An overview of the Tunisian Authorisation Regime for Renewable Energy

Published: 14/01/21

The law relating to renewables in Tunisia (Law No 2015-12, the “Law”) as complemented by Decree No 2016-1123 and No 2020-105 (the “Decrees”), sets out the conditions and procedures for the implementation of projects for the production and sale of electricity from renewable energy sources.

The Law was adopted due to the need to expand the installed capacity to ensure energy security in Tunisia, increase the share of renewable energy in the country’s energy mix and invite more private capital to participate in the sector. The Law aims at encouraging and facilitating tenders for private investors in the renewable energy sector.

Producing Electricity from Renewable Energy Sources in Tunisia

Pursuant to the Law, there are three regimes for producing electricity from renewable energies and selling it to Société Tunisienne de l’Electricté et du Gaz (“STEG”):

  • Self-generation:
    • Captive power projects;
    • Depending on the voltage, the developer may need an approval from STEG or an authorisation from the Ministry of Energy, Mines and Renewable Energies (the “Ministry of Energy”).
  • Concessions:
    • Projects above 10 MW of installed capacity for solar, photovoltaic, 30 MW for wind and 15 MW for biomass;
    • The Ministry of Energy issues a public call for tenders, after which the selected developer signs a concession with the Ministry of Energy. The concession is then submitted to the Parliament for review.
  • Authorisations:
    • Projects that are below the Concession thresholds and for Tunisian consumption only;
    • After selection, the developer signs an agreement (Accord de Principe) with the Ministry of Energy. To operate and produce electricity, the developer needs to obtain an authorisation issued by the Ministry of Energy.

This article deals with the Authorisations regime. Below, we detail and discuss the steps, obstacles and their practical consequences when obtaining an authorisation for producing electricity in Tunisia.

Getting an authorisation for producing electricity

We have summarised in the diagram below the main steps in order to get the authorisation from the Ministry of Energy.

Step 1 – Tender Process

First and foremost, the ability for a developer to bid for a project depends on the number of authorisations that the Minister of Energy will issue for a given year. Each year the Ministry publishes a notice setting out the national needs and requirements for electricity from renewable energy sources. The notice fixes the number of authorisations and concessions that will be issued for the year. In the near future, the annual notice should be replaced by a more comprehensive national plan. 

After evaluating the needs of the country in terms of energy capacity, the Ministry of Energy publishes calls for tenders. The form of a developer’s response to the Ministry includes the standard components of this type of RfP and tender process: the proposed tariff, the developer’s experience, the technical characteristics of the proposed power plant, the construction, operation and maintenance terms and conditions, a technical analysis, financial studies and data for the project. The developer is also expected to agree with STEG on the arrangements for connecting the power plant to the STEG network.

At this stage, there is one point in particular that should be of concern for the developer. In the proposal, the developer must identify the land on which he intends to build the future power plant as well as the land situation of this land. Land is not always registered in Tunisia, which can make the process of securing the land slower and more complex.

Step 2 – Accord de Principe

In order to select the bidders, the Ministry of Energy relies on the recommendations of the Technical Commission. The selection of bidders is divided into two parts: first the technical phase and then, for those bidders who have passed the first phase, the financial selection.

After selecting one or more bidders, the Ministry of Energy signs an agreement in principle (Accord de Principe) with the developer.

The agreement in principle is granted entirely on the basis of the technical description of the project provided by the developer in its proposal, the developer’s actual rights on the land, the financial model, and the proposed tariff.

It should be noted that the Law provides that the agreement in principle is valid for two years for photovoltaic projects and three years for other renewable energy sources.

Step 3: Power Purchase Agreement with STEG

According to the Decree, the developer should sign the Power Purchase Agreement within two weeks of the agreement in principle.

The form of Power Purchase Agreement to be concluded with STEG was published by Order of the Minister of Energy dated February 9, 2017. In Tunisia, Power Purchase Agreements are granted on uniform terms and are not subject to negotiation. This has raised many criticisms as the Power Purchase Agreement is said by many to contain concerns for the bankability of projects.

In our experience, below are some of the key issues[1]:

  • Effectiveness: the Power Purchase Agreement enters into force only upon commissioning and issuance of the ministerial authorisation to produce electricity. Until the Power Purchase Agreement is effective, the developer cannot claim any relief, including force majeure, change in law, termination, arbitration.
  • Deemed commissioning: there are no provisions with respect to deemed commissioning in the template agreement. To protect the developer and lenders of the project, we usually expect deemed commissioning and payment of deemed energy to occur, inter alia, in the event of political force majeure, unavailability of the grid, default by STEG.
  • Force majeure: we usually expect PPAs or other ancillary project documents to distinguish between ordinary and political force majeure events. In addition, change in law is not included as a force majeure event as it customarily is.
  • Termination payments: upon termination of the Power Purchase Agreement, STEG only has the option to purchase the plant at a price negotiated between the parties pursuant to an independent expert report. There is a risk that STEG elects not to purchase the plant and the developer would not be able to sell electricity to another customer (or the plant to another developer). In addition, termination payments are scheduled to be made in dinars, rather than hard currency, causing bankability issues.

However, we note that, as part of the funding of projects, the Ministry of Energy has agreed to sign comfort letters to resolve some of these issues.

Step 4 – Issuance of the authorisation

After the Power Purchase Agreement is signed with STEG, the developer may create and incorporate the project company in Tunisia. Once the project company is incorporated, it may sign any other contracts necessary for the project.

In the meanwhile, it should also obtain other permits and authorisations for the project.

As mentioned above, the authorisation is granted upon commissioning of the plant. The Ministry of Energy issues the authorisation to produce electricity after the Technical Commission has reviewed the request for authorisation.

The Ministry of Energy grants the authorisation for a period of twenty years.

National program of tenders

Tunisia’s ambition is to bring renewable energies to 30 % of its energy mix by 2030, representing an installed capacity of 4700 MW. To that end, in 2015, the Ministry of Energy announced the launch of the first phase of a national programme of tenders. This programme was expected to lead to the installation of about 1000 Megawatts (MW) of new capacity from renewable energies over the period 2016-2020 and about additional 1250 MW for the period 2021-2025.

Trinity International has been active in advising and representing multiple sponsors and lenders in respect of the renewable energy tenders, including advising a leading fund on the 30MW Sidi Mansour windfarm.

We remain happy to advise lenders and sponsor clients in more detail on renewables and other projects in Tunisia and across the wider region.

[1] This is not an exhaustive list of issues.

I’d like to learn more about a service you provide

I’m looking for

Copyright © 2023 Trinity International LLP | Legal and Disclaimer

Marketing by Unity Online