The Middle East and North Africa (MENA) region has recently seen a surge of interest in developing renewable energy, in particular solar energy projects.
In almost all cases, the projects are procured on an “independent power project” (IPP) model. As further described in the next section, under this model, a government entity enters into a long term, typically 20–25 year, power purchase agreement (PPA) with a private sector entity to purchase power at a fixed price from the project.
Typically, the private sector will enter into project financing arrangements with lenders (commercial banks, multi-lateral agencies, export credit agencies, etc.) whereby the lenders are repaid from the revenue stream generated by the project.
In recent years, a number of factors have led to Islamic financing gaining ground in the project financing market in the MENA region.
