods,

supplies, works and services on the Moroccan market. Studies on CSP deployment show that almost

500 jobs will be created on-site during the implementation phase and close to 50 permanent jobs

during the operational phase of the project.

7

2.5.5 Ultimately, the Ouarzazate solar complex will generate 1200 to 1500 GWh of electric power

each year from solar energy. This will greatly transform the Moroccan economy in general, and the

energy sector in particular. The Government considers that the project will have an impact on

industrial development by promoting the local production of essential project components, as well as

vocational training and research in renewable energies. The project will have a transformative effect

on Morocco, the MENA region and Europe. In particular, it will facilitate the supply of green energy

to European countries.

2.6 Participatory Approach

2.6.1 A participatory approach was adopted at all stages of the project study. It consisted mainly

in the identification of stakeholders, individual discussions and collaboration with local authorities.

Consultations, thematic meetings, workshops, discussions and focus-groups were conducted by

MASEN, and others are planned for finalization of the socio-economic study. The first local

consultation for the socio-economic study took place from 20 to 24 December 2010. It was followed

by a prospective workshop held on 15 March 2011 and a third workshop in September 2011. The

ESIA public survey took place from 12 September to 2 October 2011.

2.6.2 Various stakeholders were consulted, including social and economic stakeholders, local

administrative and elected authorities, traditional representatives of the local communities, as well as

associations (such as women's associations and civil society associations). The consultations helped

to inform local communities of the project impacts and address the concerns of certain groups.

2.6.3 High expectations were expressed, mainly about local employment, the importance of youth

involvement in training opportunities, support for local development in terms of services to industry

and spill-over effects on the local economy, and the need for regular communication between project

representatives and local stakeholders. For example, the local communities expressed concerns about

receiving foreign workers.

2.6.4 Associations complained of possible inconveniences from the construction site (road

traffic). All the concerns were taken into account, and preventive or mitigation measures have been

proposed. The communities have a positive perception of the project as regards employment,

economic activity, and the town's reputation.

2.7 Bank Group Experience and Lessons Reflected in Project Design

2.7.1 Lessons learned from the Bank’s other renewable energy, and especially solar energy,

operations were factored into the project design. Indeed, the Bank is already involved in and supports

several projects and operations of similar magnitude with resources from the Clean Technology

Fund.

2.7.2 The following lessons drawn from the above experiences were taken into account during

project preparation: (i) the combination of traditional donor resources and concessional CTF

resources is an appropriate approach for financing highly capital-intensive projects of this nature; (ii)

the need for good donor coordination and private sector involvement for the development of such

projects; and (iii) the use of operation and maintenance (O&M) contracts ensures sustainability of the

operation, as well as efficient human capacity building.

2.7.3 The combined report on the completion of RBCSP 2007-2011 and the 2010 portfolio

performance review recommends that officials from executing agencies and the Ministries be

8

familiarized with and trained in the Bank’s rules and procedures relating to procurement,

disbursements, audit and results-based project management. In addition to the scheduled launching

mission during which MASEN will be given an overview of the Bank’s disbursement, audit and

project management rules and procedures, training sessions have been scheduled for the SPC to

ensure efficient project implementation.

2.7.4 The same combined report also mentions the special attention that should be paid to the

procurement process in order to reduce the time-limit for giving no-objection opinions and

processing bidding documents. This was taken into account in this project through the use of advance

procurement actions (APAs), especially for the selection of the private developer.

2.8 Key Performance Indicators

2.8.1 The key project performance indicators are detailed in the results-based logical framework

matrix. They concern the solar electric power generated, combating climate change through

displacement of CO2 emissions, reduction of primary energy imports, revenue generated from carbon

credits under the CDM, and energy infrastructure constructed and connected to the electric power

grid.

2.8.2 The project executing agency will be responsible for establishing the baseline situation of

performance indicators, as well as for monitoring and analyzing their evolution mainly by comparing

them with the projections in the logical framework. In MASEN, the project’s performance indicators

will be included in the periodic progress reports. They will be analyzed by comparing them with the

project's target values, time series, international standards and the achievements of similar companies

on the continent or elsewhere.

3 PROJECT FEASIBILITY

3.1 Economic and Financial Performance

The financial and economic viability of the project is based mainly on the strong commitment and

support of the Kingdom of Morocco and on its long-term transformative impact through the

development of 2000 MW of solar energy in Morocco. Indeed, under current market conditions, the

project costs are extremely high, and this inevitably has an impact on energy production costs. CSP

technology is still in its infancy and its costs remains prohibitive compared to those of other electric

power generation technologies. The use of CTF concessional funds and loans from multilateral

development institutions will help to reduce the project deficit. The same applies to the

Government’s decision to cover the differential between MASEN’s energy sales price to ONE and

the energy purchase price paid by MASEN to SPC. Furthermore, despite this deficit, Morocco has

agreed to embark on this project because of: (i) its innovative nature and the prospects it offers; and

(ii) the energy situation of Morocco, which possesses substantial resources to ensure basic

production at competitive costs. This project has macroeconomic benefits. Being the first phase of an

ambitious programme that targets the development of 500 MW on the same site, this project will

have a major long-term impact on Morocco’s trade balance because of the revenue that will accrue

from "green" energy sales, particularly to Europe. Besides, industrial integration which consists in

promoting the local production of inputs used to build the infrastructure can create a new form of

industrialization with spill-over effects (job creation, generation of direct and indirect revenue, etc.).

3.1.1 Financial Performance: The project’s financial rate of return (FRR) was estimated on the

basis of the project investment costs, as presented in the corresponding tables (See Annex B7). These

costs concern the procurement of equipment, works, supplies and services needed to build the power

station. The estimates also include physical and price contingencies. The operational life of the

9

project structures is estimated at 25 years. The construction period for the project is 3 years. The

annual operational, maintenance, administrative and management costs of the project have been

factored into the project’s financial model. The project income will essentially consist of energy sales

to ONE. Considering that the developer is selected based on the KWh price of electricity generated,

the financial analysis from the SPC standpoint is based on the Levelized Cost of Energy (LCOE)

methodology. By definition, the project will generate attractive return on investment for the private

partner, since the partner will seek to ensure profitability in defining the parameters for submitting

the project.

With respect to MASEN, project implementation will yield a net financial deficit over the entire 25-

year operational period. This deficit stems from the differential between the price paid by ONE to

MASEN and the price that MASEN will pay to the private developer under a PPA. This deficit will

be covered by the Government of Morocco, which has undertaken to guarantee the financial

sustainability of MASEN and, consequently, the project’s financial equilibrium throughout the

operational period. The sustainability will be based mainly on the construction of the entire

infrastructure in the Ouarzazate complex (500 MW) and in subsequent projects of the Moroccan

Solar Plan. There are also prospects for exporting green energy, through the existing lines, to

European countries of the Mediterranean within the framework of agreements under discussion, as

well as the eventual creation of a local industry for the technology used by the project.

