Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004271 IMPLEMENTATION COMPLETION AND RESULTS REPORT ON A LOAN IN THE AMOUNT OF US$200 MILLION LOAN NUMBER 80880-MA AND A CLEAN TECHNOLOGY FUND LOAN IN THE AMOUNT OF US$97 MILLION LOAN NUMBER TF010916 TO THE MOROCCAN AGENCY FOR SUSTAINABLE ENERGY FOR THE OUARZAZATE CONCENTRATED SOLAR POWER PROJECT ( P122028 ) March 31th, 2018 Energy & Extractives Global Practice Middle East And North Africa Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank FOR OFFICIAL USE ONLY
Report No: ICR00004271
IMPLEMENTATION COMPLETION AND RESULTS REPORT
ON A
LOAN IN THE AMOUNT OF US$200 MILLION
LOAN NUMBER 80880-MA
AND A CLEAN TECHNOLOGY FUND LOAN IN THE AMOUNT OF US$97 MILLION
LOAN NUMBER TF010916
TO THE
MOROCCAN AGENCY FOR SUSTAINABLE ENERGY
FOR THE OUARZAZATE CONCENTRATED SOLAR POWER PROJECT
( P122028 )
March 31th, 2018
Energy & Extractives Global Practice
Middle East And North Africa Region
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CURRENCY EQUIVALENTS
(Exchange Rate Effective February 28th, 2018)
Currency Unit = Moroccan Dirham
USD 1 = MAD 9.25
EUR 1 = USD 1.22
FISCAL YEAR
July 1 - June 30
Regional Vice President: Hafez M. H. Ghanem
Country Director: Marie Francoise Marie-Nelly
Senior Global Practice Director: Riccardo Puliti
Practice Manager: Erik Magnus Fernstrom
Task Team Leader(s): Manaf Touati, Moez Cherif
ICR Main Contributor: Richard L. Berney
ABBREVIATIONS AND ACRONYMS
AFD French Development Agency AfDB African Development Bank CO2 Carbon Dioxide CPS Country Partnership Strategy CSP Concentrated Solar Power CTF Clean Technology Fund DAR Ministry of Interior’s Rural Affairs Directorate EC European Commission EIB European Investment Bank EIRR Economic Internal Rate of Return ESMAP Energy Sector Management Assistance Program FESIA Framework Environmental and Social Impact Assessment GHG Greenhouse Gas GoM Government of Morocco GRM Grievance Redress Mechanism GWh Gigawatt Hours DAR Ministry of Interior’s Rural Affairs Directorate IBRD International Bank for Reconstruction and Development ICR Implementation Completion Report IFI International Financial Institution ISR Implementation Status Report KfW Kreditanstalt für Wiederaufbau kW Kilowatt kWh Kilowatt Hour LAP Land Acquisition Plan LRMC Long Run Marginal Cost M&E Monitoring and Evaluation MAC Marginal Abatement Cost MAD Moroccan Dirham MASEN Moroccan Agency for Sustainable (formerly Solar) Energy MBTU One million British Thermal Unit MENA Middle East and Northern Africa MW Megawatt MWh Megawatt Hours NOx Nitric Oxide NPV Net Present Value ONEE Office National de l’Electricité et de l’Eau Potable OP Operational Policy PAD Project Appraisal Document PDO Project Development Objective PPA Power Purchase Agreement PPP Public Private Partnership PV Photovoltaic
SOx Sulfuric Oxide SVC Social Value of Carbon
TABLE OF CONTENTS
DATA SHEET ....................................................................... ERROR! BOOKMARK NOT DEFINED.
I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 5
A. CONTEXT AT APPRAISAL .........................................................................................................5
B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ..................................... 10
II. OUTCOME .................................................................................................................... 11
A. RELEVANCE OF PDOs ............................................................................................................ 11
B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 11
C. EFFICIENCY ........................................................................................................................... 12
D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 14
E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 14
III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 17
A. KEY FACTORS DURING PREPARATION ................................................................................... 17
B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 18
IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 18
A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 18
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 19
C. BANK PERFORMANCE ........................................................................................................... 20
V. LESSONS AND RECOMMENDATIONS ............................................................................. 22
ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 24
ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 30
ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 32
The development objective of the Project is to support the Borrower (the Moroccan Solar Agency MASEN) in the development of the 500Megawatt Ouarzazate solar power plant by financing the first phase (160 Megawatt gross) through a public private partnership (PPP),to increase power generation from solar power and mitigate greenhouse gas emissions and local environment impact
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FINANCING
Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)
World Bank Financing IBRD-80880
200,000,000 500,000 469,865
TF-10916
97,000,000 97,000,000 97,000,000
Total 297,000,000 97,500,000 97,469,865
Non-World Bank Financing
Borrower 474,000,000 168,000,000 168,000,000
FRANCE: French Agency for Development
136,000,000 103,000,000 103,000,000
African Development Bank 236,000,000 233,000,000 233,000,000
EC: European Investment Bank
156,000,000 120,000,000 120,000,000
GERMANY: KREDITANSTALT FUR WIEDERAUFBAU (KFW)
136,000,000 133,000,000 133,000,000
Total 1,138,000,000 757,000,000 757,000,000
Total Project Cost 1,435,000,000 854,500,000 854,469,865
KEY DATES
Approval Effectiveness MTR Review Original Closing Actual Closing
17-Nov-2011 12-Jun-2013 30-Jun-2021 05-May-2015
RESTRUCTURING AND/OR ADDITIONAL FINANCING
Date(s) Amount Disbursed (US$M) Key Revisions
19-May-2015 0 Change in Implementing Agency Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Cancellation of Financing Change in Legal Covenants Other Change(s)
Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Private Sector Development 10
Public Private Partnerships 10
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Environment and Natural Resource Management 100
Climate change 100
Mitigation 100
ADM STAFF
Role At Approval At ICR
Regional Vice President: Inger Andersen Hafez M. H. Ghanem
Country Director: Neil Simon M. Gray Marie Francoise Marie-Nelly
Senior Global Practice Director: Riccardo Puliti
Practice Manager: Patricia Veevers-Carter Erik Magnus Fernstrom
Task Team Leader(s): Silvia Pariente-David Manaf Touati, Moez Cherif
ICR Contributing Author: Richard L. Berney
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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES
A. CONTEXT AT APPRAISAL
Context
1. At the time of appraisal in 2011, Morocco was largely dependent on fossil fuels imports for its primary energy
use and was the largest energy importer in the Middle East and Northern Africa (MENA). Energy imports covered 95 percent of its primary energy demand, which had a potentially destabilizing effect on its balance of payments. Morocco had a per capita energy consumption rate that was less than a third of the world average, but consumption was growing rapidly in line with its rapid economic growth. As a result, Morocco’s balance of payments position was particularly vulnerable to fluctuations in international energy prices and to supply shocks.
