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.
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.
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
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
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
The transaction will be part of SDX's Morocco USD 65 million capex plan to further expand its operations in Morocco ("the Project").
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.
- 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
+44 (0) 203 219 5653
38 Welbeck Street, London, W1G 8DP
PSD last updated
04 Dec 2020
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