3.1.2 Economic Performance: From the macroeconomic standpoint, this project will have a

positive impact on the trade balance of the Kingdom, which currently imports 97% of its primary

energy sources, consisting mainly of coal and fuel oil. This impact will stem from savings on coal

and fuel oil imports following fuel substitution with solar energy. However, two negative impacts

also have to be considered, namely the heavy initial investment (CAPEX) will be paid mainly in

foreign exchange, and during the operational phase, dividends to the private partner will also be paid

in foreign exchange. These two factors will offset any improvement in Morocco’s trade balance.

However, implementation of the project will enable Morocco to demonstrate that CSP solar power

stations can be part of the optimal production mix. The other economic benefits of the project are: (i)

the energy produced and sold on the local market; and (ii) the monetary value of greenhouse gas

emissions, although it is low today. Apart from climate change benefits, the project will foster the

creation and development of a local renewable energies industry, and create new jobs and wealth for

the Kingdom.

The project’s economic rate of return (ERR) has been calculated on the basis of the same

assumptions used for calculating the FIRR. The economic costs have been estimated on the basis of

investment costs, exclusive of tax, and adjusted with appropriate conversion factors for equipment,

works, services, as well as skilled and unskilled labour. It is estimated that the project’s ERR will

cover just the minimum required for projects of this nature. The calculation details are presented in

Annex B.7 of the technical annexes.

3.1.3 Sensitivity: The LCOE sensitivity analysis was essentially based on: (i) investment cost

variations; and (ii) an increase in operating costs. This analysis shows that the LCOE is very

sensitive to investment cost variations and less sensitive to operating cost variations. Consequently,

the results of the bidding process will be critical to project sustainability.

10

3.2 Environmental and Social Impacts

3.2.1 Environment 3.2.1.1 In terms of information disclosure, the project is classified in Category 1. Hence, in

accordance with Bank rules and procedures, a summary of the environmental and social impact

assessment was released to the public on 28 October 2011. After the establishment of the SPC and

final design of the power station, an environmental and social management plan will be prepared and

implemented.

3.2.1.2 The large surface area covered by the mirrors will have a huge impact on soil sealing,

surface water run-off in case of rainfall which is very scarce in this region, and the natural

environment. The chosen technology, which comprises thermal storage and accumulation through

heat transfer fluids (molten salt), carries fire and pollution risks in case of leakage or operational

incidents. Water consumption through the "humid" cooling process will affect management of the

resources of the basin in which the Mansour Edhabi dam is located and from which the cooling water

will be tapped. Water consumption could reach 1.5 to 2 million m3/year.

3.2.1.3 With regard to land, the project is located on community land of approximately 2500 ha,

that belongs to the Ait Oukrour Toundou community, and is under the supervisory authority of the

Ministry of the Interior. To ensure transfer of this property according to the laws in force, MASEN

contacted the supervisory council of the community, chaired by the Ministry of the Interior and

composed of the Ministry of Agriculture, the High Commission for Water and Forestry, the Director

of Political Affairs and the Director of Administrative Affairs in the Ministry of the Interior, and two

members appointed by the Ministry of the Interior.

3.2.2 Climate Change

By generating electricity without CO2 emissions, the project will significantly help to mitigate

climate change by curbing the expansion of Morocco's carbon footprint. The energy produced will

replace thermal power production which is dominant in Morocco, and the solar plan will discourage

the construction of new coal-fired or fuel oil power stations and optimize the operation of those

already in service. The Moroccan Solar Plan will help to reduce CO2 emissions by 3.7 million tonnes

per year. This first Ouarzazate solar farm will reduce CO2 emissions by 240,000 tCO2 per year for 25

years.

3.2.3 Gender: Improved access to drinking water and energy will help to enhance the integration

of women into Morocco’s economic and social development. Such is already the case in the project

area, which is situated in a rural area with several small villages. Approximately 90% of these

villages already have access to these amenities (water and electricity). Regular energy supply will

make it possible for women to develop new lucrative economic activities. The expected indirect

effect is that the social development study and local development plan will yield results that will also

benefit women.

3.2.4 Social

3.2.4.1 The project will produce positive social impacts. By increasing the Kingdom’s energy

production capacity, the project will facilitate the electrification of rural and semi-urban areas, and

supply electricity to hitherto marginalized social groups, thereby reducing the isolation of various

regions and enhancing security through improved street lighting.

11

3.2.4.2 The project will boost the industrial fabric by eliciting a proactive approach from the

contractors and MASEN. Local and regional businesses will have the opportunity to respond to

contractors' demands. The project will help to strengthen the competitiveness of national industries

and develop national expertise in the technologies used. Such expertise will be shared in the sub-

region and other regions of Africa.

3.2.4.3 The project will have a positive impact on employment, economic activity, tourism, as well as

on the project area and local communities. During the construction phase, the project will create jobs

and new income-generating opportunities at two levels. The construction phase will create

approximately 500 jobs. Such jobs will stem mainly from an increase in the activities of existing local

businesses which will supply materials and equipment needed for the project and ensure the day-to-day

maintenance of the facilities. They will also stem from the on-site assembly of the solar farm. During

the operational phase, the power station will recruit at least 50 full-time employees. Furthermore, local

small and medium-sized enterprises will deliver various services like maintenance, security services,

industrial cleaning, etc.

3.2.4.4 Proceeds from the sale of the community lands will be used in funding community

development projects.

3.2.4.5 The project is likely to have negative impacts at the social level: (i) an increase in road

traffic is expected during the construction phase. Such traffic could create temporary inconvenience

due to noise and dust produced by passing vehicles. (ii) During the construction and operational

phases, herders and their livestock will no longer be able to pass through the site. It will be enclosed

with a fence. However, the project will have only a very limited impact on agro-pastoral activities

since the site is located far from irrigation farming areas.

3.2.4.6 An environmental and social management framework plan (ESMP) has been prepared as

part of the preliminary environmental assessment. It sums up the mitigation and compensatory

measures that will be taken during project implementation. To ensure that all these measures are

taken into account, the ESMP will be included in the bidding documents of private developers (in the

form of terms of reference which must be respected). Furthermore, the developer must supplement

and have the final ESMP validated by the competent authorities during establishment of the project,

as appropriate.

3.2.5 Forced Resettlement

3.2.5.1 The implementation of the project and construction of the Ouarzazate solar complex will not

lead to any resettlement of the population. The project will require no destruction of houses, or

displacement of communities or economic activities. The project site is located on land that was not

used for any particular economic or residential purpose by the local community. Only the access road

to Douar Tasselmante will be modified by the project. There is very little pastoral activity on the site.

The land use changes will therefore have a very limited impact. As a compensatory measure, a new

access road to Douar Tasselmante will be created.

