Recording and presentations: The Impact of COVID19 on the renewable energy industry in the MENA Region

11 June 2020

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Automated transcription (it may contain errors)

Unknown Speaker 0:11
Hello, everyone, so well, if you have come to see the webinar on the invader of COVID-19 on the renewable energy industry in the manoeuvre region, you have come to the right place. So thank you for joining us today. We’ll wait for a minute or so to make sure that everyone is here to hear our three experts who are going to share their views on what’s going to happen in the manoeuvre region. Now, you know, and how things are likely to evolve after the COVID-19 Christ, well, you know, in the evolving COVID-19 crisis so just to let you know that we will send you an email, we’ll be recording the video recording On Face webinar, and you’ll also get the presentation slides. So you’re likely to get back, you know, probably early next week. I know that’s normally one of the common questions you get. So, the other thing I would like to tell you is that you This is your chance to ask questions. So even though you’ll get the recording Stay with us, because if you look at the toolbar, which is at the bottom of your screen, you’ll see that you’ll have a questions and answers box and you can send your questions, wills or presentations are being delivered. And then we’ll choose some of them and talk about them at the after the presentations are done.

Unknown Speaker 1:53
Also, we have a kind of like a tradition here from here at APA

Unknown Speaker 2:00
inside and we essentially we

Unknown Speaker 2:04
used a chat box do, we encourage you to use the chat box to tell us where you’re joining us from? So I’m hearing in Madrid with my colleague, Anna, who you can’t see, but she’s bearing back on making sure that everything is working well. And right, so let us know where you’re joining us from. So I think the minute of courtesy for the boys who are lagging behind has passed. So we’ll start the webinar right now. So once again, welcome to the webinar, the aim of COVID-19 on the renewable energy industry in the matter of region. So I’ll get we’ll have three presentations today and we’ll get the speakers to introduce themselves. So appetite review Mind briefly introducing yourself with a couple of just very briefly.

Unknown Speaker 3:06
Yes, sure. Thank you very much, Carlos. And thank you very much for inviting me to participate to this webinar. So, my name is Ahmed Mizzou. I’m a senior legal counsel at Amir power, a power energy developer based in Dubai.

Unknown Speaker 3:23
Thank you very much. Kathy, could you please introduce yourself briefly and get ready to present?

Unknown Speaker 3:32
Yes, absolutely. Thank you so much, Carlos. First of all for having invited me to present in to talk at this seminar for such an interesting topic. And a hot topic for us so obviously, so my name is Kasia Krishna Riva. I work as principal counsel and as a global sector lead for environmental and municipal infrastructure in the legal department or the International Finance Corporation. I’m based in Dubai. But I do work globally. And I do see the impact on the projects also globally around the world.

Unknown Speaker 4:07
Thank you. Thank you very much. gaffa and nav could stop sharing the initial screen. So Kathy can start presentation. Thank you very much. So well over over to you, Kathy. So, what’s what’s in store for us on further renewable energy industry? Given the COVID-19 crisis?

Unknown Speaker 4:31
Yeah. Thank you so much, Carla. So, yes, so I wanted to make it as as interactive as possible, even though we are making it virtual so that I can set the stage for further presenters and further discussions. And I think the interesting part for us today is that in this group, we have representatives of the developers of the lenders and on both sides of the investors and on both sides. We do see also how the government’s are behaving in this crisis. So that’s, that’s I think that’s, that gives us many perspectives, on lessons learned and on things that we’re taking forward. So the way you know, the way I wanted to structure the discussion today on my end is basically to first touch on the things that we see happening and issues that we see popping up in different countries in the region, as we have been observing during the past couple of months, the impact of the COVID-19 over the power industry, and then maybe spend a little bit more time talking about what do we see happening that could affect the developers situation? Where do we see government’s coming up? And what do we see government’s bringing up as part of the consequences of the crisis impact? And also, you know, I wanted to just maybe give a couple of pointers on what are the particular concerns that the lenders are now taking forward? With respect to the new projects that we’re now working on, given the implications of the crisis. So with that, let me first sort of, you know, start from developers sort of, you know, going back to to the developers perspectives, whenever we as a lender finance the project, obviously the first thing that we’re looking to ease the project document base right. And for that, from that perspective, of course, you know, it is important for any IPP project for project to proceed to be bankable from the lenders perspective, bankable meaning that the developer gets adequate protections and the regime of the rights and obligations is balanced. So when COVID-19 hits under many contracts and the many PPA contracts in men are we faced and not only in men, actually that happened all around the world we had a massive inflow of developers informing us of massive in full force majeure notices, so these notices sometimes were coming from their contractors, so Sometimes the developers were evaluating a situation and we’re considering whether they would want to send a force majeure notice to to the utilities, most markets in which we work in which we finance projects or emerging markets, meaning that these are single buyer markets as opposed to emerging markets. So they do benefit from the from the IPP schemes and feed in tariff schemes for renewable energy and from the ppas where we’ll look at bankability allocation as I mentioned. So, typically, you know, from what we have seen so far, whenever we looked at the situation of force majeure or arising under a particular project, in vast majority of the countries and cases the project documentation typically would cover for fools mature and for the consequences of force majeure, or, and would give specific protection to the developer as part of the documentation. Typically, again, what we see is that these protection is time relief. Sometimes you know, sometimes he under limited circumstances you can see cost relief. One of the lessons learned that I think is very important to know is that and that is something that we typically do as part of the due diligence but it is becoming becoming even more prevalent is the back to back protections that you have in your EPC contract, Visa v. The PPA, right? So these contracts need to match. We were usually careful in evaluating whether the provisions of the PPA are passed through into the EPC contract but now it becomes even more so important because the last thing we want to see on the project is EPC contractor for example, being able to claim costs, where the project company for example, cannot recover this cost under the PPA. So yes, as I mentioned, you know, when EPC contracts we typically also see time relief and pandemic typically qualified as other force majeure or under the under the PPA contract or natural force majeure. Depending, you know, from jurisdiction to jurisdiction, it actually differs And or the uh, certainly, you know the implementation of force majeure and the implementation of remedies allowed under the contractual framework allegedly depended on drafting of specific contracts. But also typically, you know, based on the on the same grounds and the company would need to demonstrate the impact of the post mature and also will need to properly maintain the process of communicating with the off taker in terms of the occurrence of the force majeure per se.

