OPIC-SUPPORTED RENEWABLE ENERGY INVESTMENT

UNCLAS RABAT 000847

SENSITIVE
SIPDIS

DEPARTMENT PLEASE PASS TO OPIC - B BRERETON

E.O. 12958: N/A
TAGS: EINV ENRG SENV TRGY MO

SUBJECT: OPIC-SUPPORTED RENEWABLE ENERGY INVESTMENT
FUND

REF: STATE 95170


1. (U) Summary: Morocco's energy sector is expected
to require nearly USD 12 billion of investment in
the next six years, including USD 7.6 billion for
electricity production. The Kingdom's energy
strategy calls for renewable energy to make up one-
third of the new production capacity. Moroccan
officials welcome foreign investment in the energy
sector, and Embassy interlocutors have indicated a
need for additional sources of financing. The
stated goals of the USRG Emerging Market Fund
(reftel) appear compatible with Morocco's energy
strategy and development priorities.

Energy Requirements
--------------


2. (U) Morocco's Ministry of Energy, Mines, Water,
and the Environment forecasts a requirement for
approximately USD 11.5 billion in investment in
Morocco's energy sector in the next 6 years,
including USD 7.6 billion for electricity
production. Morocco's national energy strategy,
published in March 2009, anticipates adding 6,600
megawatts (MW) of new electricity production
capacity by 2020. The strong share of renewable
energy projects in the future generation plans
(about one-third of total new capacity) appear to
align well with the Fund's objectives for
investment.


3. (U) Ministry of Energy and wind power trade
journals variously estimate Morocco's wind
generation potential at 10,000 to 21,000 MW.
Morocco currently has approximately 300 MW of
installed wind generation capacity, with a goal of
1500 MW installed by 2012 and 2200 MW installed by

2020. The Ministry of Energy expects to generate 20
percent of the country's electricity supply from
wind by 2020.


4. (U) Other renewable energy sources under
development include hydroelectric (currently 1600 MW
installed capacity, and 440 MW programmed for
construction),and solar thermal and photovoltaic
(PV) (20 MW solar thermal plant under construction,
and plans to install 200,000 PV kits for remote
households, for a total generation capacity of over
400 MW).

Project Financing
--------------


5. (SBU) The National Electricity Office (ONE) has
no plans to finance or construct new production
facilities itself, preferring to sign power purchase
agreements (PPAs) with independent power producers
(IPPs),of which two exist already in Morocco
(including Morocco's largest power plant, currently
owned by an Emirati firm, but previously owned by an
American energy company). Moroccan Ministry of
Energy and ONE officials have repeatedly stressed to
Embassy officers that Morocco invites additional
foreign firms to operate IPPs in Morocco, as well as
foreign investors to provide the capital necessary
to finance power projects. However, foreign firms
working in renewable energy in Morocco tell us that
in spite of government policies welcoming foreign
investors, they have experienced delays in obtaining
bureaucratic authorizations required to commence
their projects.


6. (SBU) Although Moroccan banks are healthy and
have not significantly scaled back lending in the
global economic downturn, there are a large number
of capital-intensive developments in Morocco (in
housing, transportation, tourism, and other
sectors). This means that Moroccan projects
frequently look abroad for financing. Traditional
sources, including Persian Gulf-based investors,
have dramatically reduced financing since 2007,
suggesting that U.S. financing would be welcome
here.


7. (U) The Mission has no information to add
concerning the local reputation of "US Renewables

Group, LLC," the prospective fund manager.

KAPLAN