2. Morocco, a country endowed with unique renewable energy resources, made the strategic decision to maximize their use to increase its energy security, reduce its dependence on imported fossil fuels, and limit greenhouse gases (GHG) emissions. Morocco had already developed a considerable experience in renewable energy during the late 1990s and the 2000s with several wind and hydropower projects, while solar remained an untapped resource. In 2009, the Government of Morocco (GoM) decided to scale up the use of its abundant, clean sources of renewable energy, particularly solar energy, available within its border, and adopted a progressive energy sector development plan with a commitment to increase the country’s share of renewable energy generation from 31 percent in 2010 to 42 percent of national capacity by 2020.
3. Solar technology, and more specifically concentrating solar power (CSP) with storage, was one of the emerging
key technologies that could serve as a substitute to fossil fuels and demonstrate the critical role of energy technologies in significantly reducing global GHG emissions. Morocco was at the time satisfying its evening peak demand through prohibitively expensive heavy fuel oil. The Concentrated Solar Power (CSP) technology was chosen because of its strong potential to be a key technology for mitigating climate change, and because its ability to store energy enhances grid reliability, by providing reliable electricity that can be dispatched to the grid whenever it is needed, including after sunset, when Photovoltaic (PV) is unavailable, to match late evening peaking demand.
4. Morocco decided to play a leadership role in the development of an almost dormant CSP industry. At time of
appraisal, the CSP industry was in a weak position, due to the worldwide economic crisis, as well as the delays in development in promising markets, such as the United States, Saudi Arabia, India and Chile. Morocco had already gained experience with CSP1 and considered this high technological risk as an opportunity to take a first-mover advantage in an industry bound to take off.
5. The World Bank was willing to support Morocco’s intent to reanimate the development of CSP. Unlike PV technology, CSP would allow Morocco to address its pressing need to generate electric power in the early
1 The Ain Beni Mathar plant, which was one of the first Integrated Solar Combined Cycle plants (ISCC) to be operated worldwide, was commissioned in May 2010. The plant has a capacity of 470 MW, including 20 MW CSP, and was in part financed through a GEF grant of US$ 43 million.
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evening peak demand period, thereby saving precious foreign exchange that would otherwise be needed for importing fuel oil for inefficient diesel generators to service peak supply. Although CSP projects could be considered as high-risk operations, the World Bank supported the leadership role that Morocco was willing to take, given the value of this new technology for the Moroccan electricity sector and the country’s potential contribution to the global public good of developing this technology and lowering its deployment costs.
6. In accordance with this objective, the World Bank and the Clean Technology Fund (CTF), along with other
major donors, announced a large initiative to accelerate CSP deployment. The focus of the US$ 5.6 billion program, which includes a US$750 million contribution from the CTF, was on the MENA region, because its extensive solar resources, combined with its proximity to European electricity markets, made it the most suitable place to accelerate global CSP deployment.
7. Morocco was prepared to take advantage of this major initiative, as the first MENA country to launch the
development of a concrete project. The “Noor Solar Plan” is the cornerstone of the country’s national energy strategy. This plan calls for the development of at least 2000 MW of solar capacity by 2020 (see Box 1), starting with the ambitious Noor-Ouarzazate Complex, to be implemented in four stages, of which the first, Noor-Ouarzazate I - or “Noor I” - was to be one of the world’s largest CSP plants.
8. A dedicated organization was created to implement this vision. The Moroccan Agency for Solar Energy2
(MASEN) was established in 2010 to implement the Noor Solar Plan as a Public-Private Partnership (PPP). The electricity market would however remain structured around the vertically integrated national utility, the Office National de l’Electricité et de l’Eau Potable (ONEE), which operates throughout Morocco’s electricity value chain, including generation, transmission and distribution.
Box 1: The Noor Solar Plan
The Noor Solar Plan (“Noor” means “Light” in Arabic) was launched in 2009 and consists of the development of a minimum of 2000 MW of solar power capacity by 2020, and a total of 6000 MW by 2030. The current pipeline of projects either completed, under construction, or under tendering is detailed below. Project Technology Capacity and Status Noor-Ouarzazate I (“Noor I”) CSP 160 MW, completed Noor-Ouarzazate II (“Noor II”) CSP 200 MW, under construction Noor-Ouarzazate III (“Noor III”) CSP 150 MW, under construction Noor-Ouarzazate IV PV 72 MW, under construction Noor-Boujdour PV 20 MW, under construction Noor-Laayoune PV 85 MW, under construction Noor-Tafilalet PV 120 MW, under construction Noor-Midelt (Phase I) Hybrid CSP/PV 600 to 800 MW, under tendering
2 Later renamed Moroccan Agency for Sustainable Energy (since 2016)
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Theory of Change (Results Chain)
9. The Project’s objectives are closely aligned with Moroccan national priorities as well as the Bank’s MENA
Strategy. National priorities include security of energy supply through diversification of sources and resources,
and optimization of the country’s energy balance. The project is closely aligned with the Bank’s MENA Strategy,
and more precisely its “renewing the social contract” and “regional cooperation” pillars by contributing to an
increased sustainable electricity generation, and pave the way for sustainable energy trade with Europe and
other neighboring countries. The project is also consistent with the MENA Climate Action Plan, announced during
COP22, which supports the energy transition in the MENA region.
10. The project is also consistent with the Bank’s Energy Directions Paper, which postulated that the Bank “is open
to providing support for higher-cost projects with smaller environmental footprints3” contingent on (a) availability
of concessional financing to cover the incremental costs of clean energy projects and (b) strong client demand
and ownership based on close alignment with national development objectives, such as enhancing the security
of supply, the development of new industries, and job creation.
11. The Project’s objectives are also closely aligned with the global community’s need to demonstrate the viability
of alternatives to traditional, fossil-based technologies. The global community was seeking non-carbon
technologies for generating electricity around the clock, to complement the limited number of available options.
CSP had already demonstrated its capacity to supply uninterrupted power, but still had a long way to travel down
the cost curve. Any project designed to help jump-start this process was therefore expensive and high risk, and
hence needed substantial financial support. However, the global rewards to that initial support were potentially
extremely high.
12. The target Output was the completion of the Noor I CSP plant. Project activities were designed to support the
development of a 160-Megawatt (MW) CSP electricity generation facility, along with associated facilities,
including a water access pipeline from a nearby impoundment dam, and power lines for evacuation of the power
to the nearest power transmission substation. This 160 MW plant is the initial stage of the 5004 MW Noor-
Ouarzazate Complex, which itself is the first pillar in the 2000 MW roadmap by 2020. The target Outcomes were
annual electricity generation, and associated reductions in greenhouse gases emissions (carbon dioxide, CO2)
and local air pollution (nitric oxide, NOX, and sulfuric oxide, SOX) avoided through displacement of thermal power
plants (coal, gas, oil).
13. The solar technology selection was based on demand structure. The selection of CSP over PV was made on an
informed basis, as the national power generation expansion planning prioritized technologies able to produce
energy during peak demand evening hours when required, while the alternative would be generating with diesel
generators using expensive imported heavy fuel oil. Although PV solar technology has some critical applications,
CSP has the flexibility to generate electricity when needed to enhance grid reliability, which PV cannot do. Both
technologies had high capital costs (in the order of US$ 6,000 per kilowatt at time of appraisal). In this aspect,
3 Toward a Sustainable Energy Future for All: Directions for the World Bank Group’s Energy Sector (July 2013) 4 It was estimated at appraisal the the Noor Ouarzazate Complex would total a capacity of 500 MW. The actual total capacity of the Complex is 580 MW.
