SUSTAINABLE ENERGY SUPPORT FOR BUILT ENVIRONMENT PROJECTS

REVIEW OF SUSTAINABLE ENERGY OPPORTUNITIES IN THE HOTEL SECTOR OF EGYPT (RED SEA AND SINAI REGION)

FINAL REPORT Prepared for:

Prepared by: AF-MERCADOS EMI (SPAIN)

September 2013

AF-MERCADOS EMI

REVIEW OF SUSTAINABLE ENERGY OPPORTUNITIES IN THE HOTEL SECTOR OF EGYPT (RED SEA AND SINAI REGION)

FINAL REPORT

TABLE OF CONTENTS

ACKNOWLEDGEMENTS ...... ERROR! BOOKMARK NOT DEFINED.

1 EXECUTIVE SUMMARY ...... 5

2 INTRODUCTION ...... 13

3 BACKGROUND CONSIDERATIONS FOR INVESTMENT ...... 18

4 MARKET SURVEY ...... 25

5 WALK THROUGH AUDITS ...... 30

6 TECHNICAL AND MARKET POTENTIAL ...... 60

7 MAIN FINDINGS AND RECOMMENDATIONS...... 67

8 ANNEX A: ENERGY PRICES ...... 71

9 ANNEX B: LIST OF RESORTS THAT PARTICIPATE IN THE SURVEY ...... 72

10 ANNEX C: MARKET SURVEY ...... 74

11 ANNEX D: KPIS PER SQUARED METER ...... 83

12 ANNEX E: CONCENTRATED SOLAR POWER ...... 95

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 2 AF-MERCADOS EMI

TABLE OF EXHIBITS

Exhibit 1- Cost per guest night in the different resorts ...... 7 Exhibit 2- List of the energy conservation measures and simple paybacks ...... 7 Exhibit 3- WTAs resume (CHP results not included) ...... 8 Exhibit 4- CHP resume ...... 8 Exhibit 5- Technical market: Number and percentage of hotels per prototype segment ...... 9 Exhibit 6- Market Barriers and way to overcome ...... 9 Exhibit 7- Number of projects and associated investment in detail ...... 10 Exhibit 8- Average number of projects and associated investment ...... 11 Exhibit 9- Red Sea and Sinai distribution per hotels category ...... 14 Exhibit 10- Red Sea and Sinai hotels distribution per room number...... 14 Exhibit 11- Distribution per category according to the room capacity at the Sinai ...... 15 Exhibit 12- 4* segmentation per number of rooms at Sinai ...... 15 Exhibit 13- 5* segmentation per number of rooms at Sinai ...... 15 Exhibit 14- Distribution per category according to the room capacity at the Red Sea ...... 16 Exhibit 15- 4* segmentation per number of rooms at Red Sea ...... 16 Exhibit 16- 5* segmentation per number of rooms at Red Sea ...... 17 Exhibit 17- Air temperatures (ºC) in Sharm El Sheikh ...... 17 Exhibit 18- Approximate Amount of Egypt’s Energy Subsidies in FY 2009/2010 ...... 19 Exhibit 19- Responses per hotel category ...... 25 Exhibit 20- Position of the surveyed ...... 25 Exhibit 21- Distribution of answer per guest rooms...... 26 Exhibit 22- Refurbishment Classification ...... 26 Exhibit 23- Opening year of the resort ...... 26 Exhibit 24- Energy costs over sales ...... 27 Exhibit 25- Age of the hot water facilities ...... Error! Bookmark not defined. Exhibit 26- Age of the cooling facilities ...... Error! Bookmark not defined. Exhibit 27- Distribution of the fuel use to produce hot water ...... 28 Exhibit 28- interest for the application of conservation measures ...... 28 Exhibit 29- Interest for technological investments ...... 29 Exhibit 30- Simple payback as a decision factor ...... 29 Exhibit 31- Perception for Energy Service Companies ...... 29 Exhibit 32- Location of the visited resorts for WTAs ...... 30 Exhibit 33- General data of the visited hotels ...... 31 Exhibit 34- Room occupancy evolution ...... 32 Exhibit 35- Average room occupancy ...... 33 Exhibit 36- Average guest nights per resort ...... 33 Exhibit 37- Resume of the consumption and cost baselines for selected resorts ...... 35 Exhibit 38- Energy cost (EGP) per resort ...... 36 Exhibit 39- Energy and water breakdowns in four representative hotels...... 37 Exhibit 40- Electrical, diesel and water Key Performance Indicator ...... 38 Exhibit 41- Cost per guest night in the different resorts ...... 39 Exhibit 42- Cost per guest night in the different resorts ...... 39 Exhibit 43- Areas of Energy Efficiency ...... 40 Exhibit 44- List of the energy conservation measures ...... 40 Exhibit 45- Typical monthly electrical consumption of a resort in Sinai and Red Sea (kWh) ...... 41 Exhibit 46- Coefficient of Performance of the cooling systems ...... 42 Exhibit 47- Cost estimation switching air-conditioning ...... 42 Exhibit 48- Savings switching air-condition ...... 43 Exhibit 49- Glazing types and low-E glass ...... 46 Exhibit 50- Reverse osmosis desalinated water plant ...... 48 Exhibit 51- SWH central system in hotel ...... 50 Exhibit 52- Typical figure of hot water demand in a resort at Sinai (diesel consumption, litres) ...... 50 Exhibit 53- Solar collector section ...... 51 Exhibit 54- Cogeneration or trigeneration systems ...... 55 Exhibit 55- Resume of the cogeneration investments ...... 57 Exhibit 56- CSP-DSW Plant Conceptual Design with added RO modality ...... 58 Exhibit 57- WTAs resume (CHP results not included) ...... 59 Exhibit 58- CHP resume ...... 59 Exhibit 59- Prototypes defined according to the main variables that affect energy consumption ...... 61

