Investors terminate renewable energy projects following dispute over feed-in tariff

The future of Egypt’s renewable energy program is in doubt as relations between officials and investors continue to deteriorate.

A Thursday meeting between Minister of Electricity Mohamed Shaker and renewable energy investors failed to resolve problems with the feed-in tariff, a program meant to pave the way for private-sector investment in clean-energy projects.

“The meeting was terrible. They are officially closing the doors in the face of projects,” says Hesham Tawfik, owner of Cairo Solar, who tells Mada Masr his company is pulling out of the program. Cairo Solar has invested seven million Egyptian pounds in expenses, and was scheduled to start building a plant in early October, Tawfik says.

Deals have fallen through largely due to the ministry’s insistence that investor-government disputes be resolved through the local judicial system rather than through international arbitration, Tawfik explains. As a result, international funders have shied away from supporting projects.

“All international lenders refuse the law, not one agrees to it,” Tawfik says.

The Electricity Ministry continues to defend its stance on arbitration. “The project is Egyptian, implemented on Egyptian land, thus there is no reason for foreign intervention,” Minister Shaker recently told Youm7 newspaper.

Another sticking point has been a ban on local financing, Tawfik says — the ministry mandated that at least 85 per cent of total investments should come from abroad.

While investments must be made in hard currency, the government pays developers in Egyptian pounds. As Egypt’s currency crisis deepens, developers have backed out of planned projects.

“Within the coming month most of the people will pull out,” Tawfik predicts. Saudi Abdel Latif Jameel and Italian Enel Green Power had also announced termination of their projects, Tawfik notes.

Commercial International Bank (CIB), one of the local banks that allocated funds to lend for fee-in tariff projects, tells Mada Masr that since Thursday’s meeting, they have been getting calls from investors who plan on withdrawing from the program. “They won’t go through with round one,” adds Noha Hussein of CIB’s operational risk management unit.

Companies that do not formally terminate their projects by October 26 — the closing of phase one of the project — are technically and legally at fault, and will not get their money returned. The second phase is to be announced the next day, according to the ministry.

Hussein says the minister has informed developers that many won’t be able to continue with their projects because the ministry is looking for companies who can source their own foreign funding for projects. “We are looking through the list to see how many will fall into this criteria,” Hussein says.

Twelve developers were to continue in phase one, but after today’s meeting there will be “not very many” left, she adds.

In 2014, the ministry first announced the feed-in tariff system, targeting 4.3 gigawatts of wind and solar projects to be established over three years.

The New and Renewable Energy Authority had originally signed 56 agreements with companies and alliances for solar and wind power plants. The state allocated almost 7,900 kilometers of land for the new projects.

Egypt has also allocated US$13.5 billion to up its share of power generated by renewable sources to 20 percent in 2020, later pushed to 2022.


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