Finance has been the main obstacle to getting projects into the execution stage in Egypt for the last year.

The International Finance Corporation (IFC)’s withdrawal from the first round of the feed-in tariff solar photovoltaic (PV) reflects the high perceived levels of risk in Egypt.

But it is also a consequence of the Egyptian clients (Ministry of Electricity, Egyptian Electricity Holding Company and the New & Renewable Energy Authority) changes of strategy.

The IFC and the European Bank for Reconstruction & Development spent months negotiating the inclusion of international arbitration in the project documents. International arbitration is standard for projects in the region and globally, and is seen as a dealbreaker for lenders.

The clauses were suddenly changed in May, causing the first round solar PV projects to stall.

Some developers are suggesting that the clients see the first round tariff as too high given the recent falls in the cost of solar PV equipment. By pushing the majority of developers into the second round, for which the tariff is not yet announced, they could reduce their costs.

But these actions are severely affecting developers’ confidence in the scheme, after they have spent almost two years and considerable sums to progress to this stage.

The Egyptian authorities have two options to salvage the feed-in tariff programme.

They could reverse the decision on international arbitration in time for developers to meet the first round deadline.

Or they could begin the second round with fully bankable project documents including international arbitration and currency convertability guarantees, and a still-generous tariff.

Either way, Egypt will need to offer developers an attractive deal to prevent them losing appetite altogether.