The Egyptian Electricity Transmission Company (EETC) has declared that three developers have reached financial close under the first round of Egypts ambitious feed-in-tariff renewable energy programme.
The FiT (feed-in-tariff) unit of the EETC has notified the successful developers, and the successful developers will receive a letter of award imminently.
The three developers which succeeded in reaching financial close under the first round are:
- FAS Energy (Saudi Arabia)
- Infinite (local)
- Elf Energy (local)
The three photovoltaic (PV) projects will have a combined total capacity of 150MW, and will be located at a site in Benban, Aswan.
The first round of the feed-in-tariff programme, which aims to develop 4,300MW of solar and wind projects in the next decade, has been plagued by a number of problems, from the ongoing currency crisis in Egypt to disputes over the omission of an international arbitration clause in the contracts.
A total of 40 developers were prequalified to participate in the first round of the programme in 2015, but only nine of these signed power purchase agreements (PPAs) with EETC by the deadline in October 2016. Out of these nine, only the above three were able to successfully reach financial close under the conditions of the first round.
MEED reported in January that 31 developers were seeking to develop renewable energy projects in the second round of Egypts Feed-in-tariff (FIT) renewables programme.
The companies are planning to implement a combination of solar and wind projects under the FIT scheme, which would result in total investments of $3bn and 1,845MW of new capacity to the grid, according to local press reports citing the countrys electricity ministry.
The prospective projects would involve 23 developers establishing solar projects with a total capacity of 1,295MW. This would include 970MW in Banban, 180MW in El-Zafrana and 145MW in West Nile. According to the ministry, eight developers are seeking to develop wind farms with a total capacity of 550MW in the Gulf of Suez.
The news that more than 30 developers are participating in the FIT is positive news for Egypts ambitious renewable energy targets, with many in the renewable sector fearing that a significant number of companies would not be interested in the second round as tariff-prices were cut sharply from the first round.
On 6 September 2016, the Egyptian government announced the tariffs for the second round of the FIT programme, which opened on 28 October 2016.
While the government is allowing international arbitration for the second round, a key stalling point for many schemes in the first round, the tariffs for solar projects were cut by more than 40 per cent. Egypts Electricity Minister Mohammed Shaker has said that the new tariffs were determined in light of the continuing decline in energy prices as well as the cost of technology and equipment.
The inclusion of the arbitration clause is regarded as vital to encourage the participation of international financing institutions to participate in the programme. The government has also reduced taxes on the projects from 25 per cent to 22.5 per cent in an effort to attract interest for the significantly lower tariffs in round two. Qualified developers from round one will have priority to participate in round two.
The tariff in round two will be paid in EGP on new USD ($) exchange rate formula as a result of the increase of the dollar exchange rate against local currency.
For solar projects: 30 per cent of the tariff will be calculated at a fixed rate of EGP8.88 per USD, and 70 per cent will be paid at the prevailing exchange rate at the time of payment. For wind projects, 40 per cent will be indexed at a fixed rate against the dollar. This is a reduction from round one, when 85 per cent of the tariff tracked the exchange rate between the Egyptian pound and the dollar.
The ministry has also reduced the requirement for international financing required for projects in round two (with the international financing component having been set at 85 per cent for round one), and has set a minimum local component for financing.
For round two, solar projects will be required to achieve a local component of 30 per cent, while 70 per cent of financing can be from international financiers. For wind projects, the local component has been set at 40 per cent.