Local content and renewable energies in Algeria

Currently, the Algerian authorities are preparing a call for tender for the realization in project finance of several PV solar parks with a total capacity of 1,000 MW divided into capacities between 50 and 200 MW per unit.

These tenders will be carried out by the new Ministry of Energy Transition and Renewable Energy ("MTEER") in accordance with the investor tendering procedure recently introduced by Executive Decree No. 17-98 dated February 26th, 2017, as amended.

This procedure called “tender to investors” (“appel d’offres à investisseurs”) is reserved for major projects, i.e. projects where the annual volume of energy produced exceeds 20 GWh. [1]

The tender will be carried out under the responsibility of the MTEER and is aimed at concluding a power purchase agreement covering the conception, supply of technical equipment, construction and operation as well as the sale of the energy generated to Sonelgaz for a period of up to 25 years[2]

 

 

1. The requirement of an industrial project

 

Algeria emphasizes that the implementation of a renewable energy production site should go along with the existence of an industrial project. Consequently, the participation in the tender shall in principle conditional on the implementation of an industrial project.

This kind of requirement has also been established in other countries, however, in its regulations, the Algerian legislator included the possibility for the MTEER and the Ministry of Industry to select a state-owned company with which the applicant must work together either in the form of a consortium or within the framework of a joint undertaking for the industrial project.[3]

The implementation of these regulations could prove difficult but feasible. It seems conceivable that the relevant ministries could draw up a list of Algerian industrial players in the renewable energy sector, based on the work of the Commissariat aux Energies renouvelables et à l'efficacité énergétique (Renewable Energy and Energy Efficiency Office), whose task is to define a strategy for the renewable energy industry and support the development of companies in this sector in Algeria. [4]

Applicants would subsequently have to form a consortium with these operators or some of them in order to have their offer admitted.

However, it is currently too early for such measures, as the local industrial structure does not yet provide the ministries with the means to select relevant players, subcontractors or suppliers to prescribe them as partners to the candidates applying as developers for solar projects with potentially high capacities. For this reason, the decree leaves the MTEER and the Ministry of Industry the option not to include this condition.

It therefore will probably not be included in the next tender, for which the MTEER only indicates that bidders will receive bonuses if, as part of their offer, they also include the manufacturing of certain equipment or provide certain services in Algeria.

 

2. The requirement of Algerian shareholders in the project company

 

However, tenders to investors seem to require the MTEER to designate one or more state-owned companies to participate in the construction and operation of the plant,[5] without specifying a concrete percentage in terms of shares.

This means that an Algerian state-owned company must be a shareholder in the project company, which is responsible for the development of the plant, during the construction phase and - after commissioning - also during the operating phase.

The level of the required participation shall not be 51%, as the renewable energy sector is not qualified as a strategic sector requiring an Algerian majority shareholding.[6]

In the next tender, if public announcements are to be believed, the state-owned company in question will be Shaems, a joint subsidiary of Sonelgaz and Sonatrach established in April 2021, with a maximum stake of 25%.

This approach seems reasonable in so far as the tender documents contain not only the power purchase agreement but also the agreement between the shareholders of the future project company, so that the rights and powers on the Algerian side, which is both customer and shareholder, can be taken into account from the outset.

 

 

[1] See Article 24 of Executive Decree No 17-98.

[2] See Articles 5 and 11 of Executive Decree No 17-98. 

[3] See Articles 2 and 5 of Executive Decree No 17-98.

[4] See Executive Order No. 19-280 of October 20, 2019.

[5] See Article 5 of Decree No 17-98.

[6] See Article 50 of Law No 20-70 and Decree No 21-145 of 17 April 2021.

 

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