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MASEN considered that each solar project developed must be designed to optimally match the country’s energy
demand profile.
14. The desired outcome was to foster low-carbon development of the energy sector and enhance energy security,
while stimulating large private sector participation and enhance Morocco’s competitiveness. The project set
the first stone of an integrated plan calling for local manufacturing, training, education and research activities,
with an overarching goal to boost economic growth and job creation.
15. The broader, higher level development objective was to contribute to the global effort to reduce the
incremental cost of CSP technology. As costs of this process declined, opportunities would open to access
European green energy markets. The long-term outcome would be the decline in the cost of electricity to the
Moroccan economy, the growth of a domestic manufacturing industry to support the growth of solar power
industry, and the eventual integration of Moroccan (and MENA) energy markets with European energy markets.
16. Critical assumptions included sufficient concessional climate financing and continued State support, and the
medium-term development of green electricity exports to Europe. The overall program anticipated that IFIs
would continue to provide concessional support to the industry, at least until it became internationally
competitive and commercially financeable, and that the Government would continue its efforts to gradually
remove subsidies on fossil fuels and electricity to create a level playing field that would enable renewable energy
technologies to become competitive. Figure 1 below illustrates the results logic of this project.
Figure 1: Theory of Change Diagram
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Project Development Objectives (PDOs)
17. The PDO, as set out in the Project’s Loan Agreements is “to support Morocco in the development of the 500
Megawatt Ouarzazate solar power plant by financing the first phase (160 Megawatt gross) through a public
private partnership (PPP), to increase power generation from solar power and mitigate greenhouse gas
emissions and local environment impact.”
Key Expected Outcomes and Outcome Indicators
18. The following four key performance indicators were selected to measure progress toward PDO’s achievement:
• Installed CSP power generation capacity (MW)
• Electricity generation (GWh)
• Avoided local air pollution (tons of NOx and SOx annually)
• Avoided GHG emissions (tons of CO2 annually)
Components
19. Component 1 – Financing the Initial Investment of Noor I (Appraisal US$ 1,2355 million, Actual US$ 853
million). This component includes a US$97 million loan from the CTF focused on the development and
construction of the first 160 MW phase of the 500 MW Noor-Ouarzazate Complex located 10km northeast of
the city of Ouarzazate, Morocco. Noor I was implemented through a PPP and constructed by the privately-owned
ACWA Power Ouarzazate (APO) that was competitively selected using the World Bank procurement rules. This
plant features a three hours thermal energy storage system to be able to provide dispatchable energy, especially
during the peaking hours at night where electricity is the most valuable to the national power system. Besides
the CTF, several other donors have contributed to the financing of this component: African Development Bank
(AfDB), Agence Française de Développement (AFD), Kreditanstalt für Wiederaufbau (KfW), European Investment
Bank (EIB), and European Commission (EC).
20. Component 2 – Cost Mitigation Mechanism (Appraisal US$ 200 million, Actual US$ 0.45 million). This
component consisted of US$200 million loan from the International Bank for Reconstruction and Development
(IBRD) to support the acquisition of kilowatt-hours produced by the project company to partially cover the
difference in the price at which MASEN would buy the electricity generated by the plant and the price at which
MASEN would sell such electricity to ONEE. This facility was to serve the purpose of a credit line for GoM, to
resort to this concessional financing when necessary, instead of State financing, when economic and fiscal
conditions warrant it.
5 The total project costs appraised in the Datasheet include the cost of Associated Facilities. Component 1 costs in the ICR is focused on the Capital Expenditures for the Plant (US$m 853 actual, US$m 1139 appraised).
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B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)
Revised PDOs and Outcome Targets
21. The PDOs were not revised.
Revised PDO Indicators
22. Following the favorable bidding results, the project’s team proactively restructured in May 2015 to cancel the
IBRD loan dedicated to the second component (see “Revised Components” section below), and
contemporaneously roll it over to the broader Noor-Ouarzazate Complex Project (P131256). An additional PDO
indicator, “Direct Project Beneficiaries” was added to the results framework in this restructuration context.
Revised Components
23. As indicated above, the project’s Cost Mitigation Mechanism (Component 2, US$200 million IBRD), was cancelled
as part of the May 2015 restructuring6, and contemporaneously rolled over to the broader Noor-Ouarzazate
Complex Project (P131256). The new loan provided, and continues to provide the same support as the cancelled
one, but will have more advantageous terms that will allow MASEN to better time its disbursements to meet its
financial needs for the entire Noor-Ouarzazate CSP Complex (Noor I, II and III).
Other Changes
24. Effectiveness extensions. Loan effectiveness date extensions were required given the complexity of the
effectiveness process, including financial close and the execution of a web of several dozens of legal agreements
and opinions involved in establishing the PPP.
25. Changes in Closing Dates. The cancellation of the Bank’s US$200 million loan necessitated several changes in
financial covenants, as well as a change in project closing date. The original closing date of June 30, 2021 had
been based on the expected completion of disbursements from the IBRD loan (Component 2), which were
expected to begin only after the start of commercial operations in 2016. When this component was cancelled,
the Closing Date for the existing CTF loan was moved to June 30, 2017, one year after the planned date of start
of plant operations, to provide some time to assess the Results Indicators on the basis of at least one year of the
plant's actual operations.
Rationale for Changes and Their Implication on the Original Theory of Change
26. The rationale for changes was focused on financial optimization based on a proactive team effort. This change
had no implication on the project and its original theory of change.
6 Contemporaneously, with effectiveness of a new IBRD loan under Noor-Ouarzazate Solar Complex Project (P131256)
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II. OUTCOME
A. RELEVANCE OF PDOs
Assessment of Relevance of PDOs and Rating
27. Relevance of objectives is rated high. The Project contributed to the World Bank Group’s 2014-2017 Country
Partnership Strategy (CPS), as it provided straightforward evidence of the alignment of the PDO to the CPS, tackling two of its three pillars. In fact, the Project contributed to “promoting competitive and inclusive growth” (Results Area 1) and “building a green and resilient future” (Results Area 2), more precisely by increasing renewable energy generation and improving electricity supply reliability.
28. The project is also highly relevant to the World Bank higher level energy sector objectives. The project is also consistent with the Bank’s Energy Directions Paper, as well as the Bank’s corporate objective to support climate change mitigation and sustainability while pursuing the twin-goals of ending extreme poverty and boosting shared prosperity. Also, the Project is in line with the current World Bank MENA strategy and more precisely its “renewing the social contract” and “regional cooperation” pillars, by contributing to an increased sustainable energy service delivery for the citizens of Morocco, which would potentially pave the way to sustainable energy trade with neighboring countries.