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 3 AF-MERCADOS EMI

Exhibit 60- Technical market: Number and percentage of hotels per prototype segment ...... 61 Exhibit 61- List of the energy conservation measures ...... 62 Exhibit 62- Market Barriers and way to overcome ...... 62 Exhibit 63- Number of projects and associated investment -Conservative Scenario ...... 65 Exhibit 64- Number of projects and associated investment -Optimistic Scenario ...... 65 Exhibit 65 - Number of projects and associated investment in detail ...... 65 Exhibit 66- Average number of projects and associated investment ...... 66

Disclaimer Notice “The findings, interpretations and conclusions expressed in this report are entirely those of AF-MERCADOS and should not be attributed in any manner to the EBRD or its affiliated organizations.”

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 4 AF-MERCADOS EMI

1 Executive Summary

Tourism is recognized to be one of the largest contributors to Egypt’s economic growth, where most of the sector’s new jobs and businesses are being created. According to the Central Bank of Egypt, tourism represents 11.3% of Egypt’s GDP, 36.4% of the total exported services and accounts for 23% of the country’s foreign currency income. Therefore, the hotel sector represents one of the cornerstones of the Egyptian economy, particularly since mid 80s – 90s when a large number of large resorts initiated their activities in the South Sinai and Red Sea areas; these were mainly 5*, 4* and 3* hotels, which receive European tourism all year through due to the excellent climate, beaches, high quality services and aqua sports (diving, snorkelling, windsurfing and kite surfing).

According to the Egyptian Hotel Association1 (EHA), there were approximately 965 hotels in Egypt, with almost 180.000 rooms (equivalent to 342,302 available beds). Of these, the Sinai and Red Sea areas concentrate the 60% of the hotels in Egypt, representing the 75% of the room capacity (134,761 rooms). More precisely, 90% of the rooms in these areas are concentrated in 389 hotels (5*, 4* and 3*), which represent the largest potential for investments in sustainable energy (see chapter 2)