3.2.5.2 MASEN has already completed the land acquisition procedures in accordance with statutory

terms of sale and for a price set by the review commission. The land was acquired (negotiated

contract) and paid for at the end of 2010. The amount was paid into a special account opened in the

name of the community at the Ministry of the Interior and will be managed by the Department of

Rural Affairs. The supervisory council of the community will decide on how proceeds from the land

sale will be used. MASEN has designed an information and consultative process with various

stakeholders that will determine and settle any disputes.

12

4 PROJECT IMPLEMENTATION

4.1 Implementation Arrangements

4.1.1 Project implementation has been entrusted to MASEN, which is the project owner. MASEN, a

State corporation, was established in March 2010 by Law No. 57/09 to implement the integrated

solar plan and develop all aspects of solar energy. It is jointly-owned, in equal proportion, by the

Moroccan Government, the Hassan II Fund for Economic and Social Development, the National

Electricity Authority (ONE) and the Energy Investments Corporation. Its activities focus on three

major solar energy missions, namely to: build power stations, contribute to the development of

national expertise, and engage in advocacy activities at the regional and international levels. Its staff

includes about twenty high-level experts. In the development of this project, MASEN is assisted by

internationally renowned technical, financial, legal and fiscal advisers. Furthermore, MASEN has a

project management structure. MASEN has prepared the terms of reference for the project

implementation, which provide for the selection of an independent electric power producer and

ensure the involvement of local industries in each solar project, as well as the development of related

infrastructure.

4.1.2 The private sector will participate in project implementation through a public-private

partnership. MASEN and the private partner, which is currently being selected through international

competitive bidding, will create the Solar Project Company (SPC) to develop Phase 1 (125-160 MW)

of the 500 MW of CSP to be generated from the Ouarzazate Complex. It should be noted that the pre-

selected consortiums are all internationally renowned.

4.1.3 Institutional Arrangements: The institutional flow-chart is presented hereunder. The SPC’s

share capital will be held by MASEN (25%) and the private partner (75%). MASEN, which will be the

sole purchaser of the electric power generated, will act as intermediary between the developer and

ONE. MASEN will sign the first electric power purchase contract with the developer based on

production costs, and a second electric power sales contract with ONE based on the net rates

applicable in the country. The legal documents establishing the electric power purchase/sales

contracts and the SPC’s shareholding structure have been submitted to the Bank and other donors.

4.1.4 Procurement Arrangements: Phase 1 of the Ouarzazate solar power station will be

constructed through a public-private partnership. This will entail selecting a private developer that will

be responsible (under a turnkey contract) for the design, financing, construction, operation and

maintenance of the power station. The Bank will fund only the private developer’s contract through a

co-financing arrangement with other financial partners such as the World Bank, EIB, AFD and KfW.

The support will be through a loan to MASEN which will onlend the funds to the Project Company

(within which the private developer will hold majority shares) to finance part of the investment for the

Δ (P1-P2)

Commercial Debt

ONE

Equity

Participation

Equity

Participation

Concessional

Financing

Debt or

convertible debt

Electric Power

Purchase

Agreement PPA

(P2)

Equity

Participation

El. Power Purchase

Agreement PPA (P1)

MASEN

Solar Project Company

(SPC)

Developers

Commercial Banks

Government of Morocco Guarantee

Multilateral Development Banks

13

construction of the power station. The developer will be selected on a competitive basis. Considering

that the resources of the abovementioned financial partners are perforce fungible, an agreement was

reached to adopt the procurement procedures of one of the multilateral banks participating in the

financing. In this regard and after consultations, the majority agreed that the procurement procedures of

the World Bank (January 2011 version) as well as its eligibility criteria should be used for the project. In

accordance with the provisions of Article 1.17 (b) of the Bank’s Rules and Procedures for Procurement

of Goods and Works (R&P), such a decision must be endorsed by the Board of Directors to become

effective and allow for the pooling of Bank and other financial partner resources for use in this project.

Indeed, Article 1.17 (b) of the R&P provides that: "Where the Bank finances on a joint basis with

financiers, other than the Borrower, it will require as a condition for its financing that these Rules

apply, unless the Board of Directors authorizes a waiver".

4.1.5 The private developer will be selected as detailed out in Annex B3 and through competitive

bidding acceptable to the Bank. The related bidding documents are based on the standard documents of

the Bank and the World Bank. The process guarantees open and transparent competition with clear and

pre-defined evaluation and qualification criteria, as well as contractual clauses that are fair to all parties.

The private developer, acting within SPC, will provide a series of services to achieve the objectives

defined in the CPP. To that end, the developer will be responsible for the works (representing the bulk

of the investments), goods and services required for the design, supply of equipment, construction,

financing operation and maintenance of the solar power station. As stated in Article 3.13 of the Bank’s

rules or Article 13.4 (a) (similar provisions) of the World Bank rules, the private developer will be free

to use its own procedures to conclude contracts with other service providers for the construction of the

power station.

4.1.6 MASEN will be responsible for selecting the private developer. An assessment of MASEN’s

capacity conducted during project preparation revealed a high procurement risk, due mainly to the fact

that the structure was still in its infancy. MASEN has made efforts to consolidate capacity by procuring

the services of a pool of internationally renowned advisers who are specialized in the technical, legal,

financial and procurement aspects of the project. The details of this assessment and the proposed action

plan are presented in Annex B3.

Special Arrangements: Given programming constraints, the Borrower has sought and

obtained from the Bank, approval for Advanced Procurement Actions (APA) for the services of the

private developer in accordance with Article 1.9 of the R&P which provides that: "The Borrower may

wish to proceed with the initial steps of procurement before signing the related Financing

Agreement. In such cases, the procurement procedures, including advertising, shall be in accordance with

the Rules in order for the eventual contracts to be eligible for Bank Financing, and the Bank shall review the

process used by the Borrower. A Borrower undertakes such advance contracting at its own risk, and

any concurrence by the Bank with the procedures, documentation, or proposal for award does not

commit the Bank to provide financing for the project in question". This bidding exercise was preceded

by pre-qualification, and will be implemented through a two-stage process (adapted for similar

procurements) and subjected to ex ante review by the Bank.

4.1.7 Financial Management Arrangements and Audit

4.1.7.1 Fiduciary Risks and Safeguard Measures: MASEN will be accountable to donors for the

project implementation and resource management. Nevertheless, these tasks will ultimate be

assumed by the Solar Project Company (SPC) to be created. Financial management assessment,

conducted in accordance with Bank guidelines, shows that there is a high initial fiduciary risk for this

project (see Table of Risks in Annex B4), requiring implementation of mitigation measures and

conditionalities for ADB and CTF loans (measures detailed in 4.5.3). Implementation of the agreed

14

action plan (see Annex B4) will help to scale the fiduciary risk down to a moderate and acceptable

level at project start-up.