29. Relevance of design and implementation is also high. Project design was consistent with the project’s stated
objectives, and changes were considered proactively through restructuring (detailed below) to retain relevance of objectives and design.
B. ACHIEVEMENT OF PDOs (EFFICACY)
Assessment of Achievement of Each Objective/Outcome
30. Efficacy is rated high for the first PDO objective (increase power generation from solar power). The first PDO
indicator – Installed Capacity – was fully achieved as the Noor I 160 MW plant was built following an innovative PPP structure and is operating satisfactorily since commissioning. The second PDO Indicator – Electricity Production – is overachieved, as generation levels exceeded its objectives (400 GWh for the first year of operation in 2016, eight percent above the 370 GWh target). The plant’s output is expected to rise over the first years of operation, gaining from a learning effect, as confirmed by the March 2018 supervision mission of the Noor-Ouarzazate Complex, which established total generation for the second operation year of Noor I at 414 GWh (12 percent above target).
31. Efficacy is also rated high for the second PDO objective (mitigate GHG emissions and local environment impact). The second objective was successfully achieved. These environmental objectives (CO2, NOx and SOx) are intimately connected to the project’s output (its annual production in GWh). The targets for all three of these environmental objectives were similarly overachieved. The plant has been providing operational value to the system, especially for the evening peak demand period (around 20 percent of total plant generation).
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Annual Target Unit Baseline End Target Actual Achieved (percentage)
Electricity production GWh 0 370 4007 108
Avoided local air pollution NOX Tons 0 1,000 1,120 112
Avoided local air pollution SOX Tons 0 4,000 4,240 106
Avoided global GHG pollution Tons 0 240,000 254,800 106
Direct project beneficiaries number 0 310,000 347,780 112
32. At the global level, the Project has had a transformational effect by demonstrating the viability of CSP power
generation in emerging economies and contributing to a significant drop in costs. As the first phase of the world’s largest CSP plant, the Project contributed significantly to scaling-up deployment of CSP globally, and had a strong learning effect that led to verified reductions in the costs, both in capital costs and, by reducing perceived risks, in financing costs. The Noor Ouarzazate complex hosts energy and utility officials from all over the world, and its success has helped to spur new projects elsewhere, including the 700 MW CSP plant to be built at Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, the 150 MW Aurora plant in South Australia, Chile’s 110 MW Atacama solar tower plant, as well as over a dozen 50 to 100 MW pilot plants now being constructed under China’s pilot program. Building in part on the Noor project experience, developers of the Dubai and South Australia projects were able to offer bids of under 10 US cents per kilowatt-hour (kWh). Morocco was, and still is, well suited to shift the global technology cost curve, facilitating its long-term economic viability and making it more attractive regionally and globally.
Justification of Overall Efficacy Rating
33. Overall efficacy is rated high. The operation has exceeded its objectives, and is likely to continue overachieving
the promised outcomes.
C. EFFICIENCY
7 After project close, the team pursued supervision of the Noor I project in the context of the broader Noor Ouarzazate Complex Project, and had the opportunity to confirm the upward generation level trend (414 GWh for year 2017 instead of 400 GWh for year 2016).
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Assessment of Efficiency and Rating
34. Efficiency is rated as Substantial. While the operation did not represent the least-cost solution to attain pure
energy delivery objectives, the Noor I project showed significant capital expenditures reductions over pre-bid expectations, and is generating higher than expected energy output. What was, at the time of appraisal, a borderline project, proved to be much more efficient than anticipated. The Economic Rate of Return (ERR) of 3.4 percent estimated at completion was substantially higher than the 0.9 percent estimated at appraisal. This operation showed to the global community that CSP can become an economically viable clean solution. Underlying assumptions about costs and benefits and other information supporting the analysis is presented in Annex 1.
35. The global public good nature benefit of this project deserves to be analyzed beyond the traditional project-
level analysis. The country’s focus on CSP is a choice with broader implications to the global public interest in developing this technology, which is one of the few carbon-neutral technologies that can provide baseload power. The Project, and the Noor Morocco Solar Program in general, heavily contributed to global knowledge of CSP technology and to lowering its deployment costs, by achieving tremendous global learning curve benefits. As such, a project-level cost-benefit analysis only provides a partial assessment of the economic benefits of a transformational project at an early stage of the technology learning curve, as demonstrated in the case of PV technology.
36. Aspects of Design and Implementation significantly contributed to enhance efficiency, including world-class
international procurement process, and plug & play feature that allow for the development of integrated projects at the lowest tariff based on the most effective risk allocation. This range of design and implementation aspects allowed the bidders to focus on value.
Table 1: Key Assumptions and Results
Unit Appraisal Actual
Assumptions Energy Generation GWh 370 400 Economic Capital Cost US$ million 931 750 Operations and Maintenance Costs US$ million 15.5 15.5 Energy Valuation (peak) US$c per kWh 13.8 13.8 Energy Valuation (off-peak) US$c per kWh 9.7 9.7 Share of Peak Energy Percentage 20 20 Carbon Price (2016) US$ per ton 30 30 Local Environmental Benefits (SO2) US$ per ton 1,380 1,380 Local Environmental Benefits (NOx) US$ per ton 1,370 1,370
Results ERR Percentage 0.9 3.4
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D. JUSTIFICATION OF OVERALL OUTCOME RATING
37. The overall outcome of the project is rated Highly Satisfactory, based on high relevance of the PDO indicators, high overall efficacy of objectives and outcomes, and substantial efficiency. At the time of appraisal, the Bank supported a high-risk project. However, efficiency has surpassed initial expectations: costs were substantially lowered and the output significantly increased above that expected at appraisal. In sum, it was an effective and efficient investment, which has influenced the way the global community sees the CSP technology. It is now considered a best practice project for this technology and has had a powerful global learning effect.
E. OTHER OUTCOMES AND IMPACTS (IF ANY)
Gender
38. The project had positive gender impacts. During construction of Noor I, about 70 local women were employed
directly by the project, despite social and gender norms. The women that were hired held a wide range of positions within the CSP plant, ranging from catering, administration, and quality control to health and safety, welding, and topography. Women also make up about 10 percent of the operations and maintenance staff (7 women). Moreover, in the Ghassate commune surrounding the project (about 1,200 households), where girls and women tend to lag behind men in educational attainment, MASEN built a secondary-level girls’ boarding school (for about 100 students). Women were also involved in the development and implementation of Noor I at both technical and managerial level within MASEN.
Institutional Strengthening
39. The success of the institutional framework introduced by the creation of MASEN led to a broadening of its prerogatives to the broader renewable energy sector. MASEN has rapidly built its capacity to around 150 staff, attracting a highly talented technical staff from both Morocco and abroad. In 2016, the Government extended MASEN’s role and responsibilities to cover all forms of renewable energy8. While currently the portfolio of power generation assets managed by MASEN is dominated by CSP, in the future it is expected to be a more balanced
mix of renewable energies (wind, solar PV and CSP, as well as hydropower).
