The expansion of Egypt’s renewable energy sector has hit a snag after financiers objected to revised terms for government projects that exclude the possibility of international arbitration.
Companies have long been interested to tap Egypt’s renewable energy sector with the government originally targeting 4.3 gigawatt (GW) of wind and solar projects to come online next year.
While the renewable energy programme also includes wind, the most advanced is the solar segment amounting to billions in investment including a plant in Benban in Upper Egypt, with a capacity of 1.8GW. Currently none of the projects have met all of the contractual obligations for financing and project agreements, and only have until October to do so.
The Egyptian Electricity Transmission Company (EETC), leading the tendering process, acknowledges there will be delays.
“Many of the 39 developers say that they’re close to reaching financial close, but not all will,” said Lamya Hady, the head of private sector projects for the EETC, on Wednesday at the Menasol conference in Dubai.
Ms Hady said there were some other requests from companies to sign power purchasing agreements, but this could not proceed until lenders got on-board.
And one of the major lending factors are development financial institutions (DFIs) such as the International Finance Corporation, European Bank for Reconstruction and Development and the Overseas Private Investment Corporation (Opic). While these institutions have said that they would not be able to finance all of Egypt’s renewable energy needs many companies are banking on DFIs to pick up a hefty chunk of the tab.
Nancy Rivera, Opic’s managing director of structured finance, said support would go to projects with a long-term view with proper risk allocation but that the DFI community could not finance all Egypt’s needs.
“There is a need for a greater variety of financing intermediaries to come into the market. Local commercial banks are also an important element to this conversation,” she said.
Earlier this month, the government tweaked its contract terms to exclude the option of international arbitration. DFIs had pushed Egypt into including the option of international arbitration, which is a standard clause in legal contracts, but the government has revised project terms to only allow for arbitration to happen in Cairo.
“The DFI community is speaking with one voice and international arbitration is an essential element,” Ms Rivera said, adding that it didn’t depend on the country. “If you’re doing a project in Europe, you’d have international arbitration. You don’t get a free pass because you’re a more developed country.”
DFIs met government officials last week to discuss the issue. Ms Hady said she expected a “solution to this problem soon”.
lgraves@thenational.ae
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
Company%20Profile
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SPECS
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What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
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Sector: Laundry
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The specs
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What is graphene?
Graphene is a single layer of carbon atoms arranged like honeycomb.
It was discovered in 2004, when Russian-born Manchester scientists Andrei Geim and Kostya Novoselov were "playing about" with sticky tape and graphite - the material used as "lead" in pencils.
Placing the tape on the graphite and peeling it, they managed to rip off thin flakes of carbon. In the beginning they got flakes consisting of many layers of graphene. But as they repeated the process many times, the flakes got thinner.
By separating the graphite fragments repeatedly, they managed to create flakes that were just one atom thick. Their experiment had led to graphene being isolated for the very first time.
At the time, many believed it was impossible for such thin crystalline materials to be stable. But examined under a microscope, the material remained stable, and when tested was found to have incredible properties.
It is many times times stronger than steel, yet incredibly lightweight and flexible. It is electrically and thermally conductive but also transparent. The world's first 2D material, it is one million times thinner than the diameter of a single human hair.
But the 'sticky tape' method would not work on an industrial scale. Since then, scientists have been working on manufacturing graphene, to make use of its incredible properties.
In 2010, Geim and Novoselov were awarded the Nobel Prize for Physics. Their discovery meant physicists could study a new class of two-dimensional materials with unique properties.
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Rating: 5/5