The submission of initial studies by two Chinese companies for major coal-fired power plants in Egypt will be welcomed by both Egyptian utility providers and also by international firms in the power sector.

Shanghai Electric and Dongfang Electric Corporation were two of the companies that signed memorandums of understanding (MoUs) with the Egyptian government at the Egypt Economic Development Conference (EEDC) held in Sharm el-Sheikh in March. In total, Egypt’s electricity clients signed preliminary agreements for more than 16GW-worth of coal-fired generation schemes at the conference. The Electricity & Energy Ministry revealed it was planning to develop 12.5GW of coal-fired power generation by 2022.

The target is very ambitious, particularly considering that coal will be a new fuel for the country’s power sector, with parliament only having passed legislation to enable it to be used for large-scale power generation for the first time in 2014.  Cairo’s decision to turn to coal is mainly due to the difficulty of securing gas feedstock for power plants. Gas shortages have played a major role in the electricity outages in the country since 2012, which even occurred during the winter of 2014.

In addition to the difficulties of implementing projects with new technology on such a large scale, Egypt’s power programme faces the challenge of securing finance for its ambitious generation schemes. The Electricity & Energy Ministry estimates that $70bn of investment will be required in the power sector up until 2022, with $25bn of this slated to come from the private sector.

A key part of securing international financial backing for projects will be ensuring sufficient legislative and regulatory frameworks are in place, and that sovereign guarantees will be made available for long-term power purchase agreements (PPAs).

While the signing of the multiple MoUs in March was welcomed, the hard part of awarding contracts and executing projects is still to come. However, although much work is still required, the prompt submission of studies for the coal plants from established international firms experienced in the coal industry shows that Egypt’s clients and the companies it has appointed are serious about delivering. With an estimated 54GW of additional power capacity required in the next seven years to meet forecast demand, Cairo and its partners must ensure plans are turned into action.

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