Solar energy has arrived in a significant way and is powering new electricity generation projects large and small. There is an increasing need for mid- to large-scale consumers to consider how they can mitigate some of the rising costs of utilities in the region. This is coupled with a growing imperative for many institutions to demonstrate a commitment to sustainability as part of their ESG framework. Solar energy provides a possible solution to both of these challenges.
Entrepreneurs, corporates and fund managers are getting into the market by proposing rooftop schemes with relatively small capital investment requirements. Financial modelling is arguably more important than technical expertise (which can be contracted in). Such schemes often involve a structure along the following lines:
- The developer will establish a single investment vehicle for multiple projects.
- An EPC framework contract will be prepared for design, procurement and installation on multiple rooftop sites.
- A framework operation and maintenance contract will be prepared to operate and maintain the rooftop generators, metering and deal with customer billing.
- The developer will sign a form of power purchase agreement with individual customers who will receive power from the rooftop generator.
- The customer will pay to the developer a monthly amount which compensates the developer for its costs but is at a discount to the tariff for electricity from the grid.
The basic suite of contracts for these schemes requires a sophisticated and fully integrated approach which allocates responsibility and risk to the contractors who can manage the risks, leaving the developer to manage the financial modelling and, of course, find and build a customer base.
We have recently acted for electricity distributors (DEWA and EWA) on huge schemes, such as the Mohamed bin Rashid Solar Park V, a 900MW scheme in Dubai, UAE and the smaller but impressive and challenging Askar 100MW project in Bahrain that will be built over a landfill project. These are complex transactions which follow the conventionally fuelled IPP/IWPP models with which we have been involved since the very first independent power project in the Middle East (signed in 1994). The principles are being adapted into the scaled-down rooftop solar market.
We are legal experts in the power generation sector with market-leading credentials. We would be delighted to hear from would-be developers and help them initiate investments and develop their suite of contracts to participate in this exciting market.
