Private finance is priority for Cairo's power capacity

11 April 2008

While private investment in the power and water sectors has grown more prevalent in most countries around the region, Egypt has for the most part looked on from afar.

A brief encounter with independent power projects several years ago was enough to demonstrate to the government that it was not ready to pursue any more. A devaluation of the Egyptian pound at the time meant that the dollar-denominated agreements it had signed cost far more than expected.

Now, as part of plans to restructure the country’s electricity sector, private developers are being encouraged to return. They will be able to sign power-supply deals directly with industrial and commercial customers.

Developers will no doubt be encouraged by Cairo’s renewed commitment to the expansion of the private sector’s role in the power market. And Cairo has been careful to frame its draft law in a way that ensures it will avoid the kind of payment problems experienced in the past.

The change of heart fits in with Egypt’s wider plans to liberalise its economy, but the new power strategy is as much to do with practicalities as philosophy - it is becoming increasingly difficult to raise the necessary finance for power plants.

Given the magnitude of the country’s plans for new power-generating capacity, and the state’s diminishing ability to fund the projects itself, it needs support from developers sooner rather than later.

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