Mobilizing Private Sector Financing
40. The use of a PPP structure for the Project was a clear governmental commitment to introduce private sector
participation into the country’s renewable energy sector. The Project was structured as a PPP with a competitively selected private sector sponsor. Construction of the plant was financed through 80 percent of debt
8 Except pumped hydropower and grid stability RE facilities
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and 20 percent of equity from a private sector consortium led by Saudi-based ACWA Power International. Private sector financing totaled US$126 million. This was the first large scale solar power PPP in Morocco and more broadly in the MENA region.
41. An innovative risk management strategy. Rather than relying exclusively on commercial financing, MASEN repackaged concessional loans and on-lent them to the project company. This approach reduced the cost of capital and, therefore, the anticipated State support needed to meet the financial requirements of loan repayments for this capital-intensive project. While maintaining the benefits of private sector cost minimization initiative for building and operating the facility, this strategy also allowed for an optimal allocation of risks, with the Government handling most of the financial responsibility of the policy decision to use this capital-intensive technology, while allocating to the private sector, the management of risks related to designing, constructing, operating, and maintaining the plant.
Poverty Reduction and Shared Prosperity
42. The local development strategy MASEN has developed is supporting one of Morocco’s lagging regions. Located
in the lagging Draa-Tafilalet region, which has been adversely impacted in recent years by increasing desertification, the project had a strong positive social development impact on the neighboring communities and the local economy of Ouarzazate. The Project has stimulated local economy, improved the standard of living in the community, improved connectivity of the population living near the plant with road access, and created jobs.
43. There was a concerted effort to use local resources in the construction process. The share of the Moroccan manpower during the construction phase was consistently above 75 percent of total manpower. Workers from local communities, Ouarzazate and Ghassate, formed a significant part of the workforce. At the peak of the construction phase, the total number of the workforce on site has reached more than 1900, among them 1500 Moroccans, including 600 workers from the region. The Operations and Maintenance (O&M) staff is almost exclusively Moroccan (78 out of 80 staff).
44. The project spurred industrial development value in Morocco. The local industrial integration rate, i.e. the rate
of local procurement of goods and services, was higher than expected and reached 32 percent, exceeding the project company’s commitment of 30 percent, and was focused on the solar field collector supports, piling and civil works, and mechanical/electrical erection. Moroccan manufacturers of some components have entered into partnerships with technology providers that provided the basis for upgrading local manufacturing facilities and technical knowhow. Community projects financed through a project designed development fund are improving the quality of life of the surrounding communities and are teaching skills for income generating activities, including sewing for girls, welding for boys, and weaving for women.
Other Unintended Outcomes and Impacts
45. The success of the Project was a key factor in the acceleration of the Moroccan energy transition. At the time
of project preparation, Morocco’s government outlined a comprehensive and ambitious plan to bring the share
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of renewable energy to 42 percent of the total installed power capacity by 2020. The success of the project has encouraged the government to raise the renewable energy target to 52 percent by 2030. This goal seems attainable because the Noor I project has aroused significant interest in the development of Morocco’s renewable energy sector among power projects developers, investors and international financial institutions. The project’s success has also brought about the transformation of MASEN into an agency with a wider scope of responsibilities covering all renewable energy technologies.
46. The success of Noor I symbolized the country’s regional leadership in climate mitigation. The worldwide recognition of the GoM’s intense support for the development of sources of renewable energy was demonstrated through the GoM’s hosting of the 22nd Session of the 2016 Conference of the Parties to the United Nations Framework Convention on Climate Change (COP) in Marrakech. One important outcome of this COP was an agreement, in the form of an official Minutes of Understanding, between Morocco and four European countries (France, Germany, Portugal and Spain) to work together on exchanging renewable energy, which may eventually lead to Morocco exporting solar power to Europe, allowing EU countries to meet their renewable energy objectives at lower cost, while creating at the same time a source of revenues for Morocco.
47. Regional energy planning influence. The Project has influenced the energy planning in the region in that,
following the success of this project, some other MENA countries have developed or are thinking to develop CSP (United Arab Emirates, Saudi Arabia, Tunisia, Lebanon, Jordan and Egypt). MASEN organizes knowledge sharing events by welcoming officials from several countries, such as Chile, the United Arab Emirates and South Africa.
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III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME
A. KEY FACTORS DURING PREPARATION
48. The Moroccan State commitment, combined with MASEN’s leadership, provided an ideal institutional basis
for project success. The State support, materialized through a general convention before project start, and through a specific convention for the Noor I project, was instrumental for the success of this operation. MASEN’s leadership in the technical, procurement and financial aspects of the project provided the ideal conditions for private sector participation, while reducing to the maximum extent possible the overall project’s cost of capital. In this sense, there was an appropriate selection of stakeholders to engage on this ambitious agenda, an appropriate plan for monitoring, and sound readiness for implementation.
49. Uncertainty was a key factor during preparation. The pool of bidders and the project costs were uncertain. At time of preparation, and by design, key project risks could not be fully assessed as the competitive bidding process was not completed and negotiations of key project documents did not take place.
50. The Bank ensured proper project preparation. The Bank had a leading role in the project preparation and was instrumental in bringing in other donors. It identified, facilitated preparation of, and appraised this project to maximize project’s success rate. It also jointly ensured with the African Development Bank the mobilization of the Clean Technology Fund, a heavily concessional financing source, which role was critical in opening markets for potentially transformative technologies, such as CSP.
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B. KEY FACTORS DURING IMPLEMENTATION
51. The Government ensured and continues to ensure a sound implementation phase. The Government of
Morocco provided continuous commitment with adequate regulation and legislation to empower the newly created agency. In addition to mobilizing internal expertise, MASEN employed technical, legal, financial/fiduciary and social and environmental safeguards advisors to provide assistance in supervising the bidding process, as well as for supporting negotiations with the best bidder and for the preparation of the legal documentation. MASEN also put in place an internal organization to monitor the performance of APO’s obligations, including regular reporting on construction progress and capital expenditures, monitoring and overseeing start-up, commissioning and testing of the plant, and reviewing project forecasts and operating budgets. This support was critical for the effective implementation of this first MASEN project.
52. The Bank ensured adequate supervision and reporting. With MASEN’s facilitation, the Bank ensured a proactive identification of opportunities, appropriate follow-up and resolution of implementation, especially on social safeguards.
53. Several factors outside the control of the government or MASEN occurred, with minimal delay impact to the project. A delay of two months was recorded for plant’s initial commercial operation, mostly related to (i) climate-related incidents, including heavy wind storms and heavy rains, respectively in August and November 2014, leading to material damages in the solar field and works interruption, and (ii) dust from the ongoing works in the Noor II and Noor III projects under construction reduced mirror efficiency during the first year of operation. This impact was subsequently mitigated through the purchase of additional cleaning vehicles and an increase in mirror cleaning frequency for the solar field.
IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME
A. QUALITY OF MONITORING AND EVALUATION (M&E)
M&E Design
54. Monitoring and Evaluation (M&E) design was adequately structured. The operations’ theory of change was
clear, and adequate indicators were identified to monitor progress toward the PDOs using effective M&E arrangements after plant’s operation, such as plant output (annual GWh), project beneficiaries (of which female – added at project restructuring) and associated reduction (savings) in GHG emissions and local environmental pollutants.
