RE Auctions and Bankability

18/12/2019

Out of the numerous designs, modalities and structures, Uzbekistan, given its conditions, has chosen the most appropriate form: a site-specific, technology-specific, pay-as-bid, multi-stage televised auction, considers Jannat Salimova-Tekay, Partner at Unicase.  This, coupled with the assistance from the IFC’s Scaling Solar team, has resulted in truly phenomenal results: a 100MW worth of greenfield solar capacity has been procured at a staggering USc2.64 per kWh.  The winner of the auction, Masdar of UAE, has been chosen in a highly competitive process among the equally strong rivals from Europe and China.

However, with this success in mind, Jannat believes that the auctions in Uzbekistan will need to evolve.  This will require clear answers to four questions:

WHY does the country need renewable energy?

WHAT do they want to procure?

HOW is the auctioning process set?

and

WHO can participate?

The future setup of the auctions in Uzbekistan will very much depend on the answers that the Government will give tothe market and the investors. Is it the urgent capacity needs that Uzbekistan needs to address? Or is it the desire to expand renewable capacities in the energy mix? Or perhaps there is broader need to develop specific technologies and the market capabilities in Uzbekistan?

When conducting an auction, any auction, bankability is an important factor for investors. It can be broadly defined in two aspects: the bankability of the auction process and the bankability of the auction documents.  Therefore, it covers the following provisions:

1.Bankable PPA and GCA

2.Take or pay Curtailment

3.Credible offtaker

4.Currency risk indexation

5.Sovereign guarantee

Under the contract obligations, lendersshould be flexible enough and provide the following conditions for the sellers :

1.Clarity in grid connection conditions

2.Termination guarantee

3.Quantifiable curtailment risk

4.Legislative stability

5.FX-denominated tariff

6.International arbitration

7.Step-in rights and LDA

Based on the deep knowledge of Uzbekistan’s law regulation of RE auctions, Jannat believes that Uzbekistan has everything necessary for successful development of RE in the region.