4.1.7.2 Financial Management Arrangements: The financial management of the project will be

based on the SPC financial management system and the cash-flow, control and reporting systems of

MASEN. Hence, apart from audits that the Government may request in its capacity as shareholder,

there will be no recourse to Morocco’s Public Finance Management System during project

implementation. Compliance with the under-mentioned arrangements will guarantee transparency,

traceability and adequate financial information for the invested funds. The SPC will prepare an

annual work plan that is budgeted, controlled and transmitted by MASEN to the Bank before the start

of each fiscal year. SPC accounts will be merged with project accounts. The SPC will have qualified

and experienced staff, and will keep its general accounting, cost accounting and budgetary

accounting with the proper software. The accounting principles will be described in the project's

financial management handbook. MASEN and SPC will apply appropriate and documented internal

control procedures such as accounting records, financial transactions, expenditure commitment and

justification, and back-up of financial and project asset data. Internal controls will be conducted in

each entity by an internal auditor and an audit committee, as appropriate. On account of its public

shareholding, MASEN will be subject to State financial control. A progress report and an interim

financial report for the project will be prepared every six months based on a template acceptable to

all partners. The financial report (see indicative content in Annex B4) will be prepared based on

periodic feedback of information by the SPC. Such information will be controlled and supplemented,

as appropriate, by MASEN which will transmit the report to donors within 45 days following the end

of the six-month period or any other deadline set in the procedures manual. Furthermore, the annual

financial statements of the project (and consequently of the SPC) will be prepared in accordance with

Moroccan accounting standards (see indicative content of financial statements in Annex B4). The

project’s financial management will be supervised on-site and off-site for both MASEN and SPC.

The Bank will endeavour to coordinate with the other partners and, above all, organize joint

supervision missions with them (See Annex B4).

4.1.7.3 External Audit Arrangements: The financial statements of MASEN and SPC will be

audited annually by their respective auditors appointed in accordance with the relevant statutes. The

project will be audited by the SPC auditor in accordance with IFAC international audit standards.

The project audit terms of reference (TORs) will be prepared to the satisfaction of all the donors,

taking into account the procedures agreed upon in accordance with the Bank’s TORs and will be

submitted to the Bank for approval without delay. The audit reports of the project and MASEN,

accompanied by letters to their various managements on internal control, will be transmitted to the

Bank not later than 6 (six) months after the close of the fiscal year concerned. The project’s first

audit report will cover the period starting from project commencement on 31 December 2012.

Furthermore, MASEN may also be audited by Morocco’s Court of Auditors.

4.1.8 Disbursement Mechanism and Arrangements

4.1.8.1 Common Mechanism: For financial transactions during the power station construction

phase, MASEN will open a Designated Transitory Account (DTA) for each financing agreement in

Bank Al-Maghrib and a Designated Common Account to receive all funds from the DTA. Another

Designated Common Account will be opened by the SPC into which MASEN will deposit the

financing. These accounts will be opened in acceptable banks and currencies, and will be audited

annually together with the project's financial statements. To reduce MASEN’s financial deficit, an

agreement was also reached as follows: (i) CTF resources mobilized by the ADB and WB will be

fully disbursed in priority before MASEN solicits other financing; (ii) upon depletion of CTF/ADB

15

and CTF/WB resources, each replenishment will be done on a pari passu basis for all donors,

whereby the share of each partner is defined in proportion to their contributions to the non-CTF

external financing of the project; (iii) the loan agreement between MASEN and SPC will define the

disbursement mechanisms in accordance with principles acceptable to each of the donors, including

the distribution formulae and payment conditions adopted; (iv) payment requests will be presented to

each donor based on the project’s interim financial statements, their verification by an independent

auditor and in accordance with the procedures of each donor; (v) the funds disbursed into the DTAs

will be immediately transferred into MASEN's common account and immediately into the SPC

account from which the expenditure provided for in the agreements will be directly committed.

4.1.8.2 Specific Arrangements: In addition to agreeing on a common mechanism, payment

requests on the ADB and CTF loans will be presented in compliance with the procedures described

and applicable in the Bank's Disbursement Handbook. The disbursement method will be the special

account exclusively. As conditions precedent to the first disbursement, the Bank will require

evidence of the opening of two special accounts (ADB loan in Euros and CTF loan in dollars) by

MASEN in Bank Al Maghrib. The Bank agrees that MASEN should first disburse CTF funds and

then follow up with the ADB loan, once the FTP loan has been exhausted. The initial advance

request will be presented based on the request form and on the form indicating the SPC investment

budget for 6 months of activities with application of the Bank’s financing share. The ADB share in

CTF resources will be 50.8% (and 49.2% for WB). Upon exhaustion of CTF resources, the ADB

share of the remaining donor financing will be determined by MASEN and confirmed by a letter

accompanying the first request for the ADB loan. Replenishment requests should, in addition to the

above statements, include a summary expenditure statement highlighting the share of investments

attributable to the Bank, along with a financial report for the preceding six-month period audited by

an independent auditor, as well as the statements and reconciliations of the transitory and common

accounts. A disbursement letter will be reviewed by both parties during negotiation of the loan

agreements, and forwarded to MASEN, the Borrower, as soon as the Bank approves the project.

4.2 Project Monitoring

The main milestones of the project are presented in Table 4.1 below:

Table 4.1: Major Project Implementation Milestones

Duration Milestones Monitoring Activities/Feedback Loop

90 days Approval and

effectiveness

Approval of loans

General Procurement Notice

Signing of the loan agreements

ADB launching mission

Effectiveness of the loan agreements

120 days Selection of the

consortium

Preparation of the bidding documents

Competitive bidding and contract award

840 days Physical implementation

of the project

Execution of contracts

Preparation of periodic project progress reports

Supervision missions from the Bank

Environmental and social monitoring of the project

Mid-term review by the Bank

120 days Project accounts audit Recruitment of the auditor for conduct of annual audits

Conduct of annual audits

70 days Project Completion Borrower’s project completion report

Preparation of the Bank’s project completion report

16

4.3 Governance

4.3.1 Morocco continues to implement economic and structural reforms to modernize its public

administration and the financial sector so as to boost its economic performance and enhance its

competitiveness within a rapidly changing regional and international context. The Bank’s operations

in the area of governance, which is one of the pillars of CSP 2012-2016, fall within the various

phases of the public administration reform support programme that led to the gradual creation of an

institutional framework, marked by a new culture of public service performance and efficiency.

