egypt power report – 2020 - african energy · 2020-02-07 · egypt power report 2020 is the third...
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Egypt Power Report – 2020
www.africa-energy.com
Contents and executive summary
Egypt Power Report 2020 is the third in a series of
easy-to-digest studies on key energy industry segments
presented by African Energy’s consultancy team.
Key features include:
• Political and economic risk analysis – the
challenges facing the Sisi government after his
consolidation of power;
• Policy and regulation outlook – the effects of the
gradual introduction of new electricity and gas laws and
what’s next for the power sector;
• Demand and supply outlook – analysing sector
planning through to 2035 and future scenarios – do
Egypt’s ambitious capacity plans add up?
• Exclusive power sector data – 15-year (2010-24)
trends on installed capacity, broken down by fuel,
technology, provinces and more – sourced from African
Energy Live Data;
• Key stakeholders in the sector – from leading
politicians through to senior officials, the main
institutions and market participants;
• Profiles of major projects and selected generation
sub-sector developers and financiers.
Instant access to essential market intelligence
Other reports available include:
• Ghana Power Report 2019/20
• Kenya Power Report 2019/20
• South Africa Power Report 2020/21
How to buy
Price: £2,995
Discounts available for multiple report purchases
To buy contact:
Harry Randle-Marsh
T: 44 (0) 1424 721667
Reasons to buy
• Understand the competitive landscape
• Support for strategic planning through risk
assessment
• Understand the wider economic environment for
power projects
• Match up government supply and energy mix
targets to demand projections
• Power generation forecasts based on actual
project development pipeline
Contents
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 3
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY.......................................................................................12
COUNTRY SNAPSHOT............................................................................................15
2. RISK MANAGEMENT REPORT...........................................................................16
3. POLITICAL OVERVIEW........................................................................................16
3.1 Structure of government ...............................................................................................................18
- Political system ..................................................................................................................................18- April 2019 constitutional changes......................................................................................................18
- Authoritarian trend .............................................................................................................................18
3.2 Key actors......................................................................................................................................19
- President Abdel Fattah El Sisi............................................................................................................19
- Prime Minister Mostafa Kamel Madbouly ..........................................................................................20
- Minister of electricity and renewable energy Mohammed Shaker El Markabi ...................................20
- Deputy minister of electricity and renewable energy Osama Ali Asran .............................................21
- First under-secretary for research, planning & authorities follow-up Mohamed Mousa Omran........21
- Egyptian Electricity Holding Company chairman Gaber Desouky.....................................................21
- Egyptian Electricity Transmission Company chairwoman Sabah Mashaly........................................21
- Electricity Utility Regulatory Authority CEO Mohamed Abdel Aziz Hassan Abdel Rahman ..............21
- New and Renewable Energy Authority executive chairman: Mohammed El-Khayat ........................22
3.3 Overview of main political parties.................................................................................................22
- Governing party: Independents and Sisi loyalists..............................................................................23
- Main opposition: Civil Democratic Movement .................................................................................. 23
- Other parties ......................................................................................................................................23
3.4 Elections ........................................................................................................................................23
- Electoral system.................................................................................................................................23
- Previous election................................................................................................................................23
- Next election ......................................................................................................................................23
3.5 Major policy initiatives.................................................................................................................. 23
3.6 Corruption......................................................................................................................................24
- Transparency International rating.......................................................................................................24
- Major corruption concerns.................................................................................................................25
3.7 Security risks .................................................................................................................................25
- Terrorism ............................................................................................................................................25
- Ethnic/tribal conflict ...........................................................................................................................26
3.8 Recent major developments.........................................................................................................26
Contents
4 AFRICAN ENERGY • EGYPT POWER REPORT • 2020
4. MACROECONOMIC OVERVIEW.........................................................................27
4.1 Overview ........................................................................................................................................28
4.2 GDP................................................................................................................................................28
- Trends/projections..............................................................................................................................28
- Breakdown of economy by sector .....................................................................................................28
4.3 Inflation ..........................................................................................................................................28
4.4 Current account.............................................................................................................................29
4.5 Balance of payments.....................................................................................................................29
4.6 Public debt.....................................................................................................................................30
- Risk of debt distress ..........................................................................................................................30
- Debt-to-GDP......................................................................................................................................30
- Debt service as percentage of exports ..............................................................................................30
- Major creditors ...................................................................................................................................30
4.7 Credit ratings .................................................................................................................................31
