Bank of China contributes to $851 million syndicated loan for the 2 GW Al-Dhafra Solar Power Project

Project narrative

On December 22, 2020, financial close was reached on the 2 GW Al-Dhafra Solar Power Project. To finance the project, a syndicate of banks — including Bank of China (BOC), acting through its Shanghai Branch — signed a $851 million syndicated loan agreement with Dhafra PV2 Energy Company for the 2 GW Al-Dhafra Solar Power Project. The borrower was expected to use the proceeds of the loan to partially finance a $1.028 billion commercial (EPC) contract with China Machinery Engineering Corporation (CMEC), which was signed on October 23, 2020. Dhafra PV2 Energy Company (also known as Dhafrah Solar Energy Power Company LLC) is a special purpose vehicle (SPV) and joint venture between EDF Renouvelables S.A. (EDF-R), a subsidiary of Electricité de France S.A., Jinko Power (HK) Company Limited, a subsidiary of Jinko Power Technology Co. Ltd., Abu Dhabi Future Energy Company PJSC (Masdar), and Abu Dhabi National Energy Company PJSC (TAQA). TAQA holds a 40% ownership stake, while Masdar holds a 20% ownership stake, EDF-R holds a 20% ownership stake, and Jinko Power holds a 20% ownership stake.. The limited recourse loan was structured as a four-year hard mini-perm, with Emirates Water and Electricity Company (EWEC) backstopping the refinancing risk via a tariff readjustment mechanism. It reportedly carried an interest rate of LIBOR plus 80 basis points. In addition to BOC acting through its Shanghai Branch, the following banks participated in the syndicated loan for this project: BNP Paribas Fortis S.A./N.V., Crédit Agricole Corporate and Investment Bank (Crédit Agricole CIB), HSBC Bank Middle East Limited, MUFG Bank, Ltd, Standard Chartered Bank, and Sumitomo Mitsui Banking Corporation (SMBC). MUFG Bank, Ltd. acted as Mandated Lead Arranger, Hedging Bank, Global Facility Agent, Offshore Security Trustee and Offshore Account Bank for this project BNP Paribas Fortis S.A. N.V. acted as the sole Bookrunner, the Documentation Bank, a Mandated Lead Arranger (MLA), and a Hedge Provider. It also served as the sole Equity Bridge Loan (EBL) Lender to EDF Renouvelables and Jinko Power, and EBL Facility Agent. The project sought to construct a solar farm with a capacity of 2 GW on a 20 square kilometer site in the Al Dhafra Region of the Emirate of Abu Dhabi, 35 kilometers away from Abu Dhabi. The project was expected to power up to 160,000 homes and reduce Abu Dhabi's carbon emissions by more than 2.4 million metric tons annually. Once constructed, Al Dhafra Solar Plant was to be the world's largest single-site photovoltaic (PV) solar plant. The plant included innovations in solar technology through its employment of crystalline bifacial solar technology, which utilize both sides of solar panels to generate energy. The plant was described as a 'milestone...in the field of green energy' under the Belt and Road Initiative (BRI). On July 28, 2020, EWEC and Jinko Power and EDFR signed a 30-year Power Purchase Agreement (PPA) for the Al-Dhafra Solar Plant. Under this long-term PPA, the tariff for the plant was set at $0.0135 USD per kWh on a levelized cost of electricity (LCOE) basis, which was lowered to $0.0132 USD per kWh at financial close. EWEC launched the process for the construction of a solar plant in June 2019 under the independent power producers (IPP), which EDF Renouvelables and Jinko Power's consortium won. CMEC was the general EPC contractor responsible for the design, supply, construction, warrant, operation, and maintenance of the plant. The contract had a construction period of 22 months. CMEC awarded a subcontract to China Energy Construction Group Hunan Thermal Power Construction Co., Ltd. for the construction and installation of the pooling station, the inverter of the plant, the laying of the DC cable, and the installation of the box transformer. Hitachi ABB Power Grids was responsible for the supply of large generator step-up (GSU) transformers, protection and telecommunication systems to CMEC. CMEC signed an inverter equipment agreement with Sungrow Power Supply Co., Ltd. for the provision of Sungrow’s string inverter SG250HX and the supporting medium voltage system for the project. Arctech Solar received a contract to provide its SkySmart II trackers for the power plant. The Timken Company provided high-precision drives to help position solar panels. Construction began on January 16, 2021 and the project created about 5,000 jobs, of which 95% where local hires. The power plant was originally expected to be commissioned within 22 months of the start of construction (April 17, 2023). However, CMEC faced implementation obstacles related to the Covid-19 pandemic and related supply chain problems. The project required obtaining 4 million bifacial solar PV modules from the Chinese mainland to be mounted on 30,000 single-axis sun trackers. More than 10,000 containers were necessary to ship these modules to the UAE. The desert's complex and varied topography also posed engineering problems. The project site's proximity to the sea means that the subsoil is highly saline and alkaline. Therefore, to protect the piles, whose ends go deep into the ground, from corrosion, concrete had to be poured into the holes during piling works. The high water level to the northeast caused the soil to collapse during the piling process, so sunken soil choked the burrowed holes. This problem was solved by inserting plastic tubes to anchor the soil before burrowing. Loose soil in the dune-dominated southeastern region was another problem until it was displaced and concrete was substituted to provide a more stable structure. Construction was completed on December 30, 2022. By April 2023, the Al-Dhafra power plant was operating at full capacity. It was successfully handed over to the project owner on June 30, 2023. It had already produced 3.6 billion kilowatt-hours of clean electricity by the time of its official inauguration on November 17, 2023, CMEC reportedly raced to get the project done in time for the COP28 climate summit in December 2023.