4.3.2 The governance risk in the current project is very low, and could arise in the private partner

selection process. However, this is mitigated by the fact that donors will ensure full application of

their relevant rules of procedure. The Bank will also conduct supervision missions, as well as

technical and financial audits to ensure conformity between the terms of reference, progress in the

construction of the power station, disbursements made and the loan agreement. Lastly, it should be

noted that the involvement of the highest ranking authorities in the project management is a

guarantee of good governance. Besides, MASEN has a Board of Directors and a Surveillance Board

that ensure some control over its activities. During implementation of the first phase, MASEN will

be assisted by internationally renowned (technical, legal and fiscal) advisers. A project management

office has been set up with the support of a national consulting firm, and will be responsible for the

planning, monitoring and evaluation of project implementation.

4.4 Sustainability

4.4.1 Project sustainability is based essentially on the private partner’s capacity to ensure the

construction, repair and maintenance of the equipment and facilities to be constructed under the

project. The selection process for the future developer responsible for the construction, operation and

maintenance of the power station is underway, and is based on a two-stage international competitive

bidding process. Under this procedure, the first stage consists in initiating technical discussions with

bidders in order to have a better understanding of their technical bids, which will be improved at the

second stage.

4.4.2 A Maintenance Plan will be prepared each year and updated every month by the SPC, and

submitted to MASEN for information for the entire duration of the power purchase agreement (PPA).

Concurrently, a Maintenance Fund will be established, and the SPC will pay the fund amount into an

escrow account opened in a registered bank in Morocco (Maintenance Fund) during the last five

years prior to expiry of the PPA to ensure that the power station in is good working order at the end

of the PPA. An escrow agreement will be concluded between MASEN, SPC and the bank in which

the Maintenance Fund resources are deposited. Maintenance expenses will be defrayed by the SPC

from this escrow account so long as there are supporting documents and the expenses are in

conformity with the Maintenance Plan.

4.4.3 Furthermore, Law No. 57/09, which governs MASEN, guarantees Government support for

the development of the entire 500 MW of the Ouarzazate solar complex and the implementation of

the Moroccan Solar Plan for 2000 MW. The Government is committed to ensuring the financial

equilibrium of the project. Hence, the Government is expected to cover the differential between the

purchase price paid by MASEN to SPC and ONE's sales price for the electric power generated.

These arrangements also constitute a guarantee of the project’s financial sustainability.

17

4.5 Risk Management

4.5.1 Technological risk: This risk stems from the fact that there is no single-module solar

complex of this dimension in the world. MASEN is assisted by a Technical Adviser and some

technical discussions took place during the pre-qualification phase prior to the bidding process.

MASEN has engaged in experience-sharing with similar ongoing projects in the world that could be

especially beneficial to the subsequent phases.

4.5.2 Implementation risk: MASEN is a newly-created entity and consequently has no real

experience in the monitoring and implementation of such complex projects. This risk is mitigated by

the quality of the management, assistance from leading consultants, and various assessments by the

Bank and other donors on MASEN’s capacity to implement the project. These assessments

determined its technical assistance, technical consultancy or capacity-building needs. Furthermore,

during the project implementation phase, MASEN will be assisted by a Consultant who will ensure

fulfilment of all disbursement conditions and availability of all legal and contractual documents. In

addition, the two-stage selection procedure for the developer will mitigate this risk because it affords

the opportunity to ensure that all bidders have a full understanding of the project and to ascertain

their capacity to implement it efficiently.

4.5.3 Fiduciary risk: The initial fiduciary risk is deemed high for this project. Although MASEN,

the borrower, has the advantage of being a structure whose organization and financial management

system are being established, the SPC, which will implement the project, has not yet been created.

Consequently, its capacity to ensure sound financial management of the project cannot be ascertained

at this stage. Furthermore, the complexity of the project requires a joint management mechanism for

the mobilized resources, and this constitutes an additional risk for the Bank. Implementing the

following conditionalities will help to reduce the residual risk to a moderate and acceptable level.

Apart from the effective establishment of the SPC and the fiduciary responsibility clauses of the

agreements to be signed between MASEN and SPC (especially the loan agreement) and which will

be approved by the Bank, it will be necessary for the Bank, prior to any disbursements (3 months

after, for the SPC), to ascertain or obtain evidence that the Government has created the entity

responsible for project implementation (SPC) and that the Borrower (MASEN) has finalized a

financial management mechanism that is deemed satisfactory for project start-up.

4.5.4 Financing Risk: During the operational phase, MASEN could encounter difficulties in

financing the cost differential. This risk is mitigated by the new Government's strong commitment

and the support of Moroccan authorities through dedicated mechanisms. Furthermore, this risk is

mitigated for the entire project by the coordination among donors instituted at the very beginning of

the study phase and by the fact that MASEN is seeking to secure investment financing before taking

a final decision to select the developer.

4.6 Knowledge Building

4.6.1 For the various donors and the Moroccan Government, the project presents a unique

opportunity for disseminating new knowledge. For the Bank, it is the first step in the implementation

of the CTF Solar Investment Plan for the MENA region. The project will make it possible to acquire

new technical and financial knowledge, especially with the installation of solar equipment,

management of CTF resources, and the design of projects of this magnitude. A similar experiment

with Eskom in South Africa will generate additional synergies.

4.6.2 For the Moroccan Government, new knowledge will be acquired at several levels. The

creation of a local industry and research centre as part of the industrial integration support measures

18

expected from strategic partners of the SPC will have a positive impact on the sector and the country.

Hence, local and North African experts will then have the tools and information needed to build their

professional capacities. By virtue of its role as executing agency and project owner, MASEN will get

considerable exposure during the power station construction and operational phases. Furthermore,

special seminars and workshops have been scheduled to build the capacities of MASEN staff. Lastly,

the population will benefit from this new knowledge, especially the youths and SME/SMIs, which

will have the opportunity to work on the project sites during infrastructure construction.

5 LEGAL FRAMEWORK

5.1 Legal Instrument

5.1.1 For the financing of this project, the Bank will use: (i) an ADB loan of EUR 168 million to

MASEN; and (ii) a CTF loan of USD 100 million to MASEN awarded by the Bank in its capacity as

the executing agency of the CTF Trust Fund. Both loans are covered by the sovereign guarantee of

the Kingdom of Morocco.

5.1.2 The ADB loan will be denominated in Euros (EUR) with a maturity period of 20 years,

including a 5-year grace period. The interest rate is composed of a floating base rate (6-month

EURIBOR) with a free-fixing option on amounts disbursed and still outstanding, to which is added

the funding margin and contractual margin (0.60%). Furthermore, the project will benefit from

concessional terms for the CTF loan. For the implementation of the project, the ADB and CTF loan

amounts will be onlent by MASEN to a private developer selected through international competitive

bidding, on conditions to be defined and acceptable to the Bank. In principle, the onlending

conditions will be determined in advance and in keeping with market conditions. However, given the

specificity of this project, which deals with renewable energies of higher cost price, it is not

appropriate to increase the cost of electricity.