4.8 Exchange rates..............................................................................................................................31
4.9 Key lending rates...........................................................................................................................32
4.10 Foreign reserves ..........................................................................................................................32
4.11 Liquidity of local markets ............................................................................................................32
4.12 WBG Ease of Doing Business.....................................................................................................32
4.13 Major economic strategies .........................................................................................................33
- Economic reform programme ............................................................................................................33
- Flagship infrastructural initiatives.......................................................................................................34
4.14 Major recent developments ........................................................................................................35
5. POWER SECTOR OVERVIEW .............................................................................36
5.1 Overview ........................................................................................................................................36
5.2 Market structure ............................................................................................................................37
- Future developments .........................................................................................................................38
5.3 Profiles of institutions....................................................................................................................38
- Ministries............................................................................................................................................38
------ Ministry of Electricity and Renewable Energy.............................................................................38
- Utilities ...............................................................................................................................................38
------ Egyptian Electricity Holding Company (EEHC) ...........................................................................38
------ Egyptian Electricity Transmission Company (EETC) ...................................................................38
------ New and Renewable Energy Agency (NREA) .............................................................................39
------ Egyptian Natural Gas Holding Company (Egas) .........................................................................39
------ Egyptian General Petroleum Corporation (EGPC) ......................................................................39
Contents
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 5
- Regulators..........................................................................................................................................39
------Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) ...................39
5.4 Market operation ...........................................................................................................................40
5.5 Sector history ................................................................................................................................40
- Ownership and organisation history ..................................................................................................40
- EEHC five-year plans .........................................................................................................................41
- Role of IPPs .......................................................................................................................................42
5.6 Regional electricity trade ..............................................................................................................42
5.7 Financial health of the electricity supply industry .......................................................................43
5.8 Main consumers of electricity.......................................................................................................43
MAP: ELECTRICITY INFRASTRUCTURE...............................................................44
6. POLICY AND REGULATION ................................................................................46
6.1 Overview ........................................................................................................................................46
6.2 Major legislation ............................................................................................................................47
6.3 Sector plans...................................................................................................................................48
- Egypt Vision 2030 ..............................................................................................................................48
- New and Renewable Energy Strategy ...............................................................................................49
- Integrated Sustainable National Energy Strategy to 2035 .................................................................49
6.4 Legal requirements........................................................................................................................50
- Generation..........................................................................................................................................50
- Transmission ......................................................................................................................................50
- Distribution.........................................................................................................................................50
- Local content .....................................................................................................................................50
6.5 Procurement ..................................................................................................................................51
- Feed-in tariff .......................................................................................................................................51
- Competitive BOO auctions ................................................................................................................51
- Net-metering ......................................................................................................................................51
6.6 Tariffs..............................................................................................................................................52
- Retail ..................................................................................................................................................52
- Latest tariff change ............................................................................................................................52
6.7 Sector programmes.......................................................................................................................53
- Fiscal Consolidation, Sustainable Energy and Competitiveness.......................................................53
6.8 IPP environment ............................................................................................................................53
6.9 Sovereign guarantees ...................................................................................................................53
7. FROM THE NEWSLETTER ..................................................................................54
Contents
6 AFRICAN ENERGY • EGYPT POWER REPORT • 2020
8. RESOURCE AVAILABILITY .................................................................................56
8.1 Overview ........................................................................................................................................56
8.2 Natural gas.....................................................................................................................................56
- Infrastructure......................................................................................................................................57
