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As Algeria embarks on a transformative journey toward a sustainable economy by 2050, the recent enactment of the 2025 Finance Law marks a pivotal moment in the landscape of foreign investment.
This legislation allows for international funding of projects deemed to be of national interest across all sectors, with particular significance in the energy domain. Notably, the focus on renewable sources—especially green hydrogen—positions Algeria as a potential key player in satisfying a portion of the European Union’s energy demands.
Historically, foreign investment in Algeria faced hurdles due to restrictive regulations, limiting access to vital financing for renewable energy projects. However, the new law seeks to shift this paradigm, marrying public and private investments and fostering innovative public-private partnerships.
This opens the door to multidimensional funding sources, potentially enhancing the capacity for substantial infrastructural improvements necessary for both local energy needs and exports.
While the enthusiasm surrounding this legislative change is palpable, it is essential to adopt a measured perspective. The success of these reforms will hinge on their practical implementation and the establishment of a conducive investment climate.
With Algeria currently emitting 25 gigatons of carbon, the imperative for clean energy infrastructure and robust financing mechanisms has never been clearer. As stakeholders navigate these new regulations, a cautious optimism prevails regarding the tangible impacts anticipated by 2025.
The future of renewable energy investment in Algeria is poised for evolution, yet the journey ahead requires careful navigation to translate policy into practice effectively.
Algeria is on a clear trajectory to achieve a sustainable economy by 2050, primarily through Sonelgaz’s Energy Transition (ER) Program and the Ministry of Energy’s green hydrogen roadmap.
The country aims to satisfy 10% of the European Union’s hydrogen needs, sourcing 75% from solar and 25% from wind energy. Currently, Algeria emits 25 gigatons of carbon, with only 2% coming from renewable sources.
This situation underscores the urgent need for a robust clean energy infrastructure and substantial investment in renewable energy, essential for both local consumption and EU exports.
Investors in Algeria’s renewable energy sector can benefit from a stable legal framework, as established by the Investment Law, which mandates that the effects of any future revisions or repeals of the investment law will not apply to investments made under the same law, unless expressly requested by the investor. In addition, they benefit from tax incentives, including exemptions lasting from three to ten years, are in place to promote investment.
The recent reforms of the finance law enhances opportunities for investment in the energy sector, facilitating full foreign ownership of companies; however, there is an exception for the strategic sectors and for the importation of goods for resale in the same condition, which requires a 51% partnership with a local resident.
Moreover, a transfer guarantee is granted to foreign investors, it is the right to transfer profits and dividends, means net income from the sale of shares, investment capital and liquidation proceeds, if the foreign investment equals or exceeds 25% of the total cost of the investment project.
Land allocations present certain challenges, but Algeria’s recent digital allocation system facilitates project development and underscores the need for clearer concession regulations. Economic land intended for investment projects is thus granted by mutual agreement for a renewable period of thirty-three (33) years, with the option to convert into ownership.
Despite a promising legal foundation dating back to the 1970s, Algeria’s renewal efforts have stagnated since the 2001 Electricity Law. To attract private investments and stimulate demand, enhancing public policies is paramount.
This modernization is critical for fostering a favorable investment climate and ensuring that Algeria can capitalize on its renewable energy potential, ultimately securing gas supplies for Europe while driving sustainable development.
Financing renewable energy projects in Algeria has traditionally posed significant challenges, primarily due to strict regulatory barriers limiting access to international funding. However, a pivotal change was introduced, allowing external financing for projects deemed of national interest. Thus, projects of national interest can be funded by international institutions and other financial partners.
This said, two safeguards are in place, the first is that the funding is contingent on the approval of the Council of Ministers, the second is that the Ministry of Finance has the exclusive powers to seek this funding This shift is set to invigorate the renewable energy sector, previously constrained to local financing sources like bank loans and equity.
Notably, project-financing models akin to those used in desalination projects are gaining traction, exemplified by a DZD 3 billion investment secured by a solar energy initiative through BNA.
The 2025 Finance Law Project seems to encourages the adoption of innovative financing structures such as the Independent Power Producer (IPP) and Public-Private Partnerships (PPP). These models aim to enhance financial mobilization and bring in the necessary expertise for renewable energy development.
This progressive regulatory framework signals Algeria’s commitment to addressing long-standing financing challenges and facilitating investment in this crucial sector.
Investors seeking to undertake renewable energy infrastructure projects require robust financial assurances, particularly price guarantees from Sonelgaz, the state electricity company. The absence of clear pricing and purchase guarantees diminishes investment attractiveness.
Moreover, Sonelgaz’s monopoly and the cumbersome tender process hamper fair energy purchase agreements. To overcome these hurdles, authorities must establish transparent regulations supporting direct energy sales, implement stable pricing mechanisms, and streamline administrative procedures, thereby fostering significant growth in Algeria’s renewable energy sector.
This evolving legal landscape positions Algeria as an emerging market for renewable energy investment, offering substantial opportunities for stakeholders.
In the burgeoning renewable energy sector of Algeria, effective regulation of disputes is imperative. As technical issues and varying stakeholder interests often give rise to conflicts, establishing a robust framework for dispute resolution becomes essential to safeguarding investments.
Although specialized commercial courts exist12 , their efficacy can be inconsistent, particularly for complex disputes requiring expert legal intervention. Therefore, bolstering a strong, impartial national arbitration system is vital to enhance investor confidence.
Simultaneously, international arbitration offers a viable pathway, supported by Algeria’s adherence to the New York Convention, which protects foreign investments through arbitration clauses.
Recent legislative reforms aimed at streamlining investment processes are positive steps; however, persistent governance challenges necessitate stable regulatory structures to attract sustainable, long-term investment in the renewable energy domain.
As business lawyers, our role extends beyond mere litigation; we facilitate comprehensive frameworks that enable successful project implementation and minimize risks, ultimately fostering an environment conducive to investment and development.
Take the next step and request your free consultation to discuss how we can help with your unique legal needs.
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Looking to establish or expand your business in Algeria?
Gain clarity on the country’s legal environment with this 65-page guide that covers the essentials:
Legal frameworks, Taxation, Permits, Trade rules, IP protection, and Dispute resolution.
Looking to establish or expand your business in Algeria?
Gain clarity on the country’s legal environment with this 65-page guide that covers the essentials:
Legal frameworks, Taxation, Permits, Trade rules, IP protection, and Dispute resolution.
