Cairo makes good progress building power capacity

29 June 2015

The government has made brisk progress over the past years with its efforts to plug Egypt’s energy deficit

This has involved ordering 3.7GW of gas turbine capacity on a fast-track basis from the US’ GE, Germany’s Siemens and Italy’s Ansaldo, and signing contracts for the delivery of 75 cargoes of liquefied natural gas.

The next stage will involve installing up to 30GW of capacity over the coming decade, much of which will be provided on the basis of initiatives proposed by suppliers and developers.

Energy mix

Most of the new capacity will be gas turbines and combined-cycle, but a significant portion will be renewable, including 4.3GW of wind and solar projects, for which dozens of developers are preparing bids. Further down the line, a number of large coal-fired power stations have been proposed, and the government is persisting with plans to build a nuclear power station west of Alexandria.

The speed with which the new projects are advancing – shown most dramatically with the 3 June announcement by Siemens of plans to install 16.4GW of capacity – is in stark contrast to the sluggish progress of some projects that were already in the pipeline in 2011, for example the 2.25GW Dairut independent power project (IPP).

The Dairut tender was interrupted by the 2011 uprising and its turbulent aftermath, but the project was revived in 2012, when the Ministry of Finance and the Central Bank of Egypt indicated they would be prepared to furnish guarantees for the power-purchase agreement (PPA) for the scheme and a 250MW wind IPP. The Egyptian Electricity Holding Company is now evaluating the technical aspects of the single bid eventually submitted for Dairut, by Saudi Arabia’s Acwa Power. Black & Veatch of the US has been appointed as a consultant. If negotiations culminate in a contract, it would be the first major IPP deal to be concluded in Egypt since the early 2000s.

The approach of Siemens and other suppliers and developers that have proposed new power station investments has been different. Rather than wait for the government to initiate a tender process, companies have come up with project ideas, on the basis of which they have signed initial agreements giving them exclusivity over the proposed sites and a fixed period in which to conduct studies and draw up detailed contracts.

Siemens announced its plans at the Egypt Economic Development Conference in March, and the contract announcement came less than three months later. It will supply, on a turnkey basis, three 4.8GW combined-cycle plants in Beni Suef, 100 kilometres south of Cairo; Burullus, on the Mediterranean coast; and in the new capital. Its local partners are El-Sewedy Electric and Orascom Construction.

Project timelines

The first plant, Beni Suef, is scheduled to come online by mid-2017, and the three plants are to be completed within 38 months of the financing agreement being closed and advance payments made.

Siemens will also supply 2GW of wind capacity in the Gulf of Suez and West Nile area, and invest in a rotor blade manufacturing plant at Ain Sokhna.

The German company’s in-house financing agency has devised a package of loans and guarantees to support the project, which will cost an estimated E8bn ($9bn).

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications