JBIC Provides Project Finance for Onshore Wind Power Generation Project in Egypt
Supporting Japanese Companies' Participation in Renewable Energy Power Generation Business
- Region: Africa
- Overseas Investment Loans
- Project Finance
The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed on December 1, 2017 a loan agreement amounting to approximately USD192 million (JBIC portion), with Ras Ghareb Wind Energy SAE (Ras Ghareb), a corporation in the Arab Republic of Egypt (Egypt) invested in by Toyota Tsusho Corporation (Toyota Tsusho) and Eurus Energy Holdings Corporation (Eurus Energy). This loan is provided in the form of project finance*1
for a wind power generation project on the shore of the Suez Canal in Egypt. This loan is co-financed by Sumitomo Mitsui Banking Corporation and Société Générale S.A., bringing the total cofinancing amount to approximately USD320 million. The financing provided by the private financial institutions will be covered by insurance from Nippon Export and Investment Insurance (NEXI). This is the first project finance loan that JBIC has provided for a project in Egypt since the Arab Spring as well as for a wind power generation project in Africa.
Under this project, Ras Ghareb will construct, own and operate an onshore wind power generation plant with a total generation capacity of approximately 262.5 MW in Ras Ghareb, the Red Sea Governorate, situated 260km south-east of Egypt's capital Cairo and on the shore of the Suez Canal. Ras Ghareb will sell the generated electricity to Egyptian Electricity Transmission Company for 20 years.
Toyota Tsusho focuses on expanding its business in renewable energy, primarily wind power generation, in collaboration with its group company Eurus Energy, Japan's largest and world's leading wind power developer. Toyota Tsusho plans to proactively go ahead with businesses particularly in Africa where growth is expected. JBIC's long-term financing support for a renewable energy project in Africa, in which Japanese companies have less business experience, is intended to contribute to maintaining and increasing the international competitiveness of Japanese companies.
In its export strategy for infrastructure systems revised in May 2017, the Japanese government expressed its intention to expand orders for infrastructure systems, including the design, construction, operation and management of infrastructure, as well as investments in local businesses. Additionally, the government released "Actions for Cool Earth: ACE2.0" in November 2015, an initiative aimed at supporting action in developing countries to address climate change. This financing is also in line with these government's initiatives.
- The promotion of economic structural reform in Africa through economic diversification and industrialization was raised as an important topic of discussion at the 6th Tokyo International Conference on African Development (TICAD VI). During the conference, the Japanese government expressed its commitment to supporting further economic development in the African region through public and private sector cooperation. Following the launch of the JBIC's Facility for African Investment and Trade Enhancement (FAITH) in June 2013, JBIC established FAITH 2*2 to expand the financial support provided under the previously launched FAITH. This project is the first renewable energy project that JBIC has approved under FAITH 2.
- In Egypt, population increase and economic growth have boosted power demand. In addition, the Egyptian government emphasizes diversification of power sources in its energy policy, including renewable energy, in order to avoid its dependence on thermal power generation. Under these circumstances, this project is expected to play an important role in promoting the use of renewable energy in Egypt.
- As Japan's policy-based financial institution, JBIC will continue to provide financial support to assist Japanese companies in developing overseas businesses by drawing on its various financial instruments for structuring projects and expanding its risk-taking ability.
Project finance is a financing scheme in which repayments for a loan are made solely from the cash flows generated by the project.