Unknown Speaker 9:31
With respect to with respect to the projects that are in construction, we’ve seen we’ve seen situations where developers were effectively no channeling back the full special notices to the government based on based on their EPC contractors approaching them with force majeure notices as well. And obviously, you know, the interesting thing here, the interesting part was that the the basis for invoking force majeure Listen, as I mentioned pandemic is usually typically qualified as a natural force majeure. But if you look at all of the countries in our region, right, and not only in in many region, most of the countries such as Jordan, Egypt, and in many other countries in the region following the evolution of the pandemic, they implemented specific regimes, locked down regimes restrictions, regimes, travel bans, and consequences on the projects were caused by these restrictions rather than the pandemic itself. And the interesting thing is that

Unknown Speaker 10:37
that we discovered in a number of projects is effectively you know, whether whether you can claim relief on the basis of the consequences or the force mature, and what additional protections can be available to protect companies based on that. Again, you know, this caused quite a bit of a debate in some of the projects that we have seen in some countries. And that is That is Egypt and Jordan as well as to whether the events under question our natural force majeure event or government force majeure event. And the reason for this debate is also very interesting and very insightful, because obviously, you know, when you think about projects in when you think about projects in construction, it is particularly important, it could be particularly important for developers because if an event is qualified as a government force majeure, then the developers can seek certain additional protections typically coolest protections, or, for example, protections under the deemed energy regime, whilst for natural force majeure or these protections would not be available. This would, this could also potentially impact the termination regime as well because for other force majeure event very frequently under many IPP systems deployed in our region, for example, Egypt, this is one of these examples. The project company in case will be out a force majeure or prolonged The first module would not be able to terminate the IPP corn truck. Whilst you know, whilst the in case of government force majeure, the consequences would be different. So that is that is, I think, is the evolving debate that is still continuing. And I would be very interested to hear where to hear from my co presenters what they’re seeing, but we have seen these debatable in a number of countries in the region. And we are also seeing a thought process as to whether basically, you know, in a situation where pandemic is evolving and governments are taking measures, it should be made very explicit in the ppas that the companies can still seek change in law protection with respect to the changes that have been implemented. Because a number of countries we’ve seen the government disclaiming disability saying that it is a natural force majeure, so only time relief should be available, not other forms of relief, again, which legally we disagree with. And also there is a general debate now happening in the market as a result of the evolution of As to whether there is merit in pushing the natural or the pandemic, into into government force majeure events as opposed to natural force majeure events, which, from what you know, from from the from the private sector perspective, that is something that the private sector has seen becoming a big issue in NPP as an MPP is being unwrapped effectively by the by the governments as part of this crisis. And I’ll get to this in a in a couple of minutes when we talk about the government perspective on the on the consequences of the crisis with respect to the ppas. I think also, you know, an important point to mention and the lesson learned in this crisis is that, for the for the natural force majeure events, we talked about this in the past when we were evaluating IPP projects, but we we never saw practical implementation is typically you know, the, the comfort that the lenders were getting from Not having the ability of the parties to terminate for long term other false mature was that this is something that could potentially benefit from insurance protection. Now, this crisis has proven that this is not a correct statement, because in most of the instances where there is no real property damage, we have seen that the companies were not able to make use of the business interruption insurance or any other insurances and any insurance cover that could potentially cover for that will be very expensive, and it’s questionable whether the companies would be willing to take on this insurance cover in the market. Now, with that, I will switch to the to sort of to to where we’re seeing the government’s coming out. So what would the government’s think in this crisis the government think? Well, this crisis has shown right creating significant deficits on the southern side, that we as governments sometimes are locked up into very expensive Long Term ppas that create a huge fiscal drag on our resources. And who do we do we need to make choices in this situation, we can’t simply, you know, we can’t continue as is because we don’t have as a government resources to comply with all the obligations under the PPA. And in some countries, the governments have made sort of, you know, assessments and for that the tariff is no longer sustainable. And here, you know, we have a couple of interesting examples, which played out you know, due to this due to this concept into a variety of disputes ongoing disputes between the between the single uptake or single buyer off takers and the developers were effectively off takers are coming back and saying, I’m not gonna pay you in full because I have another force majeure event, which is a pandemic. So my obligation not to pay is going to be excused by that. Now under the laws of motion. jurisdiction the obligation to pay would not be excused by force majeure or, and most of the ppas in our region, thankfully explicitly provide that the payment obligation should not be excused by force majority. But there are some interesting cases where for example, you would see some references in some of the countries in the region that yes, it will not excuse non payment accepted the banking system as is unavailable. And then you know, the off takers what we have seen in practice are trying to tag this into a very kind of evolved discussion as to whether they can seek payment relief on this basis. And again, most of the government on oath takers, and that concerns this region, the region and also other regions as well. We’ve seen it also in Latin America, we’ve seen it even in Eastern Europe as well and have taken a position that the event and the question is only a natural force majeure event, it can’t be qualified as a government force majeure event, even though the changes that evolved After this event, clearly a change in law and a clearly creating consequences. And even though under frameworks applicable in some jurisdictions, a change in law is in itself a government force majeure events such as Jordan, for example. So that’s been a debate and then go in debate so far. And this is where the government’s were trying to sort of, you know, to get relief for their payment obligations on operating IPP projects in a number of jurisdictions, gleaming force majeure or as an ability to get out of their commitments. So that’s that’s one thing we have seen on the government side. The reason the reason for that sort of where the government’s coming up with all of this issues is obviously you know, the, the strain on the on the budget deficit that I mentioned on the southern budget deficit, but not only that, there is certainly an overcapacity issues issue that is coming into play. And there is also an issue of, of how you know, things are going to be managed going forward, particularly where For example, there is a significant number of IPS entered into ppas interdental in a particular market with overcapacity capacity considerations, and in some markets, thankfully, it was, you know, I haven’t seen this so far in manner. But in some other markets, the government’s have been simply bringing PPA completely for renegotiation or imposing interim ppas for the duration of the state of emergency, which significantly cut down terrorists and significantly cut down protections for the developers as well. So that’s been that’s been a very concerning factor in a number of jurisdictions. And we’re carefully observing the market because, you know, I think we still yet have to see what happens next and whether there are any foregoing consequences in this in this respect.

