The Ministry of Electricity sent the power purchase agreement for the second phase of the feed-in tariff projects to the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) for review before negotiating with investors.
Sources at the ministry said that the agreement was only sent to two out of 10 banking institutions that showed interest in financing the project. The remaining parties withdrew from the first phase in protest of the condition of holding arbitrations in Cairo.
Yet, the sources noted that the agreement will be sent to the other financers within two weeks and these will receive notes from banks on terms of the contract until the end of November.
The second phase of the feed-in tariff system was launched on Saturday, with regulations and conditions that were announced by the minister of electricity in September. The price set stands at 8.4 cents per KW up to 50 MW. Moreover, investors are required to bring 70% of cost from foreign banks. Conditions also allow companies to move arbitrations outside Egypt in case of conflicts.
The project’s duration is 12 months. Each company will have to secure letters from banks agreeing to fund the projects within six months.
Furthermore, the contracts will last for 25 years, while the payment method will be 30% of the tariff value calculated on the basis of the exchange rate against the US dollar at the time of the tariff issue. The rules also set 70% of the tariff value according to the Egyptian pound exchange rate against the greenback on the date of maturity.
The sources said that the IFC and EBRD will review the terms of the contract and the amendment to arbitrations.
The contracts will be revised in coordination with the project’s legal consultant before beginning negotiations with investors. Both institutions are expected to complete the process within 10 days.
Among the institutions that expressed interest in financing renewable energy projects in Egypt were BNP Paribas, HSBC, and Deutsche Bank.