The International Finance Corporation (IFC) and the European Bank of Reconstruction and Development (EBRD) are cautiously optimistic on the second round of solar and wind 20-50MW feed-in tariff projects in Egypt.

Developers are still studying figures before deciding whether they can go ahead with the schemes.

“Some investors are feeling comfortable and are ready to invest,” says Mouayed Makhlouf, regional director of the IFC. “The second round is more appealing than the first, but it depends on what return you are looking for – you can’t find 20 or 30 per cent.”

A significant number of developers have pulled out of the feed-in tariff scheme overall after prices were cut sharply for the second round. Egyptian Electricity Holding Company is still reviewing those projects that did secure finance and signed a power purchase agreement (PPA). 

Most developers were unable to finance schemes under the first-round conditions, which stipulated local arbitration and 85 per cent foreign finance. The IFC, EBRD and other development banks were forced to withdraw from financing round one projects.

Now they are waiting for developers to finish analysing round two models, and they hope to have a bankable PPA in the near future. Developers are also concerned over Egypt’s progress in conventional and nuclear power, which may reduce the need for renewables capacity.

“The new tariff is very challenging, very competitive, says Harry Boyd-Carpenter, senior banker for power and energy utilities at EBRD. “Floating the currency is also pretty significant.”

Since Egypt liberalised the Egyptian pound earlier in November, the Egyptian pound has fallen to more than £E17 to the dollar. It is expected to stabilise as the IMF loan is disbursed.

This affects the tariff, which is partially indexed to the dollar exchange rate.

However, with the $12bn IMF loan package set to be approved, the feed-in tariff scheme could move ahead more quickly.