Unknown Speaker 18:52
And, one, one aspect probably no, I also wanted to mention is that well thought sort of, you know, the lenders are responses, right? And how we are looking at this situation as the lenders because obviously, you know, for us, we’re looking at projects and we’re evaluating it, particularly projects that are in our portfolio, we’re looking at whether they can sustain the additional drain that is created by the current crisis, and whether the covenants still work with the ratio still work, whether you know, whether the distribute whether whether any of the covenants are going to be breached, or whether there is a potential em event of default or other events will default in question, particularly in projects that are getting close to distributions or the projects that are getting close to disbursements as well. And for the for the new projects that are still in development phases. I think what we do see in the market is that the reason include is significantly increased the level of due diligence on construction schedules and budgets for obvious reasons for buffers and contingencies, to address the current sort of crisis environment and For the financial model, obviously as well to assess how this could be impacted by ongoing and future pandemic impact. So, everybody’s recognizing that the situation is fluid and is developing. We are really seeing one thing we’re seeing is that increased level of due diligence is also on the impact that the that the pandemic is having on the creditworthiness of the counterparties, including IPP grantors and including also the takers, the EPC, contractors, the suppliers, so the whole value chain effectively. As I mentioned, you know, one of the issues is basically the thinking behind whether whether pandemics continue to be classed as natural force majeure or we move them into political force majeure or bucket because of the remedies distinction, as I’ve just explained, and I bet that’s an ongoing debate, although in my view, honestly, I think the government’s are highly unlikely to accept took epi, the move of the pandemics into the government force mature. So lenders have been revisiting thinking on material adverse effect conditions in terms of making it clear that the pandemic could constitute a material adverse effect not withstanding the fact that it is foreseeable and ongoing at the time. And that and that now we are aware that this this condition is persisting and continuing in the market. We still kind of you know, we’re evaluating it from our perspective in terms of the impact on the documentation there is there is there is ongoing thinking in this regard. Some deals as we do see have been put on hold as a result of the pandemic and there is slow down in progress, process and negotiation also because now the appraisals we’ll all have to do due diligence has to be virtual largely. So it is bringing in additional issues so on to the table as to how this is conducted. What is the assurance? What is The possibility to get additional information as well. I think in terms of the in terms of the documentation, the financing documentation itself for the ongoing projects, I think, of course, all lenders are carefully assessing whether whether the documentation contains sufficient protections for the lenders given the existing environments, and how we deal with the FM events going forward. So that’s an ongoing thinking process as well in terms of the lessons learned, and projects, projects that go into credit during the continuation of the pandemic and naturally needing to address the potential impacts of the pandemic to the satisfaction to the satisfaction of our investment committees. So we are looking at macro context from this perspective, we are looking at the context of how balanced the sectoral approach is from the government perspective. And we’re trying to avoid this as well. So, a lot of new things coming into play from from our perspective as a lender And I’ll probably stop here with that and pause and I would be very interested to hear from my co presenters, because I think there are so many cross cutting themes as we are looking at the consequences. Thank you.

Unknown Speaker 23:15
Thank you very much, Katherine, a very interesting presentation many, you know, food for thought, definitely. But you know, I won’t take much time on it. Instead, I’ll give a floor to athlete who I’m sure it’s will have also very interesting things to share. So over to you, admin and Will’s you are loading up your presentation and sharing your screen. I’d like to remind the audience that you will get a recording of the webinar and the slides that will be available as well. So and I cannot I can see one lonely question buried q&a box. I’d like to encourage you to post more questions. I think there are lots of interesting and well and difficult, you know, ramifications do the COVID-19 event, let’s call it and do the Duke renewable energy projects. So I’m sure you have questions or pose into the q&a box is your chance to get answers. So over to you.