5.2 Conditions Associated with the Bank’s Intervention

A) Conditions Precedent to ADB and CTF Loan Effectiveness

The ADB and CTF loan agreements shall become effective on their dates of signature. The ADB and

CTF guarantee agreements shall become effective on the date the Guarantor fulfills the conditions

provided under Section 12.01 of the General Conditions to the satisfaction of the Bank.

B) Conditions Precedent to the First Disbursement of the Loan

5.2.1 In addition to the effectiveness of each Loan Agreement, the first disbursement of the

resources of each loan shall be subject to fulfilment, by the Borrower, of the following conditions to

the satisfaction of the Bank:

(i) Fulfill the conditions defined in Section 12.02, paragraph (a), sub-paragraphs (i) and

(ii) of the General Conditions;

(ii) Provide the Bank with evidence of finalization of project financing, by presenting

evidence of approval of project financing by the other donors;

(iii) Provide the Bank with evidence of the undertaking by the Kingdom of Morocco to

cover the differential between the Borrower’s purchase price for electricity from the

19

Solar Project Company (SPC) and the selling price to the National Electricity

Authority (ONE) or any other company that takes its place, in the form of a special

agreement signed between the Kingdom of Morocco and the Borrower;

(iv) Submit to the Bank the original or certified true copy of the attestation for the opening

of a special account for each loan, by the Borrower, at Bank Al-Maghrib, or any other

bank acceptable to the Bank, through which the resources of each loan will be

channelled and bearing the complete bank information of each account and the names

of persons authorized to make disbursements from the accounts;

(v) Submit to the Bank and under conditions acceptable to the Bank, a certified true copy

of: (a) the SPC signed and registered statutes; (b) the attestation of SPC registration;

(c) the electric power purchase contract between the Borrower and SPC; (d) the

electric power purchase contract between the Borrower and ONE; and (e) the

agreement for onlending all or part of the loan resources by the Borrower to the SPC,

indicating that: (i) the financial and accounting information shall be transmitted by

the SPC to the Borrower every six months; and (2) the annual financial statements of

the SPC shall be audited by its auditor, in accordance with the standards applicable in

Morocco and taking into account the Bank’s terms of reference;

(vi) Provide the Bank with evidence that the Borrower has established a satisfactory

accounting and financial management mechanism with: (a) the recruitment of its

accounting staff and internal auditor; (b) the establishment of its IT system for

financial management and internal production of financial information; and (c)

preparation of templates for the project's half-yearly progress reports and financial

reports acceptable to the Bank.

C) Other conditions

In addition, the Borrower shall fulfill the following conditions to the satisfaction of the Bank:

(i) Provide evidence of release of counterpart funds within 24 (twenty-four) months

following the first disbursement of the loan;

(ii) Provide the Bank, not more than three (3) months following the first disbursement, with

evidence that the SPC has established a satisfactory accounting and financial management

mechanism with: (a) the appointment of a qualified and experienced financial officer; (b) the

establishment of an accounting system that can provide accounts of accepted standards and

ensuring cost accounting and budget monitoring; and (c) the preparation of a project financial

management manual deemed satisfactory by the Bank.

(iii) Submit to the Bank, before start-up of works, the following documents prepared in

accordance with the relevant Bank rules and procedures: (a) the detailed environmental

and social impact assessment (ESIA) prepared by the SPC; (b) the environmental and

social management plan (ESMP); (c) the socio-economic study and the social action

programme; (d) the final version of the ESIA for the shared infrastructure; and (e)

evidence of the environmental acceptability of the framework study, the ESIA for shared

infrastructure and, where applicable, the final design of the power station.

20

D) Commitments

The Borrower undertakes to:

(i) Submit to the Bank any document that is reasonably necessary for monitoring the

project implementation; and

(ii) Ensure that the SPC implements the ESMP of the final design and, where necessary,

implement the ESMP for shared infrastructure, in accordance with the Bank's relevant

rules and procedures.

5.3 Compliance with Bank policies

The Ouarzazate Solar Power Station Project – Phase I complies with the Bank's applicable rules.

6 RECOMMENDATION

Management recommends that the Board of Directors should: (i) exceptionally waive the application

of Bank's rules and procedures in favour of the World Bank's rules and procedures for procurement

of goods, works and services; and (ii) approve: (a) an ADB loan of EUR 168 million to MASEN; and

(b) a CTF loan of USD 100 million awarded by the Bank to MASEN in its capacity as executing

agency of the CTF Trust Fund to finance the Ouarzazate Solar Power Station - Phase I, both loans

being covered by the sovereign guarantee of the Kingdom of Morocco.