------ Domestic pipelines......................................................................................................................57
------ Regional pipeline interconnections .............................................................................................58
------ LNG terminals .............................................................................................................................58
- Gas expansion projects .....................................................................................................................59
------ Natural Gas Connection Project .................................................................................................59
------ Cairo and Giza Natural Gas Network Expansion ........................................................................59
- Imports ...............................................................................................................................................59
- Exports...............................................................................................................................................60
- Regulation ..........................................................................................................................................60
8.3 Solar ...............................................................................................................................................61
8.4 Wind ...............................................................................................................................................61
MAP: WIND AND SOLAR RESOURCES.................................................................41
8.5 Hydro..............................................................................................................................................62
8.6 Geothermal ....................................................................................................................................62
MAP: OIL AND GAS INFRASTRUCTURE...............................................................63
MAP: NILE DELTA, WESTERN DESERT.................................................................64
MAP: RED SEA.........................................................................................................65
9. COMPETITIVE LANDSCAPE...............................................................................66
9.1 Overview ........................................................................................................................................66
8.2 Project profiles: Landmark power projects ..................................................................................66
- Largest power plants: Siemens CCGT gas plants .............................................................................66
- Benchmark renewable PPA: Engie Gebel El Zeit Wind......................................................................66
- First Benban solar plant: Infinity 50 Consortium Benban 5-1............................................................67
8.2 Project profiles: Selected existing generation projects...............................................................67
- Giza North Gas...................................................................................................................................67
- High Dam Hydro.................................................................................................................................68
- Nubaria Gas, LFO I and II...................................................................................................................68
- Nubaria Assiut HFO, LFO...................................................................................................................68
- Benban solar park..............................................................................................................................69
8.2 Project profiles: Under construction generation projects ...........................................................69
Contents
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 7
- Helwan South Gas, HFO....................................................................................................................69
- Cairo West Gas, HFO II ......................................................................................................................70
- Assiut El Walidia HFO III.....................................................................................................................70
- Lekela West Bakr Wind ......................................................................................................................71
Box: Privatisation of Siemens’ 14.4GW gas-fired power plants ..........................................................72
8.3 Project profiles: Selected planned generation projects ..............................................................72
- Abyodos Kom Ombo Solar PV...........................................................................................................72
- Amunet Ras Ghareb Wind .................................................................................................................73
- Dabaa Nuclear ...................................................................................................................................73
- Edison/Qalaa Abu Qir Gas .................................................................................................................74
- Gulf of Suez Wind I ............................................................................................................................75
- Hurghada Solar PV.............................................................................................................................75
- Kom Ombo I Solar PV........................................................................................................................76
- Luxor Gas...........................................................................................................................................76
- New Damanhour Gas II ......................................................................................................................77
- Zafarana Solar PV ..............................................................................................................................78
8.4 Company profiles: Selected key developers................................................................................78
- Scatec Solar.......................................................................................................................................78
- Consortium of Siemens, Orascom Construction Industries and El Sewedy .....................................78
- Engie ..................................................................................................................................................78
- Hydro Power Projects Executive Authority (Ministry of Energy) ........................................................79
8.5 Selected key financiers .................................................................................................................79
- World Bank Group..............................................................................................................................79
- Arab African International Bank .........................................................................................................79
- Arab Fund for Economic and Social Development............................................................................79
- National Bank of Egypt ......................................................................................................................79
- KfW ....................................................................................................................................................79
10. TRANSMISSION AND DISTRIBUTION .............................................................80
10.1 Overview ......................................................................................................................................80
10.2 Interconnections..........................................................................................................................80
- Power pools .......................................................................................................................................81
