now loading...
Wealth Asia Connect Treasury & Capital Markets Europe ESG Forum TechTalk
Asia Connect
Japanese, European banks lend US$503 million for Egypt wind farm
NEXI to provide insurance for commercial loans extended to 500MW project
Michael Marray 15 Mar 2023

Japan’s Nippon Export and Investment Insurance (NEXI) is providing insurance for commercial bank loans extended to Red Sea Wind Energy, a project company building a 500-megawatt wind farm in Egypt.

This is the first co-financing between NEXI and the European Bank for Reconstruction and Development (EBRD) based on a memorandum of understanding signed in 2020.

Red Sea Wind Energy is owned by Engie (35%), Toyota Tsusho Corporation & Eurus Energy Holdings Corporation Consortium (40%), and Orascom Construction (25%).

The financing is provided by the EBRD, Japan Bank for International Cooperation (JBIC), Sumitomo Mitsui Banking Corporation (SMBC), Société Générale Tokyo Branch, and The Norinchukin Bank.

Green innovation

NEXI is providing cover for the US$163 million loan extended by the commercial banks, as well as for the interest rate swap agreement provided by SMBC. EBRD is providing a US$50 million senior secured loan for the bank's own account, and around US$50 million for the account of the Green Climate Fund. JBIC is providing US$240 million, bringing the total co-financing package amount to approximately US$503 million. Total project cost is US$660 million.  

Due to its contribution to environmental protection and climate change prevention, the project is provided with NEXI loan insurance for green innovation, and increased commercial risk coverage of 97.5% is applied.

Red Sea Wind Energy will build, own and operate the onshore wind farm consisting of 84 wind turbine generators, located in the Ras Ghareb region facing the Red Sea, approximately 200 kilometres southeast of Cairo.

The power generated will be sold to the Egyptian Electricity Transmission Company under a 25-year power purchase agreement (PPA). The Ministry of Finance of Egypt has issued a guarantee for the PPA.

Renewables strategy

The Egyptian government has set a target of increasing the share of renewables in the national energy mix to 42% by 2035, which consists of hydro power (3%), wind (14%), solar (22%), and solar thermal (3%). This project is expected to play a significant role in the country’s renewable energy strategy.

The project complies with the LEAD Initiative (in the environment and energy field) which NEXI actively promotes.

NEXI says its financial support is expected to expand the business opportunities of Japanese companies in Africa, and maintain and increase the global competitiveness of Japanese businesses in renewable energy development.

In its Infrastructure System Overseas Promotion Strategy 2025 (supplemented in June 2022), the Government of Japan, in support of the transition to carbon neutrality and decarbonization, established the policy of providing support for quality energy and electricity infrastructure that harnesses sophisticated technologies to reduce the burden on the environment in a way that is compatible with the energy policy of the host countries.

The JBIC loan is in line with this policy, and will financially support an overseas infrastructure project where Japanese companies have invested and will be involved in its operation and management for the long term, thereby contributing towards maintaining and improving the international competitiveness of Japanese industry.

Conversation
Janet Li
Janet Li
partner and wealth business leader, Asia
Mercer
- JOINED THE EVENT -
Webinar
Developing strategies supporting sustainable investing
View Highlights
Conversation
Mervyn Tang
Mervyn Tang
head of sustainability strategy, APAC
Schroders
- JOINED THE EVENT -
Webinar
Sustainable investing - the new market standard
View Highlights