MAROC

PROJET DE CENTRALE SOLAIRE DE OUARZAZATE

Annex I

Morocco’s Comparative Socio-economic Indicators

1990 2011 *

Area ( '000 Km²) 30 323 80 976

Total Population (millions) 24,8 32,3 1 044,3 5 732,2

Population growth (annual %) 1,9 1,0 2,3 1,3

Life expectancy at birth, total (years) 64,1 71,8 56,0 67,1

Mortality rate, infant (per 1,000 live births) 64,6 27,7 78,6 46,9

Physicians per 100,000 People … 62,0 58,3 109,5

Births attended by skilled health staff (% of total) … … 50,2 64,1

Immunization, measles (% of children ages 12-23 months) 79,0 98,0 77,9 80,7

School enrollment, primary (% gross) 68,3 113,7 100,4 107,2

Ratio of girls to boys in primary education (%) 67,6 94,3 90,9 100,0

Literacy rate, adult total (% of people ages 15 and above) … 56,1 65,1 80,3

Access to Safe Water (% of Population) 75,0 81,0 64,5 84,3

Access to Sanitation (% of Population) 52,0 69,0 41,0 53,6

Human Develop. (HDI) Rank (Over 187 Countries) … 130 n.a n.a

Human Poverty Index (% of Population) … 31,1 34,7 …

Economy 2000 2009 2010 2011

GNI per capita, Atlas method (current US$) 1 312 2 832 2 939 …

GDP (current Million US$) 37 060 90 907 95 043 105 014

GDP growth (annual %) 1,8 4,8 3,7 4,6

Per capita GDP growth (annual %) 0,6 3,8 2,7 3,6

Gross Domestic Investment (% of GDP) 25,5 35,6 38,5 39,6

Inflation (annual %) 1,9 1,0 1,0 1,5

Budget surplus/deficit (% of GDP) -5,5 -2,2 -3,0 -5,5

Trade, External Debt & Financial Flows 2000 2009 2010 2011

Export Growth, volume (%) 3,3 -10,1 31,8 15,6

Import Growth, volume (%) 3,6 5,0 -4,1 10,6

Terms of Trade (% change from previous year) -7,4 5,7 -32,2 -4,8

Trade Balance ( mn US$) -3 235 -16 279 -20 011 -23 834

Trade balance (% of GDP) -8,7 -17,9 -21,1 -22,7

Current Account ( mn US$) -478 -4 952 -4 124 -5 447

Current Account (% of GDP) -1,3 -5,4 -4,3 -5,2

Debt Service (% of Exports) 32,4 7,5 6,6 6,1

External Debt (% of GDP) 48,6 23,3 23,6 24,0

Net Total Inflows ( mn US$) 600,7 2 082,4 … …

Net Total Official Development Assistance (mn US$) 418,8 911,6 … …

Foreign Direct Investment Inflows (mn US$) 422,2 1 951,7 1 303,7 …

External reserves (in month of imports) 3,6 4,7 4,4 …

Private Sector Development & Infrastructure 2000 2005 2010 2011

Time required to start a business (days) … 12 12 12

Investor Protection Index (0-10) … 3 3,3 5

Main Telephone Lines (per 1000 people) 49,5 44,1 117,3 …

Mobile Cellular Subscribers (per 1000 people) 81,3 407,8 1 001,0 …

Internet users (000) 6,9 151,4 496,6 …

Roads, paved (% of total roads) 54,6 59,6 … …

Railways, goods transported (million ton-km) 4 576 5 919 … …

* Most recent year Last Update: October 2011

Morocco - Development Indicators

Developing

countries

Source: ADB Statistics Department, based on various national and international sources

Morocco AfricaSocial Indicators

711

Morocco

MAROC

PROJET DE CENTRALE SOLAIRE DE OUARZAZATE

Bank Group’s Active Portfolio Status in Morocco as of End-January 2012 Annex II

AGRICULTURAL SECTOR 2,1 3,5 48 641 851 55 310 809 2 254 112 111 846 755 4,1% 15,4% 3,3%

1 Tech. Supp. Proj. Prom. of Young Entrepreneurs-MIC GRANT 12-Jan-11 30-Jun-14 1,2 UA 497 000 497 000 497 000

2 Nat. Irrigation Water Saving Programme (PNEEI) 14-Dec-09 4-Mar-10 2-Jul-10 31-Dec-15 2,3 6,7 EUR 47 651 651 53 590 000 1 609 400 51 980 600 3,0% 15,0%

3Tech. Ass. To Protec. Progr. to Sauveguard the Oases of South

Morocco (POS) - MIC GRANT28-avr.-09 31-juil.-09 31-juil.-09 30-mai-12 2,9 3,1 UA 496 000 496 000 386 338 109 662 77,9% 60,0%

4 Tech. Supp. to Irrig. Infrast. Dev't - MIC GRANT 21-févr.-11 17-mars-11 17-mars-11 31-déc.-12 1,1 0,8 UA 494 200 494 200 158 834 335 366 32,1% 32,1%

TRANSPORT SECTOR 2,7 7,7 510 263 406 585 678 000 47 827 617 537 850 383 8,2% 17,4% 34,3%

5 2nd Phase of Nat. Rural Road Prog. (PNRR 2) 5-sept.-07 23-nov.-07 8-mars-08 31-déc.-13 4,5 6,2 EUR 41 754 428 45 000 000 45 000 000 0 100,0% 100,0%

6 3rd Airport Project 16-avr.-09 8-mai-09 22-oct.-09 31-déc.-13 2,9 6,3 EUR 214 456 130 240 000 000 2 827 617 237 172 383 1,2% 11,2%

7 Infrastructure Repair in 7 ports - MIC GRANT * 1-Apr-10 17-mars-11 17-Mar-11 31-Aug-12 2,0 11,7 UA 600 000 600 000 0 600 000 0,0% 40,0%

8 Project to Increase the Capacity of theTanger-Marrakech Rail. 17-déc.-10 17-mars-11 29-Jun-11 1-sept.-15 1,3 6,5 EUR 253 452 847 300 000 000 0 300 000 000 0,0% 10,0%

ENERGY SECTOR 3,3 7,5 247 151 601 261 220 000 161 320 545 99 899 455 61,8% 62,2% 16,6%

9 Ain Beni Mathar 2 Thermo-Solar Power Station Project 17-déc.-07 7-avr.-08 16-oct.-08 31-déc.-14 4,3 10,1 EUR 145 321 214 151 400 000 151 400 000 0 100,0% 100,0%

10 Electricity Transmission and Dist. Network Dev't Progr. 2-Dec-09 11-Dec-09 29-Apr-10 31-Dec-14 2,3 4,9 EUR 101 830 388 109 820 000 9 920 545 99 899 455 9,0% 10,0%

SOCIAL SECTOR 2,1 0,3 970 406 1 139 937 544 942 594 995 47,8% 47,0% 0,1%

11 Tech. Ass. for Est. of SIG & Health Mapping - MIC GRANT 12-déc.-08 23-déc.-08 23-déc.-08 3,3 0,4 UA 500 000 500 000 0 500 000 0,0% 60,0%

12 Private Education Dev't Supp. Strategy - MIC GRANT 11-mars-11 17-Mar-11 17-Mar-11 1,0 0,2 UA 470 406 470 406 470 406 0 100,0% 50,0%

WATER AND SANITATION SECTOR 3,2 7,7 309 565 848 365 074 246 80 162 879 284 911 367 22,0% 30,7% #####

13 Ninth DWSS Project 21-juil.-06 18-déc.-06 16-mai-07 30-juin-13 5,7 10,0 EUR 70 666 446 81 000 000 61 625 163 19 374 837 76,1% 80,0%

14 Tenth DWSS Project 16-nov.-08 23-déc.-08 17-juil.-09 31-déc.-13 3,3 8,1 EUR 30 702 510 33 840 000 6 835 599 27 004 401 20,2% 50,0%

15 Tenth DWSS Project 16-nov.-08 23-déc.-08 17-juil.-09 31-déc.-13 3,3 8,1 USD 34 540 816 53 340 000 11 834 867 41 505 133 22,2% 50,0%

16 Eleventh Rabat-Casa DWSS Project 12-May-10 19-août-10 13-janv.-11 31-Dec-14 1,9 8,2 EUR 135 258 333 162 310 000 0 162 310 000 0,0% 1,0%

17 Eleventh Rabat-Casa DWSS Project 12-May-10 19-août-10 13-janv.-11 31-Dec-14 1,9 8,2 USD 36 706 667 55 060 000 1 882 207 53 177 793 3,4% 1,0%

18Haouz Water Table Artific. Replenishment Proj. - AWF GRANT

**12-janv.-09 8-mai-09 8-mai-09 30-nov.-12 3,2 3,9 EUR 1 691 076 1 892 500 815 550 1 076 950 43,1% 87,0%

MULTISECTOR 1,4 1,8 201 445 338 225 734 406 134 529 840 91 204 566 59,6% 59,7% #####

18 Guarantee System Improvement Project - MIC GRANT 1-janv.-11 17-Mar-11 17-Mar-11 1-janv.-13 1,2 2,5 UA 464 988 464 988 159 388 305 600 34,3% 26,3%