- Imports/exports..................................................................................................................................81
10.3 T&D losses ...................................................................................................................................81
10.4 Planned grid improvements........................................................................................................81
11. OFF-GRID ...........................................................................................................83
11.1 Overview ......................................................................................................................................83
Contents
8 AFRICAN ENERGY • EGYPT POWER REPORT • 2020
11.2 Electrification & access rates......................................................................................................83
11.3 Players and initiatives .................................................................................................................83
11.4 Barriers to entry...........................................................................................................................84
12. DEMAND AND SUPPLY OUTLOOK..................................................................85
12.1 Overview ......................................................................................................................................85
12.2 Demand projections ....................................................................................................................85
12.3 Commissioning policy .................................................................................................................85
12.4 Reshaping the network ...............................................................................................................86
12.5 Generation outlook......................................................................................................................88
- Short-term outlook, 2020-2027 .........................................................................................................88
- Medium-term outlook, 2028-2035 .....................................................................................................88
12.6 Thermal generation additions and decommissioning policy.....................................................89
12.7 Reserve margins and surplus power ..........................................................................................89
12.8 Medium-term export potential ....................................................................................................89
13. DATA TABLES.....................................................................................................91
- Methodology ......................................................................................................................................91
- Installed capacity, RE vs non-RE, 2010-2024 (MW & %) ..................................................................91
- Installed capacity by fuel type, 2010-2024 (MW)...............................................................................92
- Installed capacity by fuel type, 2010-2024 (%)..................................................................................92
- Installed capacity, liquid fuels breakdown, 2010-2024 (MW).............................................................93
- Installed capacity, liquid fuels breakdown, 2010-2024 (%) ...............................................................93
- Installed capacity by technology type, 2010-2024 (MW)...................................................................94
- Installed capacity by technology type, 2010-2024 (%)......................................................................94
- Installed capacity by ownership type, 2010-2024 (MW)....................................................................95
- Installed capacity by ownership type, 2010-2024 (%).......................................................................95
- Installed capacity by governorates, 2010-2024 (MW) .......................................................................96
- Installed capacity by governorates, 2010-2024 (%) ..........................................................................97
- Installed capacity by fuel, Alexandria, 2010-2024 (MW)....................................................................98
- Installed capacity by fuel, Assiut, 2010-2024 (MW)...........................................................................98
- Installed capacity by fuel, Aswan, 2010-2024 (MW) ..........................................................................98
- Installed capacity by fuel, Cairo, 2010-2024 (MW) ............................................................................98
- Installed capacity by fuel, Dakhalia, 2010-2024 (MW) .......................................................................98
- Installed capacity by fuel, Damietta, 2010-2024 (MW) ......................................................................98
- Installed capacity by fuel, El Beheira, 2010-2024 (MW) ....................................................................98
- Installed capacity by fuel, Giza, 2010-2024 (MW)..............................................................................99
- Installed capacity by fuel, Ismailia, 2010-2024 (MW).........................................................................99
Contents
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 9
- Installed capacity by fuel, Kafr El Sheikh, 2010-2024 (MW) ..............................................................99
- Installed capacity by fuel, Matruh, 2010-2024 (MW) .........................................................................99
- Installed capacity by fuel, Minya, 2010-2024 (MW) ...........................................................................99
- Installed capacity by fuel, North Sinai, 2010-2024 (MW)...................................................................99
- Installed capacity by fuel, Port Said, 2010-2024 (MW)......................................................................99
- Installed capacity by fuel, Qalyubia, 2010-2024 (MW).......................................................................99
- Installed capacity by fuel, Qena, 2010-2024 (MW) ............................................................................99
- Installed capacity by fuel, Red Sea, 2010-2024 (MW) .....................................................................100
- Installed capacity by fuel, South Sinai, 2010-2024 (MW) ................................................................100
- Installed capacity by fuel, Suez, 2010-2024 (MW)...........................................................................100
11.3 Project listing .............................................................................................................................101
- Operating .........................................................................................................................................101
- Under construction ..........................................................................................................................105
- In development ................................................................................................................................105
- Planned ............................................................................................................................................106
ANNEX 1 – TARIFF SCHEDULE ............................................................................107
10 AFRICAN ENERGY • EGYPT POWER REPORT • 2020
The Egyptian power sector is viewed as an attractive destination for investment due to a relatively stable
government, economy and policy direction. However, a number of underlying tensions and challenges
mean that long-term investments in the country are far from being risk-free. Egypt Power Report 2020
outlines the market’s attractions and downsides for power developers, financiers and other industry
stakeholders.
Sisi tightens his grip as discontent simmers
Following a leadership merry-go-round – which began with the dramatic ousting of President Hosni
Mubarak in 2011 and ended with the military coup which deposed Mohammed Morsi the
democratically-elected and first ever Islamist leader – the former general Abdel Fattah El Sisi has
recreated a highly authoritarian and military-led form of governance whose foundations are security,
control and economic efficiency rather than popular or democratic support.
