Cairo faces similar difficulties to Amman

27 January 2015

For developers and clients, Egypt’s wind and solar feed-in tariff programme is a learning curve, which will be shaped by dialogue and trial and error

The openness, efficiency and responsiveness of the clients so far has been encouraging. This is partly thanks to the strong political will behind them. President Abdul Fattah al-Sisi committed to delivering the programme in his address to the World Future Energy Summit in Abu Dhabi on 19 January.

But the Egyptian New & Renewable Energy Authority’s tight timescale will increase pressure in two areas: grid capacity and financing. Regionally, Jordan’s experience of feed-in tariffs has found these issues to cause particular problems. Amman was forced to cancel the third round of its programme, partly due to grid capacity.

Egypt is pre-empting this problem with the £E4bn ($539m) investment necessary to increase its generation capacity to cope with rising demand. It will be a challenge to execute the project before 2016, and the developers see their own timetable as ambitious and so are likely to come online at staggered intervals as they complete projects. Their biggest challenge will be reaching a financial close.

“There will be at least 36 solar projects trying to raise finance and carry out construction works at the same time,” says Tim Armsby, a partner at UK law firm Eversheds. “Practically, it will be the end of 2015 before they reach a financial close.”

The six-month delay to raise funding on Jordanian alternative power projects highlights the difficulty renewables developers still face in securing financing in the local banking environment, and the importance of consulting international financial institutions over the power purchase agreement.

The projects in Egypt will also have to be financed through the local banking sector, which has not historically showed high interest in public-private partnerships and lacks experience with renewables. However, the market is dominated by publicly owned banks, which may be directed to support the scheme, while the Finance Ministry will guarantee the off-takers.

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