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Financing solar projects in the Middle East

Investors' views on solar as an investment still to be revealed.

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Nada: Investors will want to see prospects for a return on investment.
Nada: Investors will want to see prospects for a return on investment.

Securing financing for solar projects could prove challenging for an industry still in its infancy in the Middle East.

Observers will be looking at Jordan where the next step for the companies involved is to reach agreements with lenders. 

However Ahmed S. Nada, First Solar’s vice president, Middle East, does not believe the lack of precedent will be a significant barrier to getting projects off the ground.

“There are several experienced international and regional lenders operating in the region and, as you can imagine, they will only show interest in projects that are truly bankable and will deliver a profitable return on investment.

“Experienced lenders will consider the entire package – the viability and cost of a project, the reliability of the technology being used, warrantees and guarantees, and, most importantly, the actual energy that the plant will produce, as opposed to nameplate capacities.”

“In the Middle East, the reliability of the technology and actual energy produced is directly impacted by environmental conditions such as heat, humidity and dust.

“Most lenders in the renewable energy space understand this and may view some technologies more favourably than others, which in turn makes some projects more bankable than others.”

Browning Rockwell, executive director of Sasia, says: “Finance for any project in the Middle East is always a challenge. Solar is a new area for most banks.

“They will need to establish a level of comfort with the risk profile of solar in the region. Once a track record is established solar finance will become a mainstream activity.

“IPP’s have developed for traditional power generation in the region for many years so solar will not be a major leap forward.

“Country risk profile and project variables will be different for each country – there is no one size fits all.

“A baseline solar finance model will emerge for the region but each project and country will have a different variation."

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