This does not mean that Sisi has – or had – no base. It is true that his two presidential election victories
in 2014 and 2018 were both formalities as no serious opposition was permitted but even so, there is a
substantial minority of the population whose preference is for competent authoritarianism over
incompetent and potentially radical popular Islam. The July 2013 coup which brought him to power
was supported by mass demonstrations. The social compact on which Sisi’s rule depends is thus
identical to that which sustained Mubarak, Anwar Sadat and Gamal Abdel Nasser before him – that is
the exchange of democratic freedoms for security and economic well-being.
For now, any threat to the current political settlement is unlikely to come from a resurgence of the
popular Islamic movement. Millions would support such a movement if it emerged, but Sisi has crushed
the Muslim Brotherhood (al-Ikhwan al-Muslimeen) and there is no other focus around which popular
discontent can organise itself.
An unbalanced social contract?
However, this does not mean that there will be no consequences should the authorities fail to deliver
their side of the bargain – namely guaranteeing the economic well-being of the wider population. Sisi is
under pressure both from within the system and from a restive and frustrated population.
In the past five years the President has pushed through an impressive raft of macro-economic reforms
in parallel with a statist and military-led re-energising of the command economy (the development of
the Suez Canal Economic Zone being one such example).
According to its own parameters, the November 2016 to November 2019 International Monetary Fund
(IMF) Extended Fund Facility (EFF) has succeeded. The devaluation of the Egyptian pound and cuts in
subsidies and other spending have opened space for investment.
While a great deal more structural reform is needed, at the end of 2018 foreign reserves were 19% of
GDP. The government is targeting growth of 6-7% in the 2019/2020 fiscal year, while the IMF is
forecasting growth of 5.9%. All three big credit rating agencies have issued upgrades between 2018-
2019.
1. Executive summary
Executive summary
While this performance has won the confidence of multilateral financial institutions and foreign investors,
the immediate effect has been a fall in living standards. Between 2015 and 2018 the proportion of
Egyptians living below the poverty line increased sharply. This means that not only are the benefits of
reform not being felt, the reforms are actually causing pain. This is the driver behind the re-emergence
of popular protest.
Underlying pressures
A campaign of mass arrests quickly shut down the street demonstrations which flared up in September
2019 following the dissemination on social media of allegations that members of Sisi’s close circle had
enriched themselves via a lavish programme of presidential palace building. The government also eased
up on some price rises and austerity measures.
The first inchoate rumours of disquiet within the top ranks of the military following these protests suggest
that the President is neither impregnable nor all-powerful, despite the constitutional changes passed in
April 2019 which allow him to stay in power until 2030. If Sisi cannot neutralise the source of popular
anger, he could face a challenge from within rather than from outside the ruling structures. He may also
find himself confronting the kind of leaderless social media-inspired protest that has destabilised Algeria,
Sudan, Hong Kong and even some Western democracies.
Neither of these kinds of challenge would necessarily alter the system of governance. However, both
could result in a less liberal outlook towards foreign investors and a reconsideration of policies such as
the liberalisation of markets including the electric power market. Alternatively, by stifling dissent while
adopting more popular economic policies Sisi could ride out this period of dissatisfaction, particularly
if he can find ways of better sharing the benefits of economic reform. In this latter case, the pace of
reform would also be likely to slow down.
These factors have contributed to African Energy issuing Egypt a ‘D’ rating for political risk, with a
deterioration in ‘democratic accountability’ being offset by improvements in macroeconomic conditions.
Power sector context
The political imperative to avoid blackouts and to ensure the consistent availability of electric power at
peak times has been a defining feature of the Sisi presidency. The collapse of the Mubarak regime and
the brief rise and fall of the Brotherhood’s Mohamed Morsi took place against the background of a
severe energy crisis.
The long-term mismanagement of the gas production and export industry meant that by 2012 Egypt
not only had to cease gas exports, it also had insufficient production to supply domestic industry and
power generation. The related balance of payments crisis made it difficult to import replacement liquid
fuels. Morsi’s failure to respond to these economic challenges (conspiracy theorists have alleged that
his opponents – not least in the military – may have covertly exacerbated the difficulties) was an
important factor behind his downfall. It is certainly the case that after taking control in July 2013, the
military swiftly resolved the most debilitating aspects of the power supply crisis. Policies to guarantee
sufficient domestic gas supply and a generous reliable reserve margin for power generation have
remained at the top of the agenda ever since.