Unknown Speaker 24:25
Yeah, thank you very much, Gallus. Again, thank you very much for actually for inviting me to actually to speak and to share actually some insights. I mean, from from a developer perspective on like, all the consequences of COVID-19 on electron some of the projects actually in the MENA region. Katya, thank you very much for the comprehensive presentation. I mean, I think like you covered it all. So I’m just going to go through a few points, maybe I mean, just to share my, my perspective as a developer. So, so lessons learned, I think lessons learned from dealing with with the consequences of COVID-19 I did. And I did. And I divided the actually this section two to four projects under constructions and four projects under operation. So for both of them extraction, I mean, as, as we thought, as we seen in the MENA region, the disruption caused by COVID-19 created situation which, which resulted into delays in meeting key construction and work milestones and defaults. I mean, with technical defaults, actually, under the funding arrangements, the situation would have had several critical consequences if these were not limited on time through various project restructuring. So, I mean, there was a lot of discussion between the lenders, the developers, the EPC, contractor, and the off takers about about the best way I mean to address the actually the current situations and the current difficulties faced for the past few months. And I know that are still actually ongoing discussion on knowledge on some pending points as well. So one of the examples I mean, the question possible consequences includes liquidated damages, loss of incentives, colon bonds, delays for construction completions, termination for time limits exceeded. So what, what actually what we have seen is that most of the developers and contractors were trying to seek relief under the relevant project documents by relying on like on false measure on the change in law on hardship clauses, to allow for time extensions, and, and to some extent, in some circumstances, and depending on the documents was to some compensations and cost relief. So with such attempt resulting to successful claims, that’s, that’s a tricky question. So the starting point, I think, the starting point when when seeking relief should be to look at the project and finance documents and discuss the consequences of the delays with the different stakeholders. So exemption, delay lease termination events. So that’s the sorts of things That’s that actually we look at the documents. The agreements should reflect the parties expectations and in line with international best practices. And the most important also is actually mean to actually implement some sort of collaborative, collaborative approach between all the parties, which is fundamental in such times as this helps establishing communication channels to respond to it quickly developing situations and free up crucial resources to focus on the required responses. So for projects under operation, where we have also seen is that the governments in the MENA region continues to implement new legislations regulation response to the consequences of COVID-19. And what we’ve also seen is that governments maybe might attempt to reduce electricity supply generated by by piece by issuing regulations and orders and these may be costs Maybe due to the fall electricity demand caused by the containment measures taken by most of the countries or maybe the fall in like in all prices, which may be seen as an opportunity, maybe for some countries to actually to postpone their energy mix objectives.

Unknown Speaker 28:17

Unknown Speaker 28:20
many questions, I mean, in many points were raised, whether these would be successful, I mean, whether actually such measures would be lawful or not, whether these could constitute a change in law. That’s what we are going to see like in the next slides. So, developers, so many developers and EPC contractor, we’re trying to, I wouldn’t call it actually to hide behind actually the first measure or the changing role, but I would call it as a kind of, you know, relying on the last measure of closes and the change in low closes actually to to to do requests a time extensions and

Unknown Speaker 28:56
cost reliefs.

Unknown Speaker 28:59
So false measure

Unknown Speaker 29:01
Jerry’s speaking of force majeure oil. unforeseeable circumstances such as the recent outbreak of COVID-19, which may prevent a party from fulfilling its contractual obligation may fall within the definition of FOSS material in certain contracts and certain situations. Well, most of the local laws in many countries, provides for definition of force majeure in the low civil law countries provides usually provides for definition of false measure. Under English law, there is no general principle of fast measure. So the agreements for example, ppas and EPC contract they shall provide a definition of force majeure, which scope would be limited to that set out in the first measure clauses. So the change in law which is changing low quickly, this is look you’re in software defined data for example, the date of the agreement or or the submission date is for the projects of the following adoption are taken effect. The adoption are taken effect Any law rules relations any change in any law or regulation or treaty or the making or assurance of any request guideline directives by any government authority. This is a kind of like general definition of changing law that that that should be come across in different agreements. So changing law or regulation driven by COVID-19 outbreak may result in a widening of the scope of relief available to the extent it can be shown that the issues affecting the projects stem from such changes. So fast measurable and changing no clauses. These are specific to to each agreements and these clauses operate as a risk allocation mechanism in order to govern situation which are beyond the control of the parties, such as the outbreak of diseases that could be NINETEEN’S war or natural disasters. What would developers and contractors need to do to invoke knowledge to to a certain a cost measure or a change in law? A few points here. I mean, they would need to check whether there is a direct link between the outbreak the change in law regulation driven by COVID-19 outbreak and the impossibility to perform contractual obligations. They need to check whether notice periods for frost measure or changing law or they need to check if they are entitled to any compensation during the measure or change events. And if there is any obligation to be to gauge the effect of the force majeure or changing law event, which is usually the case. Also insurance with insurance may cover any of the expected losses, rising its consequences of COVID-19 situation and the rules governing early termination if the force majeure events persists very quickly. I mean, some some thoughts on like on the impact of COVID-19 maybe on the financing of renewable energy projects, again, only from the again only from the perspective of like of developers. What we have seen is that the mean developers make turns the COVID-19 situations into an advantage to their advantage. If I mean if they can take and seize some opportunities, they may take advantage of, of the existing low interest rate environments to further optimize the capital structure for energy infrastructure project. But the above should be balanced against a shrinking appetites maybe by lenders, given the high risk, the low yields and the potential massive recession and credit crunch. I mean, a sketch actually, a sketch I was highlighting earlier. Maybe lenders find it a bit difficult today to to assess and to a certain the risks for a key for some projects. Given that the situation is not, I mean it is not clear and it’s evolving. So i phi is like I’ve CBOT, ADB and others are also allocating multibillion fasttrack finance interests to private sector companies and they efforts to tackle COVID-19. And power sector, I think is a priority for these international financial institutions. So developers have been approaching the lenders and to explore a possibility could benefit from, from that, from that multi billion fasttrack financing package to I mean, I think to two essential elements and two essential objectives were were sorts by, by developers during this crisis. First is to ensure better liquidity for projects and the constructions

Unknown Speaker 33:58
some of the examples to do achieve that would be to trying to draw the maximum off ending committed and dispersed facilities as long as this is still possible in the face of an increase in volatility created by COVID-19. And trying to inject equity to enhance liquidity and assess the net debt position for the purpose of testing many financial issues before they bought in time just to be on the safe side. The second element, which is to improve the project capital structure during this turmoil through managing the debt liability, developers may consider reducing the debt burden flow depth payback. This could be achievable if developers could take advantage of like of any low interest rate environments or extra opportunities. The second element is trying to obtain financial information quantifying the consequences of COVID-19 developers may need to stand ready to close financing once the market volatility storm clears. That’s why they will need to collect as much as information so they can assess The risks themselves and also help actually the lenders also in their in their objectives and they work to do assessment to quantify the risks.