However, the profitability of the Egyptian hotel sector has been affected negatively after the 2011 revolution and the current political instability in Egypt, with a significant decrease in the number of visitors; this has been affecting the sector income since 2011. At the same time, the lack of investment on the electrical system in the last years, together with the important growth of the demand side in a country where energy prices are heavily subsidized, have led the system to continuous cuts in the summer season. So far, the hotel sector was avoided to be curtailed in the critical peak periods in summer time (5pm until 11 pm) like large industrial consumers which are being curtailed this summer; however there is an important uncertainty related to potential curtailments in the future. One of the main strategies of the government is to reduce in the short-medium term the high level of subsidies in natural gas, LPG and electricity; these are the main fuels used by the hotel sector in Egypt (see chapter 3).

From an energy point of view, in order to characterize, identify and evaluate opportunities for sustainable energy investments in the hotel sector, two complementary approaches were used. On the one hand, a market survey (chapter 3) was successfully completed during April 2013 to all the hotels in the area, with 93 hotels participating on the survey; on the other, twelve walk through audits (chapter 4) in 5*, 4* and 3* resorts were driven in Sharm el Sheikh, Hurghada, Makadi, Sahl Hasheish and Marsa Alam.

Some of the main findings are summarized in the following subparagraphs:

Architecture and design  Almost 75% of the hotels started operation between 1995 and 2005, and almost 50% of them have completed a general overhaul or partial renovation  Maximum view of the sea and/or the swimming pools  High exposure of façades to sun radiation, with nearly no attention to type of glazing, shading and insulation  Multi-storey buildings with maximum four stories high

1 Data extraction from 13/11/2012

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 Materials: reinforced concrete for the skeleton and single walls and glazing for the envelope  Several swimming pools heated during winter time  Large gardens and several sport facilities (tennis courts, gyms, etc.)

Facilities  Cooling demand proves to be the largest energy consumption in the resorts, nevertheless, only 28,2% of the hotels have a centralized cooling systems for common areas and/or guest rooms; and most of them (81%) use split units for the guest rooms where they can freely control the temperature.  HVAC: public areas are cooled using central air condition with large chillers. Guest rooms can use either central (mainly 5*) and/or split systems (4* and 3*). All HVAC systems are power operated, except for a few hotels2 (absorption chillers) that have been connected to the natural gas grid recently.  Pumping and motors: low presence of variable speed drivers  Swimming pools: all resorts have more than one large unit heated during the winter time (27ª- 30ªC)  Domestic Hot Water (DHW): all the resorts use diesel boilers (5*) or electric heaters (4* and 3*) and presence of SWH is minimum  Kitchen: they can use a mix of LPG and electricity or 100% electric and they normally run on “all inclusive” basis  Laundry: they use steam or hot water supplied by fire tube boilers  Guest rooms: high standards (TV, lighting, minibar, hair dryer, etc.)  Indoor lighting: mix of incandescent, halogens and LEDs  Outdoor lighting: mainly metal halides and mercury vapour luminaries  All have emergency generator for cases of electricity cut-off, however consumption is negligible.  Onsite power generation plants at Marsa Alam  Onsite desalination plant: reverse osmosis plants  Waste treatment plant: standard equipment required by Law  Large restaurants, shops, health centres and in few hotels large conference centre

Energy and water  Energy costs over the total operational costs vary between 5% to 15% for more than the 50% of the hotels in the areas  Electricity is provided through the grid, except in Marsa Alam (onsite generation).  Generally, fresh water is produced onsite due to the lack of a municipal water distribution system.  The fuels used for producing steam for laundries and hot water for guest rooms and swimming pools (in winter) are diesel and electricity, except in two hotels at Sharm El Sheikh that have been recently connected to the natural gas grid.  LPG is only used in some kitchens at some hotels.  In Sharm El Sheikh, the natural gas distribution company is expanding the grid in the area and it is forecasted that in few years time it will connect many hotels in the area.  By law, resorts are required to treat their wastewater and to either reuse or dispose the treated effluent in an environmentally friendly way.  None or minimum presence of renewable energies (SWH, PV, wind, biogas, etc.)

