Algeria: Launch Of The Solar 1,000 MW Call For Tender

The Algerian Ministry of Energy Transition and Renewable Energies launched the “Solar 1,000 MW call for tender on 23 December 2021 (the “Call for Tender“). This Call for Tender aims to implement the first installment of the 15,000 MW of electricity generation capacity based on renewables that Algeria aims to achieve by 2035, as provided for in the multi-annual program for the development of renewable energy and energy efficiency adopted in February 2020.

National and foreign investors have until 30 April 2022 to submit their technical and financial offers.

The new Société Algérienne des Énergies Renouvelables Spa (“SHAEMS“) (50% owned by Sonatrach and 50% by Sonelgaz) has been entrusted by the Minister of Energy Transition and Renewable Energies with processing the Call for Tender. SHAEMS will also take a stake, either alone or in association with public and/or private companies, in each project company. Electricity generation is not included in the list of regulated sectors for which the 49/51 rule applies (i.e. obligation to associate a national with 51% or more of the capital). The amount of SHAEMS' participation may therefore be lower than 51% of the project company's capital without a minimum level of participation being fixed (subject to the review of the Call for Tender terms of reference).

The decree no.17-98 dated 26 February 2017 detailing the call for tenders procedure provides that the construction of the transportation facilities for the energy produced (i.e. the connection line to the grid) will remain the responsibility of the investor. The construction and operation costs must therefore be factored into the price offered by bidders.

Each candidate can bid for one or more lots of 50 to 300 MWp with a combined capacity not exceeding 300 MWp.

If awarded, a power purchase agreement will be concluded for a period of 25 years with a “designated buyer” (whose identity is not known at the time of writing).

The selected sites are the wilayas of: Béchar, Biskra, Djelfa, El-Bayadh, El-Oued, Ghardaia, Laghouat, M'sila and Ouargla for a total area of 8,000 ha.

The terms of reference of the Call for Tender (which should include criteria detailing how the bids will be evaluated) are not yet available as certain elements are still under discussion. Bidders will be required to pay 1,000 USD to access the terms of reference.

The technical and financial bids will be accompanied by bid bonds of an amount of 500,000 USD for international investors and in local currency for domestic investors of 70 MDZD (approximately 500,000 USD) (or pro rata in the case of joint bids by domestic and international investors). The bid bond will be replaced by the successful bidder with a development bond worth 10% of the total capital expenditure at financial close which shall remain in force until the plant is commissioned. These bonds must be issued by banks domiciled in Algeria.

The successful implementation of the Call for Tender will serve as a strong indicator as to whether Algeria will succeed in its energy transition plans, following the example of its neighbor Tunisia, whose first 5 projects under the concession regime for a total capacity of 500 MW have just been approved by decree.¹

The Algerian energy sector is currently based exclusively on hydrocarbons, which account for almost 99% of the country's electricity production.² However, these resources are facing a depletion of reserves and a stagnation of production, while Algeria is facing a rapid increase in national energy consumption, which is severely impacting export revenue.

Against this backdrop and the favourable rates of solar insolation (2,000 to 3,900 hours per year³ and a daily irradiation (PSH) of 3 to 6 kWh/m² ⁴), unlocking Algeria's renewable energy opportunities will be key in addressing energy transition goals and the diversification of Algeria's energy mix.

Footnotes

1 Ministry of Industry, Mines and Energy, “Régime des concessions”, https://www.energiemines.gov.tn/fr/themes/energies-renouvelables/projets-et-programmes/regime-des-concessions/

2 Ministry of Energy of the People's Democratic Republic of Alergia, “Bilan Énergétique National” 2019, p.9.

3 K. Smaili, N. Kasbadji Merzouk, M. Merzouk, “Atlas Climatiques de l'Irradiation Solaire Journalière en Algérie”, Unité de Recherche Appliquée en Énergies Renouvelables, 5ème Séminaire International sur les Énergies Nouvelles et Renouvelables, 24-25 October 2018, p.1.

4 MR. Yaiche, A. Bouhanik, “Atlas Solaire Algérien”, Centre de Développement des Énergies Renouvelables, 2002.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.