Unknown Speaker 35:11
And this is it’s, thank you very much.

Unknown Speaker 35:16
Thank you very much. admin, very interesting presentation the covering some of the some of the challenges faced by developers and what they could do to mitigate them. So we’ll talk about more about that in the discussion part of the webinar. But for now, I’ll give the floor to batter Tracy, so he can believe that he’s presentation. So over to you.

Unknown Speaker 35:48
Thank you, Carlos. Thank you very much. I’d also like to thank my co speakers for the very insightful thoughts and elements they shared with us. I’ll try to to share with you some some thoughts were developing on this on these topics, from a, from an investor perspective, maybe a developer also.

Unknown Speaker 36:13
And, to to to, we think

Unknown Speaker 36:17
that it’s important to mention that today, numerous countries are aware about the importance of renewable energies for the local economies, but also for long term growth. And some of them have announced various stimulus packages or relief plans to support their economies and population. But the fact is, we are still in a phase during which decision makers are focused on handling the health issues. And we need also to keep in mind that some countries are still in a critical phase, Latin America or or some countries In the Middle East also or Southeast Asia. So and also we don’t know yet if there will be the so called second wave. So all what we can do today is try to understand try to anticipate, but we think that there is a lot that we don’t know yet about this this crisis and its impacts. So regarding the projects and the construction or operation, and again, from a from a from a developer investor perspective, the issue is quite difficult. They’re different. And I think my co speakers spoke about it very interestingly, regarding all the impacts on ppas and contractual agreements, I will not develop this because I think they they have more more insights and more moral expertise on this. So but it could be impacted and they will be impacted in some ways, and the stakeholders, either the developers or the governments or lenders and so on. We’ll need to address this issue on a case by case basis. We can imagine a a one solution for all the developers or investors and in this in this space, so it will be addressed project by project and it actually applies also to large utilities with concession as they also would be impacted by the current crisis. And because in some countries, contracts have been suspended, or at least during the lockdowns in Morocco, we know that the utilities stopped billing the citizens to believe to participate to the relief during lock downs. So for sure, there will be discussions to either renegotiate the contracts or or amend some some aspects of them. So it will be it will be fairly Interesting, also challenging for all the stakeholders to advance on this going back to the government and their actions and and just to be realistic, there will be situation where the country or the policymakers will have to choose between considering the their renewable energy strategies or redirecting their resources to other priorities, like health and social welfare, given the current situation. And it’s some in some ways, it will also impact a winnable project projects and mobile strategies. It will be clearly a tough situation for the for the decision maker makers in this space. That being said, some of the policies announced so far has clearly stated that climate and wearable energy in particular are going to be a Major Component and driver of their actions and relief plans, to say the least. So so some of them placed climate as a pivotal access in the post COVID era, Morocco announced

Unknown Speaker 40:16
few weeks ago that it will not change the course of its renewable strategy. Europe also in some other countries, so it’s very interesting and encouraging for for all the stakeholders in this in this in this sector. And for instance, we are we are very happy because yesterday, Germany announced a large and ambitious strategy to develop green hydrogen with a 7 billion euros plan from now on to till 2040. And one of the first initiatives that was signed officially yesterday, during the presentation by the ministers is a cooperation between Germany and Morocco to develop a first renewable electricity facility dedicated to green hydrogen. So it’s 100 megawatt facility to start with. And it’s very encouraging. And we’re very happy for all the region actually, when we see when we look at the all the the untapped resources, either wind or solar in our countries, we could we could address all the, I mean some of the hydrogen needs of Europe in the coming in the coming years. So this is just an example to show that maybe our countries with with with our limited resources, will not be able to support or continue the ambitious strategies, but maybe there’s co strategies with Europe, for example, to develop further the sector and renewable projects regarding the preparation of companies to this crisis with it I mean, we all agree that this crisis is unique, large, also humbling, and insightful in so many ways for so many subjects. And I guess either in on a on a personal or professional level, we learn a lot, either for policymakers, companies, or employees. And actually, this this very webinar is a great example on how this crisis could and will change how we think how we approach business, do business and organize our our life, either personal or professional life. So it’s very, very insightful. And actually, if we if we had to get together in some place around the world to discuss this topic together, it would have had so many implication on our work, but also our life. Now we can also organize a webinar like this one or business meeting, get together, share ideas, share experiences, develop businesses. Of course, I’m not saying that it’s better this way for sure social interactions are also part of of project making and business management. But it was just an illustration of how the quizzes changed probably forever some of our perceptions, I was going to say misconception at some extent. So, regarding the business impact of the crisis, as mentioned before it has and it will continue to have an impact. But we see these impacts on two levels actually, on the short term level with actions taken during the lockdowns, isolations and Providence and there and the repercussions in some countries are also the changes imposed by by these, these actions on processes. How organizations deal with this with this with these actions to comply with emergency requirements from from from each country. The second level we think is more permanent from our perspective actually, and it implies a thorough detailed review of all existing processes and strategies either for for project development for business management, investment, etc, to make sure that, that what the crisis has shown us will not happen again or at least we should prepare for it to reduce its impact. We can see we can we can look inside an example. I think we all think about it regarding the sourcing and supply chains that have been disrupted by the crisis. And some companies or sectors have been put under pressure or stopped simply stopped because of the of the restrictions and they couldn’t source their raw materials or equity. Either again because of the lock downs or because that because of their own manufacturers and suppliers are also impacted or shut down. So, these aspects are very interesting to study.