M&E Implementation
55. M&E implementation was sound. The Bank ensured eight supervision missions throughout the Bank’s lifetime of
the project between December 2011 and June 2017, and continues to supervise the project throughout the 2014 Noor-Ouarzazate Complex operation. These supervision missions reported on progress towards project
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completion. Their main focus was on compliance with technical, procurement, financial, and safeguards aspects. MASEN’s facilitation was also instrumental, with clear, comprehensive, and effective supervision reports. Data collection was adequate for both PDO and intermediate indicators.
M&E Utilization
56. M&E Utilization was also adequate. M&E data and performance were used to inform project management and
decision-making, including on the development of the subsequent Noor projects, also financed by the Bank. M&E utilization was unanimously considered to be excellent by all the IFIs participating in the project. Moreover, lessons learned from M&E were adequately disseminated to the global community through conferences and workshop co-organized by the World Bank, the Clean Technology Fund, and MASEN.
Justification of Overall Rating of Quality of M&E
57. Overall rating of quality of M&E is High. There were no shortcomings in the M&E system’s design,
implementation, or utilization. The M&E system allowed to assess the achievement of the objectives and to test the links in the results chain. M&E findings were disseminated and used to inform future projects with MASEN.
B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE
58. Due to its size, scope and complexity, the Project triggered Operational Policy (OP) 4.12. However,
project implementation did not involve any physical resettlement, and no adverse socio-economic impact, including through land acquisition has been recorded. The land for the Noor-Ouarzazate Solar Complex was unoccupied, arid scrubland unsuitable for agricultural or livestock activities. The 3,043 ha of land that MASEN acquired for the whole complex accounts for about 5 percent of the land owned in common by the local communities. The land used for Noor I accounted for 15 percent (450 ha) of the total land acquired.
59. The purchase of this arid unoccupied land was implemented through a willing-buyer, willing-seller arrangement. The acquisition was carried out following Moroccan standard procedures for similar types of voluntary transactions between a local community and a public agency. Land Acquisition Plans (LAPs) were prepared and published in July 2011 and May 2013.
60. The funds made available by the purchase of this land have been used for much needed community
projects with a proper grievance redress mechanism. Under Moroccan law, compensation for MASEN’s acquisition of this land is required to be administered by the Rural Affairs Directorate of the Ministry of Interior (DAR) for the benefit of the communities involved. Implementation of this program was included as a legal covenant in the Bank and CTF respective loans. The land sale provided US$3.2 million for the relevant collective communities to finance and implement community projects on a demand driven basis. These communities have elected to use the funds for social development
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projects, including irrigation improvement, potable water supply, road infrastructure, health infrastructure and equipment, and education infrastructure and equipment. Several Bank supervision missions confirmed that this process was being effectively implemented, and confirmed beneficiaries’ satisfaction. As of March 2017, 83 percent of the total budget has been disbursed, which represents more than the land share attributable to the Project (15 percent).
61. In addition, MASEN has, on a voluntary basis, also conducted a wide range of additional community
projects. MASEN and the project company also identified and implemented their own voluntary demand driven community projects. These projects range from provision of traveling health clinics, to training and youth and gender equality-linked activities.
62. The Project also triggered OP 4.01. The environmental assessment concluded that since the project was implemented on semi-desert scrub land, which had no significant alternative use, there were no significant environmental issues related to land acquisition and use. The project actually had a positive environmental impact because the environmental impacts of the underlying solar facility are significantly lower than an alternative conventional fuel power plant. Most importantly, the Project reduced air pollution as it is not emitting GHG or other local pollutants. The environmental matters related to air quality, soil, noise and vibration, waste management, wastewater quality, use of chemicals, ecology, and traffic were monitored by MASEN and reported on in the semiannual supervision missions. All were at acceptable levels.
63. A safe and effective work environment was successfully implemented and supported by both
proactive and reactive monitoring. MASEN ensured a sound Health, Safety & Environmental (HSE) policy compliant with international standards, which performed well in the context of a long and complex construction process in a remote and harsh environment. MASEN also designed and adopted a Grievance Redress Mechanism (GRM) that has met the needs of all concerned stakeholders. It includes: (i) an internal communication process, designed to listen to, inform, and train the workers on site, (ii) an External communication process designed to help workers on the site channel anonymously their constraints and concerns; (iii) a external communication process designed to maintain contact with the 28 concerned communities, and to provide them with means and channels to express their concerns and needs. This GRM is fully consistent with Bank requirements.
64. Fiduciary Compliance. The Bank received comprehensive reports semi-annually, covering both technical and financial aspect of project implementation. Audits have been carried out annually, and Auditor’s opinions were issued without any condition.
C. BANK PERFORMANCE
Quality at Entry
65. Quality at entry was Moderately Satisfactory. The Bank identified, facilitated preparation of, and appraised this
project to maximize project’s success rate. It had a leading role in the project preparation and was instrumental in bringing in other donors. During project preparation, donors held joint missions and agreed to align procurement, safeguards and financial management procedures on those of the Bank. The project team was also
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instrumental in mobilizing technical assistance support, such as the Energy Sector Management Assistance Program (ESMAP), as well as in supporting MASEN’s innovative two-stage procurement that was accepted by all donors.
66. Donor coordination. To strengthen their coordination, all co-financiers, with the leadership of the Bank, agreed to: (i) develop a common list of effectiveness conditions for disbursing their loans, (ii) recruit a common consortium of legal and technical advisors to review the project’s contractual documents and (iii) harmonize their procedures and their interaction with MASEN.
67. Design of the Project’s Cost Mitigation Mechanism was a moderate shortcoming. At appraisal, the Bank’s conservative financial analysis assumed that the State financial support to the project would have to be much larger than what resulted from the bidding process. A sensitivity analysis was implemented during appraisal, and its impact on economic rate of return was assessed. However, the potential impact on disbursements under this component was not adequately assessed. Nevertheless, the design of this mechanism is deemed appropriate for the scenarios considered realistic at time of appraisal.
Quality of Supervision
68. Quality of Supervision was Satisfactory. The Bank played a significant role in (i) ensuring the adequacy of the
technical specifications of the plant and infrastructure in the bidding documents and (ii) leading a proactive restructuring based on the favorable bidding results. Quality of performance reporting was deemed satisfactory and supervision inputs and processes were adequate. The eight supervision missions between December 2011 and June 2017 were effective in monitoring project progress, with a focus on compliance with technical, procurement, financial, and safeguards aspects. Moreover, having an energy staff based in Morocco facilitated day-to-day implementation support. Minor shortcomings included slight discrepancies in Implementation Supervision Reports (ISR) data reporting for some PDO indicators (generation level and climate benefits).
