Apr 10 2012
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Private sector gets a slice of Egypt power projects
Egypt is planning to spend EGP 51 billion (USD 8.45 billion) on building power plants until 2017. The private sector is expected to contribute EGP 9 billion, especially after the success of the build, own, operate and transfer (BOOT) strategy saw the implementation of three steam power plants in Sidi Krir, Gulf of Suez and East Port Said.
Electricity and energy minister Dr. Hassan Younis said the cabinet has approved government financial guarantees for all private sector projects implemented under the BOOT system, for the construction of thermal, wind and solar power plants. He added that the tripartite committee formed by the ministries of finance and power and the central bank on this issue will deliver its report soon.
"This will increase the interest of the private sector in financing infrastructure projects," said Ali Shaker, chief executive of Egyptian Gulf Bank. He pointed out that the government guarantee is an important element that motivates the international and local companies and firms to participate in such projects that are needed by Egypt.
Dr. Younis said the Giza North Power Plant, with a capacity of 1,500 MW, is one of the five-year plan (2012-2017) projects. It consists of four gas turbines, with a capacity of 250 MW each, and four heat recovery steam generators using the heat of the exhaust gas units to generate steam and used to run two steam turbines, each with a capacity of 250 MW. The plant is linked to the electricity grid station of 500 KV and 220 KV.
The first phase of the plant will be operational in May 2013, Dr. Younis said, and full operations will be achieved in 2014. Estimated cost of the plant is about EGP 7.135 billion, partially financed by the World Bank, the European Investment Bank and OPEC Fund, with the rest coming from the Cairo Electricity Production Company.
The government had set expectations to generate 7,750 MW of power by 2017, including 3,750 MW of combined cycle plants at El Atef, Sidi Krir and Nubaria Plants (3), El Kureimat (3), Nuweiba and 4,000 MW of steam units at Tabin, Western Cairo, Abu Qir and Ain Sukhna.
However, due to a number of constraints and increased loads, the government postponed the implementation of Abu Qir and Ain Sukhna plants to 2013, cancelled the Nuweiba plant project, and directed the financial resources towards the creation of four gas turbines at Damietta, with a capacity of 500 MW, and eight gas turbines at Al Shabab of 1,000 MW, so that the total capacity is of 1,500 MW, and each site manages to produce 500 MW to be operated before the summer of 2012.
Thermal generation capacity will be expanded with 12,400 MW, of which 5,250 MW are of combined cycle units at the Giza North Power Plant 1, 2 and 3, Benha and Dairout, and 7,150 MW of steam turbines at Suez, South Helwan, Qena, Safaga and Ayat. The investment in this is EGP 51 billion, which led the government to establish a partnership with the private sector in these projects.
A source at the Egyptian Electric Holding Company said the private sector will be allowed to enter into partnership with the government for the implementation of these projects, at around EGP 9 billion, while the Holding Company bears EGP 42 billion of the cost. The private sector will participate in the implementation of four projects with a combined capacity of 6,150 MW, including the combined cycle project of three in 750 MW at Dairout under the BOOT system, for which 10 entities were qualified through a competitive bid, while the contracting procedures are still under completion and they are expected to enter into service in 2013.
The annual report of the Egyptian Electric Holding Company indicates that there are two systems for private sector participation. The first consists of the implementation of the plant through the Independent Power Producer (IPP) system, where the project company concludes a contract directly with its customers, the power consumers, and the Egyptian Electricity Transmission Company provides support to the project by connecting the plant to the unified grid and meeting the shortfall of the generated power in case of forced exit, and thus, purchasing the surplus power from the plant based on a contract signed between the project company and the Egyptian Electricity Transmission Company.
In such event, the project company will be required to provide the site and fuel. As for the transmission tariff, it will be calculated according to the budget of the Egyptian Electricity Transmission Company.
The second system will be with the participation of the investor in the competitive bids posed by the electricity sector for the establishment of generation plants through the private sector, and the investor who submits the lowest price to sell the produced power will be contracted out. In such event, the private sector provides the investor with the required land for the establishment of the plant, while concluding an usufruct agreement and a power purchase agreement in order to purchase the produced power from the investor's plant.
Khaled El Salawi, general manager and head of corporate banking at the Bank of Alexandria, said the bank allocated EGP 2 billion to finance infrastructure projects, operating under the public-private partnership system. He added that the bank did not allocate any amounts for the PPP projects earlier, as they had no systematic framework.
He explained that the infrastructure projects are selected based on the economic feasibility study and the achievement of a reasonable profit margin, as well as an economic viability for the three parties (investor, bank and government) to participate in the projects.
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