While Arab and international companies are accelerating investments in renewable energy projects, the Egyptian government is slowing down, and delaying contracting processes, and implementation of projects for many years. Meanwhile, investors are suffering from bureaucracy, which threatens the future of investments in the renewable energy sector in Egypt.
The volume of investments—which have been in negotiations for over four years—amounted to about $15bn, of which some are still under discussion, and others are in the final stage of negotiations in preparation for contract signing.
The production, transmission, and distribution of electricity projects agreed upon by the private sector needs deadlines for implementation, and any delays which could be the result of technical or financial problems, may cause difficulty in obtaining approvals, head of Egyptian Electricity Holding Company (EEHC) Gaber El-Desouki said.
He added that the electricity sector has managed to agree on establishing a large number of projects with the private sector during the past four years, including solar energy projects in Benban.
The delayed projects include Deirout power plant, Al-Nowais coal-fired power plant, the pumped-storage hydroelectricity plant in Ataka Mount, the South Helwan power plant, and the solar and wind stations west of the Nile. All these projects are still under negotiation for over five years.
Ayman Hamza, spokesperson of the Ministry of Electricity, said that great strides have been made in contracting over establishing new power projects according to the targeted plan and actual needs of the Egyptian market. He asserted that it is normal that negotiations last for a long period, given the enormous volume of investments to be injected in these projects.
He added that the ministry seeks to finalise contracts on the projects that have been negotiated recently, provided that they meet all technical, financial, legal requirements and standards.
Hamza explained that the ministry will launch a Chinese-Egyptian alliance soon to establish coal-fired power station in Hamrawain. It is also negotiating with Sinohydro, a Chinese state-owned hydropower engineering and construction company, to sign the contracts of the Ataka pumped-storage hydroelectricity plant.
Arab and international companies believe that such delays in establishment procedures and failure to pass certain laws may affect investors’ desire to fund the Egyptian renewable energy sector.
Ahmed Zahran, chairperson of KarmSolar, said that the electricity law enabled the private sector to produce energy and sell it directly to consumers, highlighting some challenges facing companies, such as contractual procedures and project licenses.
He pointed out that the electricity market has become a magnet for all investors. The state must maintain its plans in the past years to create a competitive and promising market, and begin to facilitate procedures without delaying the implementation of projects.
Salah Ibrahim, a member of the Arab Consulting Office, the Vestas dealership in Egypt, said that the electricity and renewable energy sector needs to work at a faster pace, whether in bidding, receiving offers or awarding the winning companies and concluding the contract.
He further pointed out that Arab and international companies have other markets in which they can invest and inject capital. It is necessary to retain investors’ confidence in the Egyptian market, and remove obstacles and bureaucracy so that they can remain and expand projects.
Abbas Rady, TripleM Solar projects director, also agreed, adding that many companies do want to invest in the electricity and renewable energy sector following the legislation and incentives recently approved.
An official with a Saudi energy company said that an agreement was reached with the government to initiate a combined cycle power plant with a capacity of 2,250 MW with investments worth $2.2bn in 2013, but the contract has yet to be signed.
He pointed out that the site of the project was moved, even though the company spent over $20m on preparations and studies, before the project was listed in the 5-year plan 2022-2027.
“What is the reason for delaying projects for over five years, despite the government’s approval and the presence of funds?” the official asked.
According to experts and specialists in the electricity and renewable energy sector, officials should be responsible, and explain to companies the reasons for delay of projects in the framework of transparency, especially as such attitudes affect the investment reputation of Egypt.
Hafez El-Salmawy, former head of the Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egyptera), said that everyone is aware of the success of the electricity sector, which includes the provision of electricity without problems, and the issuance of laws encouraging the private sector to invest.
He added that the sector must announce a clear plan with absolute transparency indicating the actual needs of the sector. He noted that projects really need some time in negotiations and discussions, but the picture must be fully clarified for companies so as not to affect the investment reputation.
Salmawy said that technological development and market changes may push the electricity sector to review the projects, so as not to affect the negative result of the low tariff value, especially since that at the time of contracts, the tariff was higher than current prices.
Furthermore, he indicated that Energy Strategy 2035 is based primarily on energy efficiency and the need to integrate new and renewable energy into the general economic policies of the country.