Justification of Overall Rating of Bank Performance
69. Overall Bank Performance was Moderately Satisfactory. Despite the moderate shortcoming of Cost Mitigation
Mechanism’s design, the Bank’s efforts had a significant impact towards the success of this highly innovative project. This recognized impact has nurtured a close cooperative partnership between the World Bank and MASEN, as witnessed by the subsequent energy sector operations financed by the Bank.
D. RISK TO DEVELOPMENT OUTCOME 70. Risk to Development Outcome is negligible. The risk is considered negligible, given the strong institutional
support, including MASEN’s ownership of the Noor Solar Plan, as well as the robust project’s technical and financial design. There is a minor risk related to maintaining the availability of water for cleaning the mirrors providing steam for the turbines, However the NOOR-I water use was set to represent only 0.7 percent of the regular dam volume, and required less in reality (92 percent of the expected water use in 2017). The dry cooling technology used in the subsequent projects (Noor II and III) is expected to further limit water demand for the Noor-Ouarzazate Complex.
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V. LESSONS AND RECOMMENDATIONS
71. Adopting a balanced public-private partnership approach reduced the risk premium of the project by shouldering several risks usually taken by the private sector in standard PPPs, including provision of common infrastructures, as well as financial and technological risks. The main impact was to provide a comfortable investment climate for the private sector, given the high technological risk inherent to the project.
72. Innovative project structuring leads to an effective risk allocation approach to enhance efficiency and achieve lower costs. The operation showed the importance of developing integrated projects at the lowest tariff possible based on an effective risk allocation scheme and a streamlined tender process by (i) reducing the costs of tenders to developers through transparence of the tender processes and clear procurement rules, and the availability of background technical, social and environmental studies, and (ii) reducing the costs of funding for the project was critical for its economic success by securing the financing from several IFIs at concessional rates, enabling MASEN to repackage the funding and on-lending it to the project company, and informing the bidders of the terms and conditions of the loan at the start of the tender process. The parastatal nature of MASEN allowed such structuring which positively impacted overall implementation.
73. Strong commitment of the Government is a prerequisite for energy transitions. The commitment of the Government of Morocco, combined with MASEN’s leadership, provided the right institutional basis for this project. Government support, materialized through a general convention before project start, and through a specific convention for this project, was instrumental for the success of Noor I. The Government support mechanism was maintained for the subsequent CSP projects (Noor II and III). Moreover, this type of project requires the commitment of many governmental departments. MASEN ensured proper coordination, but has room for building more fluid relationships to further increase efficiency and to avoid unnecessary delays.
74. Securing concessional financing was a key success factor. The role of heavily concessional financing, such as the Clean Technology Fund was critical in opening markets for potentially transformative technologies such as CSP.
75. Local industrial success can be considered as a direct consequence of non-mandatory local content
requirement. Freedom in contractual arrangements for the contractor has been an essential element to reduce technology price and for developing a competitive local industry. This experience shows that imposing minimum mandatory local content levels is not indispensable for local industrial development.
76. Classical economic analysis is of limited relevance when evaluating projects designed to meet strategic national
objectives. The strategic objective was to shift Morocco’s future electricity generation from dependence on imported fossil fuels to one based on abundant, locally available, renewable solar energy. The problem is that it is difficult to incorporate the value of long-term, strategic objectives in a way that they can be incorporated into a classical economic analysis.
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.
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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS
A. RESULTS INDICATORS A.1 PDO Indicators
Objective/Outcome: Financing
Objective/Outcome: To finance Noor Ouarzazate I through a public private partnership (PPP), to increase power generation from solar power and mitigate greenhouse gas emissions and local environment impact
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Generation Capacity of Renewable Energy (other than hydropower) constructed
Megawatt 0.00 160.00 160.00 160.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Generation Capacity of Renewable Energy constructed-Solar
Megawatt 0.00 160.00 160.00 160.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Comments (achievements against targets): Target achieved
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Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Direct project beneficiaries Number 0.00 0.00 310000.00 334800.00
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Installed capacity of CSP power generation
Megawatt 0.00 0.00 160.00 160.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Comments (achievements against targets): Target achieved
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Electricity production Gigawatt-hour (GWh)
0.00 370.00 370.00 400.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Comments (achievements against targets): Target overachieved by 8%
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Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Avoided local air pollution (NOx)
Metric ton 0.00 1000.00 1000.00 1080.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Avoided local air pollution (SOx)
Metric ton 0.00 4000.00 4000.00 4200.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Comments (achievements against targets): Target overachieved by 8%
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Avoided global GHG pollution Metric ton 0.00 240000.00 240000.00 260000.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Comments (achievements against targets): Target overachieved by 8%
A.2 Intermediate Results Indicators
Component: To finance Noor Ouarzazate I through a public private partnership (PPP), to increase power generation from solar power and mitigate greenhouse gas emissions and local environment impact
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
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PPP acceptable to the World Bank and co-financiers
Yes/No N Y Y Y
17-Nov-2010 30-Jun-2015 12-Jun-2013 12-Jun-2013
Comments (achievements against targets): Achieved
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Transaction financial close Yes/No N Y Y Y
17-Nov-2010 30-Jun-2015 12-Jun-2013 12-Jun-2013
Comments (achievements against targets): Achieved
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Beginning construction of the plant
Yes/No N Y Y Y
17-Nov-2010 30-Jun-2015 13-Jun-2013 13-Jun-2013
Comments (achievements against targets): Achieved
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Commissioning of the plant Yes/No N Y Y Y
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17-Nov-2010 30-Jun-2015 30-Jun-2017 20-Jan-2016
Comments (achievements against targets): Achieved
Indicator Name Unit of Measure Baseline Original Target Formally Revised
Target
Actual Achieved at Completion
Private Capital Mobilized Amount(USD) 0.00 0.00 120000000.00 168000000.00
17-Nov-2010 30-Jun-2015 30-Jun-2017 30-Dec-2016
Comments (achievements against targets): Achieved
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B. KEY OUTPUTS BY COMPONENT
Objective/Outcome 1: Increase power generation from solar power
Outcome Indicators 1. Direct Project Beneficiaries 2. Installed capacity of CSP power generation 3. Electricity generation
Intermediate Results Indicators
