DFF - Project Green Light II

Location:

Morocco

Project number:

52261

Business sector:

Natural resources

Notice type:

Private

Environmental category:

B

Approval date:

21 Oct 2020

Status:

Signed

PSD disclosed:

04 Dec 2020

As permitted by paragraph 2.6 of Section III of the Access to Information Policy, disclosure of this PSD was deferred in accordance with paragraph 1.4.4 of the Directive on Access to Information.

Project Description

Provision of up to USD 25 million senior secured reserve based loan (with no upstream gas drilling financing) in favour of SDX Energy Morocco Ltd to replace inefficient and polluting heavy fuel oil burners in the region. The facility will have 5 year tenor and will be split into 2 tranches. A committed tranche of USD 10 million will be used to connect local industries to the Company's existing gas fields in the Gharb region. An uncommitted tranche of up to USD 15 million is contingent on SDX Morocco acquiring further natural gas assets in Morocco, which would be monetised through infrastructure investment including the potential usage of state-of-the-art Compressed Natural Gas ("CNG") technology.

Project Objectives

The operation will enable SDX Morocco to finance part of its USD 65 million investment plan to expand its operations in Morocco and thus also supports the country's efforts to put gas, alongside renewable energy, at the centre of its decarbonisation plan in response to COP 21 commitments.

Transition Impact

ETI score: 60

The Transition Impact of the Project is expected to derive from the following qualities:

i Competitive: The project will support a private sector operator selling gas directly to private sector customers in the downstream sector, against a background of market dominance by state-owned ONEE and ONHYM which still controls 90% of the market.

i Green: The project will facilitate the substitution of polluting oil products (primarily, LPG) with cleaner natural gas in Morocco's industrial sector, with the latter expected to lead to significant emissions savings of approximately 200,563 tCO2e over 10 years. The incremental gas supply from SDX will be entirely used in the local industrial zone and replace equivalent amounts of energy from LPG. The project has c.25% GET component, validated by the Bank's clearing house

Client Information

SDX ENERGY MOROCO JERSEY LTD

SDX Energy Morocco Ltd is a wholly owned subsidiary of SDX Energy Plc listed on the AIM market of the London Stock Exchange.

 

EBRD Finance Summary

USD 25,000,000.00

Up to USD 25 million senior secured reserve based loan consisting of committed tranche of USD 10 million and uncommitted tranche 2 of USD 15 million. The commitment of this tranche will be subject to commercial and technical due diligence of additional natural gas assets in Morocco  satisfactory to the Bank and its approval will be delegated to Management.

Total Project Cost

USD 65,000,000.00

The transaction will be part of SDX's Morocco USD 65 million capex plan to further expand its operations in Morocco ("the Project").

Additionality

Financing Structure :

- EBRD offers financing that is not available in the market from commercial sources on reasonable terms and conditions, e.g. a longer grace period. Such financing is necessary to structure the project. EBRD offers an RBL structure which fits the best for the development nature of the project but which is not available in the local market. The Moroccan oil and gas private sector is at its early stage of establishment and thus attracts little interest from financial institutions given their lack of expertise in the oil and gas sector.

- Crisis response: EBRD financing effectively bridges a financing gap due to adverse market conditions. The EBRD would fill the financing gap in Morocco given the current lack of foreign currency liquidity in the local banking sector.

Risk mitigation:

- EBRD's long-term relationship with a client provides comfort to the client to be willing to take on more risk and/or finance, enabling outcomes such as innovation or expansion into new markets.

- EBRD provides comfort to clients and investors, financial or strategic, by mitigating non-financial risks, such as country, regulatory, project, economic cycle, or political risks. EBRD has a longstanding relationship with the company supporting its development and expansion in the market dominated by the state-owned enterprises. EBRD financing of the project will help to mitigate nonfinancial

risks and support SDX's entrance into new gas fields delivering new supply to the industrial users, which currently use LPG and oil as the only alternative energy sources in the region.

Environmental and Social Summary

Category B (2019 ESP).  ESDD has been carried out to date using the ESDD COVID-19 approach and has involved remote review on the investment plans and Q&A with client management.   The Bank is familiar with the operations in the Gharb region, having visited these as part of the due diligence for the existing Project, and the client is currently implementing that Project in line with the Bank's Performance Requirements.  The proposed additional capex in Gharb involves similar EHSS risk to that of the existing operation and the client will be required to apply their existing risk management practices to that element of the Project.  The potential works at the additional natural gas assets would involve investment in production and transportation infrastructure to provide supply to new customers in the region who currently utilise other sources of heat and energy.  The EHSS risks associated with such works are similar to those posed in the Gharb region and the client is required to apply their corporate risk management practices to any assets acquired. These actions described here have been agreed with the client in the form of an Environmental and Social Action Plan.  A site visit to any acquired assets would be a Condition Precedent to the disbursement of funds for the works required.

Company Contact Information

Nick Box
BoxN@SDXEnergy.com
+44 (0) 203 219 5653
www.sdxenergy.com
38 Welbeck Street, London, W1G 8DP

PSD last updated

04 Dec 2020

Understanding Transition

Further information regarding the EBRD’s approach to measuring transition impact is available here.

Business opportunities

For business opportunities or procurement, contact the client company.

For business opportunities with EBRD (not related to procurement) contact:

Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

For state-sector projects, visit EBRD Procurement:

Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

Specific enquiries can be made using the EBRD Enquiries form.

Environmental and Social Policy (ESP)

The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”.  The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.

More information on the EBRD’s practices in this regard is set out in the ESP.

Integrity and Compliance

The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.

OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.

Access to Information Policy (AIP)

The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.

Specific requests for information can be made using the EBRD Enquiries form.

Independent Project Accountability Mechanism (IPAM)

If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).

IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.

Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM  via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.

 

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