Unknown Speaker 45:14
I mean, everybody is talking about the reshaping of global value chains. It’s interesting to see how we can avoid this in the future and in this specific sector, but we need to be careful to not I mean, a ways reduce the benefits of these global value chains on production gods, we all know what how solar benefited from from these global value chains and outsource productions. We all think about the dependence did dependency sorry of some sectors on some suppliers or some countries. So we are saying we need to reshape and relocate productions as well. Maybe it needs to be to be addressed and see how how to reduce this this kind of risk in the future. The other aspect which is fairly important for us as an organization also, we promote this kind of approach is the human resources and human resources as a real capital, given its importance. Within each organization, its agility, it’s the ability actually of, of every individual during this unprecedented times, that allowed project and companies to keep moving, even if it was at a slower pace. Sometimes a faster pace actually, during these past months, but organization will have to revisit their management processes to include the lessons learned during this crisis. And and we all of course, think about remote working and And, and how we do business in this in this kind of situations. The other aspect also is ESG. It’s crucial in renewable projects, we all know about this. And it will be even more important in the future to make sure that that the impacts such such environmental and health safety are addressed in adequate manner. I mean, today more than ever, and in the future even more, and we already see this in some organization where they put the CNS and health safety as a prerequisite to their projects and actions is a really a crucial aspect that we should bear in mind in future projects and future business relations. So, regarding the lessons, we are very humbled by this crisis. And we think that the main lesson from this is that we can’t anticipate all risks. We can’t, I mean, we are all trying to have this risk allocation and identify every risk and address it. And I mean, transfer it to the best party to handle it when we cannot anticipate all the risk and despite this is the proven of it. So risk management is a continuous process, we should assess and we assess our risk and risk allocation continuously to understand and to identify where the future risk I would say, are and prepare for it. This global crisis is probably not the last, at least, if you see it from a climate change perspective, and its future impacts on countries and businesses and projects. So it’s important as as project developers and investors to understand and keep in mind that that the project we we are currently developing investments we’ve we’ve, we’ve made recently will be impacted in the future on various scales. It could be a health crisis like the one we are living today or climate related impact, either directly or indirectly. What I’m trying to say and from a Pew basic investment perspective, where we are mainly investor is that maybe in few years, what is what is seen as profitable. Today, we’ll know we’ll know no longer be accepted because of either the DNS or health regulations from one side or people perceptions consumers actually add considerations of consumers. For example, assets will be

Unknown Speaker 49:57
I mean will will be worth less or the find a buyer, when we are trying to win, we will be trying to sell down or transfer an asset to another buyer, even if they are profitable, because investors are not willing to invest in this kind of assets because of the ENSO health issues. So it’s really important aspects to keep in mind. Especially that we are, we are investing in long life assets for 20 to 30 years for some assets. So we need to keep in mind that things and the environment are changing, and we should factor this in our project development and structuring. It’s really important to have this long term view and we see a lot from large institutional investors that they are really thinking about this. How I am going to sell An asset in 10 and 15 years, if the regulation change if the ns are more strict. So, I need to understand now, how I was going, how I was able to develop the projects to cope with these issues and health issues in the future. So, let’s start with Project identification. It started with the technology selection, and also the processes implemented to make sure or at least to try and address this future issues and avoid having large again long life assets that will not find a buyer in the future. On Sharjah on a short term note a project development and also material sourcing should be revisited as mentioned. And each time that is possible, try to diversify the sourcing of materials and equipments for the for each projects. Maybe a last note there We thought a lot about this and we try to have a clear answer. But we think it’s it’s maybe still early to understand all the implications in general and each country in particular, either in the MENA region or other countries across the across the world. As mentioned, some countries have already stated that renewable energies we will we will not I mean, their energy strategies will not change or will will be accelerated to contribute to the Bosco with aeroplanes. We I mentioned the Germany plans. I also mentioned Morocco statement. And I think a few other countries in the region also mentioned that they will they will, Saudi Arabia also they will keep their their strategy and change. But all we can do is is is continue advocating for the burdens of renewables in the long term growth. unsustainability and hope that policymakers will find enough fiscal resources in a very difficult fiscal context due to the current crisis, to address, of course, the priority, which is the social and, and health needs of populations, but also support businesses on a more sustainable way. And renewable projects and we will, energies are, of course, one of the most important aspects of this. And that would be all in there. We’ll be glad to answer any question later.

Unknown Speaker 53:37
Thank you very much better for your presentation. I think in these webinars, pretty much all presenters exposed for longer than intended, but what you were all saying was very interesting because I didn’t want to interrupt you. So if you don’t mind, could we stay here for another 10 minutes? Do you have answer some of the questions posed by the audience? Is that okay with all of you Sure, okay, great. So, well I mean, I’ve been looking at the questions that we have here and I mean we could be here for like base talking about these things because you have an environment in which you have a demand shock. So, you know less a free state being demanded you have you know, governments in place in which normally on the right the the off takers been placed in difficult positions, you have renegotiate contracts, at least in which you know, the ppas which are seen as very solid to be renegotiated. So, very difficult environment. So, out of all of the questions that have been asked, I think there are two questions that could be that summarize the general what everyone has in mind, really, and, and you know, what they would like to see answered one, ease or any consideration for having the renewal and use of the renewable energy transition As a way to encourage economic recovery, employment and economic recovery, and the other one, which is, you know, the flip side of this question is, what is the likelihood of having a few years in which well, essentially few renewable energy projects get developed and and financed? So over over to you, I don’t know who wants to go first.

Unknown Speaker 55:31
Not all at the same time please.

