Morocco Green Hydrogen Offer

The much-anticipated Morocco Hydrogen Offer (the Offer) was finally unveiled on March 11, 2024, generating excitement among developers and investors.

Designed to encompass the entire value chain of the green hydrogen sector, the Offer was crafted by the Government of Morocco to cater to the requirements of developers and investors. The aim is to establish the Kingdom of Morocco as a competitive player in this "nascent high-potential green hydrogen sector" by optimizing benefits for the nation while offering investors and developers a "holistic, transparent, and pragmatic approach" to develop and invest in their green hydrogen projects within the Kingdom. Many hydrogen industry players and observers are hopeful that this initiative will finally catalyze long-awaited projects and ventures.

Defining the Offer's Reach

The Offer targets investors and developers who intend to produce green hydrogen and its derivatives on an industrial scale in the Kingdom of Morocco, either for export or domestic consumption. It is applicable to integrated green hydrogen projects, which include the generation of renewable electricity, hydrogen production through electrolysis, and the conversion of green hydrogen into green ammonia, methanol, synthetic fuels, and other derivatives.

Investors and developers who focus on only one or a few segments in the upstream chain of the green hydrogen sector, possibly including the downstream chain, or solely in the downstream chain, are still eligible for the general national programs established by the Kingdom of Morocco to attract investments. These programs include the new investment charter established by law No. 03-22 dated December 9, 2022. However, investment applications for such projects would be handled by the Regional Investment Centres (Centre Régional d'Investissement) or the Moroccan Agency for the Development of Investments and Exports (Agence Marocaine de Développement des Investissements et des Exportations (AMDIE)), rather than the bodies established and identified by the Offer.

It remains to be seen whether non-integrated green hydrogen projects, particularly infrastructure projects developed in the context of green hydrogen project(s), can still benefit from the process outlined in the Offer in practice.

Land Distribution within the Offer

The Government of Morocco has identified substantial public land (approximately one million hectares located within the wind energy development zones and the solar energy development zones established by the ordinances enclosing the coordinates of these zones) with high potential for green hydrogen production. This land will be allocated to developers for the development of green hydrogen projects as part of the Offer. The allocation will be carried out in two phases, with phase one comprising 300,000 hectares divided into lots ranging from 10,000 to 30,000 hectares. Investors and developers who express interest in a larger area will be allocated approximately 30,000 hectares as part of phase one and will be provided with visibility on the overall land that may be made available to them during phase two.

The Offer recognizes the importance of providing investors and developers with certainty about the availability of land for their projects. It establishes a process for the identification, allocation, reservation, and ultimately, the leasing of the land to the relevant project company.

Shared Infrastructure for the Green Hydrogen Sector

The Offer acknowledges the importance of the availability of shared facilities required for the operation and maintenance of integrated green hydrogen projects. To that end, it envisages the development, construction, operation, and maintenance of competitive shared infrastructure within the framework of public-private partnerships. Such infrastructure includes ports, transmission lines, pipelines (including the GME and the Nigeria-Morocco pipeline), and water desalination plants.

Investor Selection and State Contracting Procedures

The Offer outlines, in high-level terms, a detailed process for the selection of eligible investors/developers and provides an outline of the agreements anticipated to be entered into between the selected investors and the Kingdom of Morocco.

The Offer outlines a staged approach for the development of integrated green hydrogen projects.

Investors wishing to develop integrated green hydrogen projects in Morocco within the framework of the Offer are invited to communicate their offers to the Moroccan Agency for Sustainable Energy (MASEN). There is no prescribed form for the offers to be submitted to MASEN. However, such offers must detail, at a minimum, the information used for the assessment criteria set out below. Investors who have initiated feasibility studies before the date of the Offer will be integrated by MASEN into the process outlined by the Offer. The evaluation of the offers submitted by the investors will be based on a set of criteria relating to the creditworthiness of the investors, their track record, and the anticipated impact of their projects on the Kingdom of Morocco, especially in terms of anticipated horizontal and vertical industrial integration.

Upon the selection of an investor or a group of investors, the investor is allocated a plot of land, and a preliminary land reservation agreement would be entered into between the investor(s) and the Kingdom of Morocco (a Preliminary Land Reservation Agreement). Each Preliminary Land Reservation Agreement will be for a six-month term (extendable by mutual agreement between the parties) and is expected to cover the period necessary for the investor(s) to perform the preliminary front-end engineering and design (Prefeed). The Offer sets the end of Q3 2024 as the target date for the execution of Preliminary Land Reservation Agreements in relation to the plots of land corresponding to the phase one (300,000 hectares) referred to above.