19 Fin. Market Contr. Consolidation Project - MIC GRANT 13-déc.-10 17-Mar-11 17-Mar-11 15-déc.-12 1,3 3,1 UA 480 350 480 350 171 410 308 940 35,7% 30,0%

20 Financial Sector Dev't Project II (PADESFI-II) 23-nov.-11 23-Nov-11 6-déc.-11 31-déc.-12 0,3 0,4 EUR 200 000 000 224 000 000 134 000 000 90 000 000 59,8% 59,8%

21 Inst. Support to SG UMA ( Multinational) - MIC GRANT 30-avr.-09 28-mai-09 28-mai-09 30-déc.-12 2,7 0,9 UA 500 000 500 000 110 735 389 265 22,1% 100,0%

Statistical Capacity Building II 15-mars-11 UA 490 000

PRIVATE SECTOR 1,4 5,1 170 250 000 188 611 111 609 000 14 391 000 4,1% 3,0% 11,4%

22 Argan Fund for Infrast. Dev't 17-févr.-10 21-juil.-10 21-juil.-10 31-déc.-18 2,1 5,1 EUR 14 000 000 15 000 000 609 000 14 391 000 4,1% 3,0%

23 Loan to the Royal Phosphate Authority /ψ 29-juin-11 0,7 USD 156 250 000 250 000 000

Summary: Sector Distribution of Operations Approvals (EUR million) Disbursement Status

Total Portfolio Amount

In Units of Account 1 488 288 450

Loans (14 projects) 1 483 091 430

Grants (9 projects) 5 197 020

En Euros 1 682 768 508

Current Proj. 2011

Total Disbursements in Euros 427 248 935 520 410 513

Disbursement Rate 28,4% 30,9%

Average Amount per Operation (in UA) 67 649 475

Average Effectiveness Deadline (months) 5,5 Loans 6,8 Grants 3,2Average Age of Portfolio (years) 2,3 Loans 2,8 Grants 2,0

Note: The grey areas relate to operations that are not yet effective. ( ψ): Project that is not yet in force and consequently not included in the determination of the total portfolio disbursement rate.

* MIC: Middle-income countries ** AWF: African Water Facility

Num

berProject Name Approval Date Signature Date

Effective

Date

Closing

Date

Averag

e age of

project

(years)

Effective

ness

Deadline

(months)

Share

in the

portfol

io

in Loan

Currency

(total by sect.

in EUR)

CurrentProjection

for Q1 2012

Loan

currency

Amount Approved Cummulative

Disbursement

in Loan

Currency by

Project/ in EUR

by sector

Cancellati

on in loan

currency

Undisbursed

Amount in Loan

Currency by

Project /in EUR

by sector

Cumulative

Disbursement Rate (in

%)

in Units of

Account

15%17%

62%

47%

31%

60%

3%

28%

4%8%

62%

48%

22%

60%

4%

31%

Disb. rate Jan. 2012 Proj. disb. Rate end-2012

Agric.

3,3%

Transp

34.3%

Energ16.6%

Social

0,1%

Water/San.

20.8%

Multis

ect.13,5%

Priv. 11.4%

0

158

643 634

476

2008 2009 2010 2011

MOROCCO

OUARZAZATE SOLAR POWER STATION PROJECT

Annex III

Development Partner Operations in Morocco by Sector

Technical and Financial Partners (TFPs) Active Portfolio of TFPs as at end-December 2011 (in EUR

million) % of Total

Main Focus Sectors of TFPs (*)

ADB 2 207.98 22.07 G, I, S

EIB 1 941.78 19.41 I, S

EU (+ Neighbourhood Investment Fund) 1 844.33 18.43 G, S

France (+ AFD and PROPARCO) 1 204.03 12.03 G, I, S

IBRD 637.33 6.37 G, I, S

JICA 542.27 5.42 I, S

FSD 213.43 2.13 I, S

AFESD 204.14 2.04 I, S

USAID 92.38 0.92 G, S

Italy 64.76 0.65 I, S

IFAD 52.29 0.52 S

Belgium 46.84 0.47 I, S

Kuwaiti Fund 41.67 0.42 I, S

OPEC Fund 38.27 0.38 I, S

Germany 34.71 0.35 I, S

Spain 351.51 3.51 G, S

UNDP 14.50 0.14 G, S

Abu Dhabi Fund 12.72 0.13 I, S

IsDB 460.00 4.6 I, S

UNFPA 0.46 0 S

Total 10 005.40 100

*G: Governance, I: Infrastructure, S: Social

MOROCCO

OUARZAZATE SOLAR POWER STATION PROJECT

Annex IV

Electricity Supply and Demand Projections

EUR 8 billion (DH 90 billion) investment from 2010 to 2015 With 65% concerning ERs.

EQUIPMENT PLAN 2010-2020

172

300

350

660

400

400

400

400

80

300

350

660

400

800

472

500

400

500

500

100

300

120

150

150

300

300

100

5,000

5,500

6,000

6,500

7,000

7,500

8,000

8,500

9,000

9,500

10,000

10,500

11,000

11,500

12,000

12,500

13,000

13,500

14,000

14,500

15,000

15,500

16,000

16,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Ins

talle

d P

ow

er

in M

W

FuelGasWind CoalHydro and STEP

AGADIR Diesel: 80 MW

STEP Abdelmoumen: 300 MWMdez-ElMenzel : 172 MWTaza Park: 150 MWJorf 6: 350 MWSafi 1: 660 MW

ABM vapour turbine: 172 MW

Jorf 5 : 350 MWPrivate Wind Farm: 120 MW

More than 5000 MW to be developed by 2015 and 9500 MW by 2020

Koudia Al Baida II: 300 MWSolar: 500 MWSTEP: 400 MW

Schists

Tiskrad: 300 MWSolar: 500 MW1 gas CC : 400 MW

Solar

Boujdour: 100 MWSolar: 100 MW1 gas CC : 400 MW

Ouarzazate Solar: 500 MWTanger II Park: 150 MWSafi 2: 660 MWTarfaya Schist: 100 MW

Aïn Beni Mathar Solar: 400 MWGas combined cycles : 2x400 MW

1 natural gas CC : 800 MW

TAG de Kenitra: 300 MWTarfaya Wind : 300MWPrivate wind farm: 300 MW

MOROCCO

OUARZAZATE SOLAR POWER STATION PROJECT

Annex V

Map of Project Area

The staff of the ADB Group have provided this map for the exclusive use of readers of this report to which it is appended. The appellations

and the demarcations on this map do not imply any judgment on the part of the ADB Group and its members concerning either the legal

status of a territory or the approval or acceptance of its boundaries.