Sughd Private Solar Power Project

dropped

The Government of Tajikistan (GoT) has requested World Bank’s and GCF’s support in the implementation of a key project within the national Generation Expansion Plan (GEP) of Tajikistan, which envisions around 1000 MW of solar PV as part of the least-cost capacity plan developed for Tajikistan until 2040. In order to meet this target, GoT intends to launch a procurement process to attract private investment to build the first new solar PV plant (200MWp) in the Sughd region, located in the northern part of the country where energy security is becoming a challenging issue. This project will support the GoT to structure, design and develop a 200 MWp PV solar plant under a Public-Private Partnerships (PPP) scheme by recruiting a private partner, through an international competitive bidding process, to design, build, finance operate and maintain the solar PV. The WB engagement also includes a private capital mobilization component by providing a guarantee instrument to potential developers to reduce project’s risks, costs and contribute to tariff affordability. Guarantee component may leverage Green Climate Fund (GCF) resources.The project is expected to include three components:Component 1: Enabling infrastructure and financing to private sector (up to US$22 million IDA). This component will support: a. Required infrastructure investment and works to facilitate the Solar PV IPP. The required infrastructure will be defined through the feasibility study. Typically, infrastructure investment would include site preparation and fencing, electrical interconnection with a nearby substation, access roads, water supply and drainage, and telecommunication infrastructure.b. Financing to enable private sector to access lower cost financing and pass the savings to the end users through a lower tariff. The team is currently designing approaches as part of the tendering process to incentivize developers to transfer savings from concessional finance to end users. The ability of developers passing through benefit to end users in the form of a low tariff will be important for the final selection of tender winners.Component 2: Guarantee for risk mitigation (up to US$11 million GCF guarantee to leverage est. US$140 million from private sector). This component will provide risk mitigation support to the private sector Solar PV IPP which will be selected through a competitive tendering process. Considering the Tajik country and sector risks, investors and lenders are expected to rely on MDBs’ risk mitigation solutions to reduce PPA payment risks. Without such solutions, the project will not reach financial close or incur higher risk premium. Such security is typically 6-12 months of the IPP’s expected revenues and is only accessible in predetermined cases, including off-taker payment default. The GCF guarantee will be structured based on the underwriting criteria and procedures of the World Bank guarantee. The design and size of the payment security and guarantees required will be informed by ongoing market sounding and discussions. Component 3: Technical Assistance for Solar PV and Capacity Building (including PPF) (up to US$3 million IDA). Considering the much-needed technical support to improve the government capacity in developing PPP project, this component will provide technical assistance support to the GoT for the development of the solar PV plant. Part of this component funds will be used to refinance the preparation fund (PPF) described in para 31. This will include the technical assistance for project design and implementation such as:(i) Supervision for the development of the solar PV plant: Owner’s Engineer(ii) Project Implementation Unit costs(iii) Supporting an overall renewable IPP program design taking into consideration of project structure and replicability(iv) Development of citizen engagement plan(v) Carrying out activities related with gender action plan