Overseas lenders may well insist on government guarantees before they are willing to offer finance
Cairo’s first major public-private partnership (PPP) scheme achieved financial close in early February, when $110m was raised from local banks for the New Cairo wastewater treatment plant.
Arranging the financing was a slow process, but this was to be expected, given the novelty of the deal. The tougher challenge will come as the government tries to launch larger PPPs, which need the support of international banks.
With the first deal concluded, Cairo is already pushing ahead with two other wastewater schemes, at 6 October City and Abu Rawash. More significantly, it has announced plans to develop several independent power projects (IPP), marking a return to private participation in the sector after a 10-year gap.
That has been welcomed by developers keen to gain a foothold in Egypt and diversify their portfolios. But such projects will need to tap into the international bank market, which is more risk-averse. Overseas lenders may well insist on some form of government guarantees.
The International Finance Corporation, part of the World Bank, is now seeking a consultant to assess the planned PPP projects for the government, including gauging how much financing and what guarantees will be required.
The study is part of Cairo’s plan to set up a long-term finance facility to lend to PPP projects. If it can organise this, Egypt should find it far easier to launch many more PPPs in the future.
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