Unknown Speaker 55:36
I could try to answer

Unknown Speaker 55:39

Unknown Speaker 55:41
if I, if I understand correctly, so what could be the impact on current projects? Right.

Unknown Speaker 55:47
The question was the weather. There were two questions one of them. What is the chance that government will encourage we’ll see renewable energy projects as a way to stimulate the economy. And the other question is, what is the chance that few renewable energy projects will be developed or fewer than in the past? Will we develop and, and finance because of the environment we’re in?

Unknown Speaker 56:18
Now, it’s clips. Actually, yeah, I try to to address this during the presentation. And, and, and from our perspective, it’s really a policy and and country by country issue, because in some countries, the fiscal resources will allow them to continue pursue their strategy. Some other countries will will will seize this opportunity. And, and, and, and I mean, try to direct or we direct the resources, start with a more sustainable growth based on of course, we will energies, but I think some countries will have no choice but to reduce or revisit their ambitions regarding renewable energies and overall projects. Hopefully, what could be interesting is is cooperation between a European countries or Western countries and and MENA region countries, as as the example I mentioned, regarding cooperation between Morocco and Germany, and also the role of deifies, like, like a wall back I see and so on. They also could help and I mean, advocate and encourage the governments to, to keep renewable energies or to put renewable energies, as is a major or at least a component of their relief and stimulus packages. So I think there is no clear answer today. It’s still early, some countries already announced that they will keep their strategies or push for further. But I guess we’ll just need to wait and see and continue advocating renewable energies as as as through this kind of webinars and and, and initiatives.

Unknown Speaker 58:20
And if I may just end up a little bit, I think I completely I completely agree. It’s certainly a case by case analysis. I think I think what No, probably we will see right, based on what governments are going through is that, first of all, you know, the government’s would be looking at the risk allocation under the ppas. Maybe more cautiously going forward, particularly in terms of the tariff sustainability, right. The government’s would probably take more time to evaluate what is really how they approach the capacity right, because in many markets where we see over capacity, this is typically a function of very inefficient, you know government decision making at some point where the government c locked itself in into a very disadvantages PPA like, for example, you take Jordan and the case, right where a which is causing a much bigger issue than the whole renewable energy package driven if you take the first mover advantage on the tariff side, I think someone had a really good question in terms of supply and demand, right, that the current IPP model basically does not encompass the possibility of conditioning tariffs on on the changes in the demand. And and that’s really a good question, but it’s a very hard question to answer because obviously, you know, on the investor side, you would want to have a very significant risk premium if you were to go the route of accepting a risk that your target might fluctuate depending on the demand and the current crisis has shown us right that demand shrink to what may be Demand first, first of all demand could shrink. But also, you know, also, government introduced measures where, for example, collections shrink significantly, because many utilities were not able to impose sanctions for failure to collect. And I think what we are looking into is a is a comprehensive macro analysis on the part of the governments when they are thinking about their renewable energy programs in terms of how they can improve efficiency also in running these programs, and how they can make sure that you know that there are no sour ppas in that respect. Would the tariffs should be Are there any kind of possible ways to improve other aspects collection, for example, or public generation? So there’s so many puzzles. There’s so many pieces to this puzzle, honestly, as of now, that we all going to see how the industry is going to be involving in picking this up. And what I can tell you what we do see so far is that in markets that are quite stable, and we’re governments Have a quite sort of, you know, and elaborate strategy on how to deal with renewable energy investments. They all continue, regardless, and new projects have been awarded and sort of, you know, and the government’s are taking a second step and reevaluating, you know, all the typical issues, the the capacity, the grid capacity and the general capacity is so that, you know, and, of course, you know, the tariff settings. So that that is because the the reason for the cry for the current crisis in many countries is that either the tariffs are super high and the government’s are sort of revisiting the concept based based on that, or the number of ppas is super high over capacity issue, or there are some limited ppas, which are extremely disadvantages, and this is affecting the whole sector all together. And then, you know, another question we have, maybe we need to represent while maybe governments need to think about the rep profile, maybe they need to see how they can amicably terminate the ppas for the less efficiency diesel plants and, and go more towards renewable energy. So there are so many routes that can be explored. And it will be done in the context of a specific economy and all the other specific circumstances at play, including, of course, the sovereign level situation and the intensity of the sovereign debt pressure. And you know, and I will say just less than just because, you know, it’s interesting because for example, if you look at Egypt, right, and the most recent measures taken in Egypt, for example, the viteri of sexually for apart from industrial tariffs have been increased almost 20%. And on the other hand, the subsidies for the power sectors are going to continue for much longer than expected for almost three years longer than expected, because if condition was to come down the subsidies, but this is definitely something that is gonna keep the power sector afloat for a while and, and this this tells you about how different governments are approaching the crisis situation from different perspectives.

Unknown Speaker 1:03:01
Thank you, Catherine, one thing I would I would remind the audience off as well is that actually, in many countries in the region, solar energy, solar and wind energy are the lowest priced energy. So you know, he’s the most cost competitive. So, you know, it would make sense for them to at least keep those projects and then maybe get rid of some of the older, you know, less efficient planters, as you mentioned, Kathy, and then admin. I don’t know if you want to add anything on this question.