At the expiry of the term of a Preliminary Land Reservation Agreement and provided the investor(s) have complied with their obligations thereunder, the investor(s) and the Kingdom of Morocco shall negotiate and enter into an advanced feasibility study agreement (a Detailed Feasibility Study Agreement). Each Detailed Feasibility Study Agreement is expected to define the objective to be achieved by each integrated hydrogen project before a final investment decision is made and a framework investment agreement (a Framework Investment Agreement) is entered into with the Kingdom of Morocco in relation to said project.

The Offer does not refer to standard form documentation to be used with the various investors, and as such, the terms and conditions of the agreements entered in relation to each integrated green hydrogen project can be freely negotiated between the investors and the Kingdom of Morocco. 

Investment Incentives Highlighted by the Offer

While the Offer does not introduce a specific investment incentive scheme for integrated green hydrogen projects, these projects are eligible for the investment incentives outlined in law No. 03-22, dated December 9, 2022, which pertains to the investment charter. To access these incentives, investors must sign an investment agreement with the Moroccan State, which can provide benefits such as:

Þ   Exemptions from custom duties on imports

Þ   Tax exemptions, including import VAT exemptions for equipment, materials, tools, related parts, spare parts, and accessories associated with the project, as well as VAT exemptions for locally purchased investment goods

The law establishes two distinct, non-cumulative investment schemes: the main investment incentive scheme and the specific investment incentive scheme for strategic projects.

To qualify for the main investment incentive scheme, which grants up to 30% of the investment amount, a project must either:

Þ   Create more than 150 stable jobs, or

Þ   Involve an investment equal to or greater than MAD 50,000,000 and create at least 50 stable jobs

Various premiums may be awarded under the main scheme, based on factors such as the creation of stable jobs or the presence of a gender ratio equal to or greater than 30%.

Notably, projects implemented in specific territories can benefit from a territorial premium to promote territorial equity. These targeted territories may allow for a 10% premium for Category A or a 15% premium for Category B.

Furthermore, investments in "promising sectors," such as renewable energies, are eligible for a 5% premium.

The maximum subsidy for projects focused on renewable energy production is MAD 60,000,000,000.

To be eligible for the specific investment incentive scheme for strategic projects, an investment may:

Þ   Be equal to or greater than MAD 2,000,000,000, and

Þ   Meet one of the following criteria:

Þ   Effectively contribute to ensuring water, energy, food, or health security in Morocco

Þ   Have a significant impact on the number of direct or indirect jobs created

Þ   Have a significant impact on Morocco's economic reach and strategic positioning on a regional, continental, or international scale

Þ   Generate knock-on effects on the development of sectoral ecosystems or activities

Þ   Significantly contribute to the development and ownership of leading-edge technologies

The investment agreement provides certain advantages to the investor but also requires the investor to adhere to the commitments outlined in the agreement, such as the investment program, implementation timeline, job creation, and the use of local suppliers whenever possible. It is important to note that the State can challenge the investment agreement if the investor fails to implement the required investment program or does not comply with their contractual and legal obligations under the agreement or with the provisions of the Moroccan Tax Code (Code Général des Impôts) applicable to the incentives granted under the investment agreement.

Governance and Oversight of the Green Hydrogen Initiative

The Offer recognizes that its success is inherently tied to the implementation of a streamlined process for investors, ensuring a clear approach and visibility in the execution of their projects.

To this end, MASEN has been designated as the primary point of contact and focal interlocutor for investors. Additionally, the Offer establishes a steering committee chaired by the Chief of Government (the H2 Steering Committee) and an investment committee (the H2 Investment Committee), both responsible for overseeing green hydrogen projects. The roles of MASEN, the H2 Steering Committee, and the H2 Investment Committee are clearly defined within the Offer.

References: 

• The geographical zones that do not benefit from the territorial premium are Benslimane, Berrechid, Casablanca, El Jadida, Médiouna, Mohammédia, Nouaceur, Settat, Marrakech, Kénitra, Rabat, Skhirate-Témara, Agadir Ida-Outanane, Fahs-Anjra, and Tanger-Assilah.

• In accordance with Moroccan law, renewable energy production projects must be carried out within the pre-defined areas within the Moroccan territory for the development of wind and solar projects as fixed by decree.

• Article 7 of Decree No. 2-23-1 dated February 16, 2023, relating to the implementation of strategic investment projects.

• Article 15 of Decree No. 2-23-1 dated February 16, 2023, relating to the implementation of strategic investment projects.

• MASEN is tasked, inter alia, with the preliminary selection of the proposed investments in the green hydrogen sector and their submission to the H2 Investment Committee.