Priority one: massive procurement of generation capacity
The procurement drive opened with an emergency Fast Track programme to install 4,736MW of gas-
fired generation capacity to meet expected demand peaks during the summer of 2015. Earlier that year
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 11
Executive summary
in March 2015, the government had attracted billions of dollars of private sector investment pledges
across every sector of the economy with power supply at the forefront. The most effective programmes
to emerge from this were the 1.44GW solar feed-in tariff (FiT) scheme at the Benban solar park, and a
large scale tendering process for wind projects on the Gulf of Suez.
In June 2015, President Sisi oversaw the signing of an $8.1bn agreement with German’s Siemens for
the installation of three vast gas-fired combined cycle gas turbine (CCGT) plants totalling 14.4GW. At
the time there was no solid evidence that improved incentives for upstream exploration would restore
domestic gas production in time to provide feedstock to the plants.
Eni’s discovery of the giant 2.7bcf/d offshore Zohr field two months later virtually guaranteed the success
of the government’s plans to restore gas-fired baseload capacity. As this report went to press, the
government was in talks with international investors about the multibillion-dollar sale of Siemens’ three
gas-fired power plants in what could be one of the biggest privatisations in Africa in any sector.
Priority two: structural reform
Parliament also passed an electricity law in 2015, which provided the basis for the gradual unbundling
of the transmission system operator and distribution subsidiaries from the heavily indebted state-owned
utility Egyptian Electricity Holding Company (EEHC); the removal of barriers to IPP entry; abolition of
costly subsidies; and divison of the supply sector into regulated and unregulated markets.
The result is that installed capacity almost doubled from 30.9GW at end-2014 to 59.9GW by end-2019.
With a generous reserve margin of 85% in place, the obsession for installing new power capacity by
any means has been replaced by a policy of least-cost expansion.
No new gas capacity will be added during EEHC’s current five year plan (2017-2022); the focus is entirely
on renewables. The government is also attempting to realise a fresh ambition to become a tri-continental
hub for power exports, with interconnections planned to facilitate trade throughout North Africa, sub-
Saharan Africa, the Gulf, and even Europe via an interconnection with Cyprus.
A recovery in gas production
There remain significant unexploited natural resources in Egypt, both in oil and gas and renewable
energies. The development of gas fields has helped put Egypt on course to being a net exporter of
natural gas after several years of being dependent on LNG imports.
The discovery of 16 gas fields in 2017/18 in the Western Desert and Nile Delta have helped satisfy the
rising use of gas as a source of power generation – the sector now consumes 63% of domestic gas
use as power generation moves away from liquid fuel. Parallels can be drawn between regulatory trends
in the gas and power sectors; wide-ranging legislation introduced in 2017 has helped liberalise the
natural gas market to reduce the burden on state entities.
Push for increased renewables
Despite having a reserve margin of close to 85% – which many argue represents significant over-
capacity – futher capacity additions are expected as the government targets up to 47% of generation
from renewable sources by 2035 (compared to 6% currently).
With demand expected to reach 70-85GW by 2035, the government’s long term plan implies that
generation capacity will be expanded to 160GW. This would represent a reserve margin of 87% by this
time, far in excess of the more modest target of 30% recommended in 2015.
12 AFRICAN ENERGY • EGYPT POWER REPORT • 2020
Country snapshot
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 13
Arab Republic of Egypt
Capital Cairo
Population 96.98m (2018)
Area 1,010,408km2
Official language Arabic
Head of government President Abdel Fattah El Sisi
Economy
Currency
Egyptian pound (subunit: 1/100 piastres)$1=E£16.1 as of 1 December 2019
GDP (nominal) $249.56bn (2018)
GDP growth rate 5.31% (2018)
Inflation (y-o-y) 14.4% (2018)
Power sector
Installed generation
capacity59,858MW (December 2019)
Installed IPP capacity 3,815MW (December 2019)
Peak load 30,800MW (2018)
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