Unknown Speaker 1:03:34
Yes, yes. Well, thank you very much. I mean, I completely agree with veteran catcher but a way it’s going to be actually really tricky. I mean, for like for governments, I mean for state utility of takers, and governments to get rid of, I would say the old actually IPP structure that they had signed some time ago. And we must also keep in mind that actually some of these projects are also mean sovereign, guaranteed. So some of these are sovereign guarantee actually, which engage the primary obligations of like other states, either directly these projects. And we know I mean, what if you looked at the ppas? I mean, if you look at the guest of power actually project and CCT projects, for example, in some of the MENA regions, then 15 years ago, you will see very, very high tariffs, which are completely different actually from the tariffs that you can get today on the solar PV projects and also on the winter project. So, the market is getting too much competitive. I mean, too many sponsors, too many developers trying to get projects, done not many projects. That’s actually what we can. That’s actually what we can see. And see. Because, because we there’s a lot of limitation, limitation as to the government’s capacity to procure new projects. There is also some limitation into the the grid capacity. I mean, as Katie was mentioning, many things and I think that’s it There will be a new area a new time in your period post COVID-19. But it’s not actually going to be the same as before. Why? Because the government I mean, why? Because there will be a lot of pressure on, on like on the resources of the government’s, a lot of fiscal pressure. And second, because the market is getting too much competitive, and maybe the demand is going to slow a bit. So the same structure of tpas, for example, that we used to see before as like the taker pay, might not, might not maybe work actually anymore. So maybe we are moving and shifting to too much more a, I wouldn’t really call it like a balance of risk approach, but I would say take a different risk allocation approach with a taken pay structures maybe with like low maturity and lower actually 10 or I mean, lower actually periods. So I think it all depends like on too many elements. But I think that we will see a different lecture. different configuration I mean of the markets in like in the next couple

Unknown Speaker 1:06:06
of years?

Unknown Speaker 1:06:08
Well, certainly I think that, you know, we’ll see, you know, governments reacting markets reacting. One last question, which I think summarizes, if you don’t mind summarizes some of the overall questions that have been cast. What is the impact of the oil price, low oil price on renewable energy projects? What what’s the likely impact? You know, in a traditional environment you think, well, some countries which already have a significant generation fleet we that relies on fossil fuels, they might continue burning fossil fuels, but what do you think would happen now? You know, the with what will be the fate on renewable energy projects off the low price?

Unknown Speaker 1:06:59
It’s amazing. Dollar questions Carlos

Unknown Speaker 1:07:04
plays a million dollar Batman. Yeah.

Unknown Speaker 1:07:08
Sure. Yeah.

Unknown Speaker 1:07:10
It’s it’s a interesting and challenging question actually. Because, of course, what we could think is that this prices could impact negatively renewable projects and it will strategist because people will just keep with the with the fossil fuels, generating assets. But we don’t think that oil prices will stay this low. It’s not sustainable actually, for the whole economy. They will, they will find at some point, a more a more a balanced tariff position. And, and, and, again, it will come to to government’s willingness to push further the SDG agenda, and all the Sustainable strategies and renewable projects are part of them. Again, I don’t think there is I mean, we didn’t find it we try to analyze it, we didn’t find a direct and obvious link between low oil prices and renewable projects are cited, because again we will enter today are are less dependent on this kind of arbitrage between oil prices and and electricity there we are beginning to be on a phase where we will is is not a nice to have is a must have to address all the SDGs and all the environmental issues. So, no clue answer, but probably the the the government will some of them actually With the with the with the resources will keep their their strategies. I mean, we hope for this actually

Unknown Speaker 1:09:09
I if I can just say a few words I mean all this point

Unknown Speaker 1:09:16
I would say

Unknown Speaker 1:09:20
every country I would say every government actually in the MENA region, they have some sort of energy mix objectives. And I think these objectives might be postponed because the government’s because I mean, the biology now, actually for some governments is actually to survive is actually mean to face a like very, very difficult situations, some governments with some countries are actually reaching I mean, like the breaking point. And, and, and actually some sectors, charter monopoly of some actually state utility. State utility actually state owned companies, they are facing real risk of, of bankruptcy, and already your risk actually of default. So, I guess It’s all a matter actually of lack of numbers and money and actually economics. So if they are going to find it a bit, a bit like a bit pricey, I mean to go ahead with, with the actual objectives that in terms of renewable energy and the energy mix, I think they will rely on fossil fuels if by relying on fossil fuel will be cheaper for them, and much more cost effective.

Unknown Speaker 1:10:28
Yeah, and I fully agree with without met. And with bought, I think I think it’s, it’s now kind of, you know, a survival game in a way for the for the governments. So it’s really a very difficult task to solve in the long run, and many of them are no idea into assistance from IMF right. And this assistance comes with conditioning as well. So to the extent for example, they’re getting conditioning on limiting the subsidies to the power sector, right. They can no longer even provide support to the state owned utilities. And we know that in many many countries If you if we look at the emerging markets, particularly because on ISIS, I’m speaking for emerging markets because we don’t do GCC. So in emerging market side most of the single buy utilities are in a very, very, very bad shape and, and they’re the government’s would need to assess basically know how sustainable entering into new new renewable energy project is going to be going forward, and how this matches up with the public agenda, given all the issues they have at hand.

Unknown Speaker 1:11:32
Thank you. Thank you very much, Kathy. Well,

Unknown Speaker 1:11:36
as I said, I could be here for hours talking about basic things very interesting, but like all good things, this webinar must also come to an end. So, you know, I’d like to thank all of you and I’d like to thank all our audience actually, for being with us for you know, the entire hour trying to, you know, we’ll be starting on another noticing how these COVID-19 prizes will change the landscape of renewable energy. So once again, thank you to our speakers, thank you to the audience. And remember, you will get a recording, you know, in your email probably early next week and the slides that were presented as well. And, you know, if you like these kind of webinars, I’d like to encourage you to come to our website, APA insider comm and see what else we have prepared. So we have all of our COVID-19 webinars on the other regions. And it they might be of interest as well. So thank you very much to all of you. Have a good day and see you next time.

Unknown Speaker 1:12:47
Thank you.

Unknown Speaker 1:12:48
Thank you. We’ll see you next time.

Unknown Speaker 1:12:50
Thank you. Bye bye.

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