An interview with Yago Mancebo, Investment Manager, Masdar

When the Request For Qualifications

[RFQ] for Noor II and III came out we started talking to companies we knew well through our experience with Torresol and Shams. However, this was the first bidding process in which we had participated on the bidding side here at Masdar. At Shams 1[100MW project in Abu Dhabi] and on other projects we were on the procurement side of the projects, so we had to learn about this process as an organization.

Our partner for Torresol [Spanish company operating the Gemasolar plant] is SENER, but SENER was already working with ACWA for the first Ouarzazate project [now called Noor I] and wanted to continue their work, so we ruled them out. ACWA have their own strategy for Morocco – they have been there since the first process and had already established their own consortium and strategy.

Abengoa [partners with Masdar and Total on the Shams 1 project] have their own strategy and usually are the developer, EPC contractor and owner. In this sense, Shams is a different story because it was a Request For Proposals [RFP]. We tendered the EPC and then (like any other IPP in Abu Dhabi and the region) you are the majority shareholder as a local company or local entity, with the foreign shareholders as bidders. The experience with Shams was fine, Abengoa and Total are good partners, but I don’t think we were quite aligned in terms of objectives and strategy with Abengoa in the case of the Moroccan bidding process.

So in the process of getting the consortium together, one of the missing parts was experience of the bidding process. We have a wealth of experience in CSP but as explained, we are new to the bidding process and for that reason we made the decision to join forces with GDF Suez, who is the biggest Independent Power Producer [IPP] in the world. This made for the perfect partnership, GDF with their experience in bidding and Masdar, with its experience in CSP We provide the CSP side of the business, they provide the IPP and bidding process of the business, and I think it is working well.

Another reason for joining forces with GDF Suez was that these are big projects, which therefore require big companies behind them. They have experience in operating big plants, and although it is not in CSP plants, in the end, the power block is the same so that is a good thing for us.

Both parties are aligned in terms of long term objectives for the project. Both organizations share a long-term view renewable energy investment opportunities, and again that supports the strength of this partnership. In our experience, when corporate values and business objectives are shared between partners it reduces the risk of complications further down the line.

In principle, the consortium’s decision-making process is like a joint venture – 50/50. There is no decision that is made by either partner without consulting the other. At Masdar we are leading the solar and EPC parts of the organization, because we have more experience in CSP. Despite having a smaller team than GDF Suez, our solar and EPC knowledge based on our Torresol and Shams experience adds tremendous value. In return, GDF Suez support us with their vast experience in Power EPC contracts.

With Noor III confirmed to use tower technology, we had discussions with GDF Suez about the choice of EPC contractor for the process. ACS Cobra is one of the most experienced contractors in CSP and fits our requirements of resources and capabilities – both technical and financial. We worked with them on the three Torresol plants and we are very happy with the performance.

We knew that ACS Cobra was working with SolarReserve on Crescent Dunes in the US. Given that Sener and SolarReserve are the only two companies that have the molten salts tower technology that we know works, and the good relationship we have with ACS Cobra, we decided to replicate the relationship they had in the US. So we chose to work with SolarReserve.

In terms of the relationship for Noor III, SolarReserve have a minority stake and are in the EPC contract. We will consult with them on anything that affects them as a minority shareholder, but that’s mainly related to shareholder issues in the company, not the bidding process. They help us because they know their technology better than anyone and they can optimize the tower. This is a really strong feature of our consortium.

Part 2: Lessons and challenges with partnerships

The main challenge with forming a good partnership in CSP is that there are relatively few players in the industry! That GDF Suez is starting to get into the CSP market is positive, because we now have a least one more company interested in this technology. Looking at the example of ACWA, they have their own strategy and they prefer to be the leading partner in every sense, and that for us creates some difficulties because we want to be an active investor.

Further down the ecosystem, there are not that many EPC contractors with experience and you need to be quick in selecting your EPC contractor. That was a big part of the negotiation, trying to arrange a consortium as quickly as possible and with at least a guarantee, or as much guarantee as possible, that you are going to be competitive and with measured risks.

A wider problem for CSP is the lack of a big number of companies that are investing in the technology right now. I believe that this is going to be solved with the new markets and we hope to see more and more companies coming in.
The main experience we take from Shams 1 and Torresol is that the technology is still quite new and there are elements to it which can be refined and improved. This provides a good opportunity for new developments. It’s important to understand how you optimize the plants, and in this respect our experience with different technologies is really important. Parabolic trough is a more mature technology, but tower is quite new and we have gained experience from Gemasolar in Spain. All of the lessons we learnt during the construction and commissioning are vital and we are now applying our experiences.

One of the biggest lessons relates to suppliers. There are not that many suppliers out there, and things that work for other technologies do not necessarily work in this technology. For example, you know what kind of pumps you need to use, which ones are the best for this kind of technology and the use you are going to give to them. This is one thing that you don’t know if you don’t have the hands on experience of what happened in previous plants. There are many things that you can only know with experience; the theoretical understanding is important but reality is often not quite so simple.

Part 3: Masdar’s plans for CSP

Overall, our basic strategy is to be a minority shareholder – but with a big minority stake – ideally about 40%. We have a constraint, and that is that we are a very small company, based exclusively in Abu Dhabi so that obviously has its limitations in terms of reach and in terms of capabilities. We look to have an active role in the projects and grow steadily. We rely on our partners to fill the gaps that we have to be able to have a big presence so we look for companies that can deploy a full team for the construction and operational process and we try to complement and add value by bringing our experience, global influence and reputation.

We are very interested in the international markets and we are always following developments. We are obviously very interested in anything that happens in MENA, we are focusing on Morocco, and we are active in wind and PV in Egypt. We also have a wind offshore investment in the UK (London Array) and we are looking to expand that, if possible. We have also been looking at South Africa for quite a time now – but we are being careful not to overstretch ourselves.

Clearly we are interested in what happens in Saudi Arabia and we have high hopes that we can play an important role in their diversification plans. However, we are also very interested in what might happen in Oman and Jordan too. We are right now building a wind project in Jordan and we are also looking to participate in PV tenders there too. Principally, we are focused on PV, CSP and wind, which will be our continuing strategy for the near future; however we are also investing in CCS technology in Abu Dhabi in partnership with ADNOC.

Morocco will be important for us. It is a big project and a big first step for us in the IPP arena, so we want to learn as much as possible.
Yago Mancebo, Investment manager at Masdar and Wim Alen, Business Developer Manager at GDF Suez, will be participating in a panel discussion on creating partnerships for CSP projects at MENASOL (6-7 May, Dubai) alongside the other key developers active in the region, such as ACWA Power, Abengoa and SolarReserve.