1. PPP acceptable to the World Bank and co-financiers 2. Transaction financial close 3. Beginning construction of the plant 4. Commissioning of the plant 5. Private Capital Mobilized
Key Outputs by Component (linked to the achievement of the Objective/Outcome 1)
1. Noor I plant constructed and in operation
Objective/Outcome 2: Mitigate GHG emissions and local environment impact
Outcome Indicators 1. Avoided global GHG pollution (CO2) 2. Avoided local air pollution (SOx) 3. Avoided local air pollution (NOx)
Intermediate Results Indicators
Key Outputs by Component (linked to the achievement of the Objective/Outcome 2)
1. Noor I plant constructed and in operation
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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION
A. TASK TEAM MEMBERS
Name Role
Preparation
Silvia Pariente-David Task Team Leader
Manaf Touati Energy Economist
Andrea Liverani Social Safeguards Specialist
Soukeyna Kane Financial Management Specialist
Gael Gregoire Environmental Safeguards Specialist
Salim Benouniche Procurement Specialist
Supervision/ICR
Manaf Touati, Moez Cherif Task Team Leaders
Abdoulaye Keita Procurement Specialist
Laila Moudden Financial Management Analyst
Arbi Ben Achour Social Safeguards Specialist
Robert A. Robelus Environmental Safeguards Specialist
Sameh I. Mobarek Team Member
Jean-Jacques Verdeaux Team Member
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B. STAFF TIME AND COST
Stage of Project Cycle Staff Time and Cost
No. of staff weeks US$ (including travel and consultant costs)
Preparation
FY11 66.403 457,370.88
FY12 24.147 181,563.17
Total 90.55 638,934.05
Supervision/ICR
FY12 12.681 78,187.02
FY13 68.109 379,050.35
FY14 31.048 157,365.52
FY15 5.398 64,510.47
FY16 0 14,150.87
FY17 .775 6,731.15
FY18 .020 133.30
Total 118.03 700,128.68
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ANNEX 3. PROJECT COST BY COMPONENT
Components Amount at Approval
(US$M) Actual at Project
Closing (US$M) Percentage of Approval
Financing the Initial Investment
97 97 100 percent
Cost Mitigation Mechanism
200 0.47 2.3 percent
Total 0.00 97.00 0.00
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PROJECT CAPITAL EXPENDITURE COSTS (APPRAISED vs. ACTUAL) In US$ million
Appraisal Actual
DEBT 877 685 Agence Française de Développement (AFD) 133 103 Kreditanstalt für Wiederaufbau (KfW) 133 133 African Development Bank (AfDB) 265 133 European Investment Bank (EIB) 133 103 Clean Technology Fund (CTF) * 197 197 Neighborhood Investment Facility (NIF) 17 17 Total debt 860 685
At appraisal, the baseline economic returns of Noor I were negative and hence unsatisfactory. Even when environmental benefits were included, the baseline estimate of the Economic Internal Rate of Return (EIRR) was 0.9 percent. Nevertheless, the project was financed on the basis of its global learning curve benefits, and as the first stage of a transformative long-term renewable energy program for Morocco, whose benefits are not captured by a conventional cost-benefit analysis. Actual costs and performance exceeded expectations at Appraisal. Annual power generation is 400 GWh instead of the expected 370 GWh, and actual economic capital expenditure was $750 million rather than $931 million.9 The table below compares the PAD estimate of returns under the original assumptions with the revised actual ones. These two positive developments resulted in a higher Economic Internal Rate of Return: 3.4 percent instead of 0.9 percent expected at appraisal.
9 The completed financial cost is $840 million. From this we subtract financial fees and other items not included in the
economic CAPEX.
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Table Detailed Key Assumptions and Results Unit Appraisal Actual Actual - High SVC
Assumptions Energy GWh 370 400 400 Economic Capital Cost US$ million 931 750 750 Operations and Maintenance Costs US$ million 15.5 15.5 15.5
Discount Rate Percentage
10 percent
10 percent 10 percent
Energy Valuation (peak) US$c per kWh 13.8 13.8 13.8 Energy Valuation (off-peak) US$c per kWh 9.7 9.7 9.7 Share of Peak Energy Percentage 20 20 20 Carbon Price (2016) US$ per ton 30 30 73 Local Environmental Benefits (SO2) US$ per ton 1,380 1,380 1,380 Local Environmental Benefits (NOx) US$ per ton 1,370 1,370 1,370
Results NPV US$ million -500 -317 -235 ERR Percentage 0.9 3.4 5.4 Impact of the Social Value of Carbon. At the time of appraisal, the generally accepted social valuation of carbon was $30/ton (constant in real terms). The new World Bank Guidance on the Social Value of Carbon (SVC) provides for significantly higher values, together with the requirement that the economic returns be calculated for both the high and the low valuations10. Using the high SVC valuation (US$73 in 2016, increasing over time), the EIRR increases from 3.4 percent to 5.4 percent (see scenario “Actual – High SVC”). At the 5 percent discount rate used in the subsequent Noor II appraisal (based on Morocco's actual opportunity cost of capital), and in ONEE's own recent planning studies, the economic returns for such a project whose main rationale is carbon emission reduction are satisfactory. Conservative energy valuation. The benefits are somewhat higher when the Long Run Marginal Cost (LRMC) rather than the off-take price is used as a basis for benefits estimation: At the date of appraisal the LRMC was assessed at 15 US$ cents/kWh, with the EIRR increasing from 0.9 percent to 2.2 percent. However, this was based on much higher valuations of fossil fuel prices than are expected today: plant gate price for coal was estimated at $150/ton, fuel oil at $450/ton, and natural gas at $10/mBTU: all are now at much lower levels. While there is no recent estimate of ONEE's LRMC (which is highly dependent on the discount rate used), there is no reason to believe that the current value of LRMC (that is also heavily influenced by the cost of thermal peaking power) would be anywhere near 15 US$ cents/kWh. Consequently, we report the ICR re-estimate of returns at the actual ONEE off-take price.11
10 World Bank, Guidance note on shadow price of carbon in economic analysis, 12 November 2017. This values CO2 in 2020
at $40/ton for the low, and $80/ton in the high case, increasing thereafter at 2.25 percent per annum in real terms.
11 Strictly speaking, the off-take price is not an economic price at all, but is simply a convenient transfer price, since does not meet the criterion as a competitively market-determined price. Indeed, the more recent economic appraisal of Noor III calculates the levelised cost of CCGT, based on the current border price forecast for LNG, in the range of 8-11 USc/kWh, depending on the extent of capacity credit. The ONEE off-take price is 13.8 US$c/kWh for peak power, and 9.7 US$c/kWh for off-peak power.
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In summary, the economic returns at completion are satisfactory. Substantially lower capital costs, higher energy production, lead to significant increases in economic returns, from 0.9 percent to 3.4 percent under unchanged assumptions for the power benefits and for the social value of carbon. These improvements in efficiency are offset by the lower fossil fuel costs of the thermal counter-factual, but even under worst case conditions of continued low fossil fuel prices, the EIRR is substantially above that estimated at appraisal.
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ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS
The following comments were received on March 19th, 2018 and were incorporated in the final version of the
ICR.
• Context: Add the rationale on the need for CSP and related storage as peak in Morocco after sunset.
• PDOs: Clarify nature of the Component 2 actual disbursement.
• Efficacy Section: Clarify direct beneficiaries’ indicator calculation.
• Other Outcomes and Impacts – Gender: Add the gender impact captured at MASEN’s level (women involved in the development and implementation of Noor I).
• Other Outcomes and Impacts – Mobilizing Private Sector Financing: Clarify that some of the financial responsibility is imputable to the private sector.
• Key Factors during Implementation: Mention MASEN’s internal expertise in addition to advisors.
• Bank Quality of Supervision: Provide examples of minor shortcomings.
• Overall Bank Performance: Further explain MS rating.
• Risk to Development Outcome: Qualify risk related to water availability as minor given negligible risk to development outcome