In terms of energy costs, the distribution per hotel varies from one hotel to another, but in general terms electricity represents the highest cost (average 59%), followed by water (average 28%) and diesel (13%); in terms of total cost per guest night (Exhibit 1) the average of the Sinai´s resort is 30 EGP/PAX, 20 EGP/PAX in Marsa Alam and 14 EGP/PAX in North Red Sea for the registered occupancy of the last three years.

2 H4-5#500@S and H3-5#400@S Resorts have been connected to the Natural Gas Grid in March 2013.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 6 AF-MERCADOS EMI

Exhibit 1- Cost per guest night in the different resorts

The scope of technologies studied in the WTAs and the associated energy conservation measures (ECMs) cover the following aspects: reduction of the energy and water demand (REM), improvement of the energy efficiency in the conversion of delivered energy to useful energy (EEM), on site generation (OGM), renewable generation (RES), fuel switching strategies (FSS), operation and maintenance benefits (O&M). The identified energy conservation measures are summarized in the following table, which also include the typical simple payback for the measure in the Red Se hotels.

Exhibit 2- List of the energy conservation measures and simple paybacks

Energy Conservation Measures Classification Simple Payback (years) Code Executive Description REM EEM OGM RGM FSS O&M min max ECM-1 Switching from individual splits to x 2 3 centralized cooling systems ECM-2 Replacement of air cooled chillers to x x x 3.5 4.5 absorption chillers ECM-3 Waste heat recovery systems x 4 5 ECM-4 Improving the envelope energy x x 5 10 performance (windows and walls) ECM-5 Building energy management system x x 3 6 ECM-6 Adding pressure exchangers to the x 2 3 desalination plants ECM-7 More efficiency motors and pumps with x x 2.5 4 variable speed drivers ECM-8 Replacement of central diesel boilers by x x 8 9 SWH ECM-9 Replacement of single electrical heaters x x 7 8 boilers by SWH ECM-10 Minimization of the evaporation and heat x 1.5 2.5 losses at the swimming pools ECM-11 Water conservation x 1 2 ECM-12 Relamping for indoor and outdoor x x 1 2 common areas ECM-13 Photovoltaic panels for outdoor lighting x x 1.5 3 ECM-14 Fuel switching to natural gas x x x 3 4 ECM-15 Cogeneration plants x x x 5 7

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 7 AF-MERCADOS EMI

For the eleven WTAs, the total investment in sustainable energy (not including CHP) is over 82 million EGP (8.8 million EUR), with a minimum investment per resort of 3.9 million EGP (0.11 million EUR) up to 13.5 million EGP (1,45 million EUR), being the solar water heaters and the central chillers the main investment for the majority of the resorts. This investment will increase notoriously in the hotels that are being connected to the natural gas grid, as can be seen below in Exhibit 3

Exhibit 3- WTAs resume (CHP results not included)

Estimated Annual Energy After-tax Energy Saving Hotel total CAPEX Saving Savings Cost (EGP) (tCO2/yr) (EGP) (EGP/yr) (%) Payback IRR NPV

H1-4#369@S 10,218,403 1,446,796 5,314,583 27 2,107 4.0 30 2,862,519

H2-5#470@S 7,107,423 1,640,347 8,942,038 18 2,879 6.1 19 1,171,445

H3-5#400@S 7,694,964 1,946738 6,536,401 30 2,040 4.8 22 2,953,766

H4-5#500@S 7,913,852 1,650,490 8,239,656 20 1,351 5.5 18 1,275,746

H5-5#318@S 4,831,141 1,134,248 5,213,479 22 1,516 5.3 20 1,194,817

H6-5#364@MA 4,779,158 774,392 3,215,977 24 721 2.8 42 1,632,833

H7-4#140@MA 3,922,88 531,795 1,586,852 34 659 3.4 36 803,102

H8-4#313@NRS 6,323,826 564,855 2,227,921 25 820 3.1 34 1,142,773

H9-5#700@NRS 13,567,560 1,482,180 7,333,767 20 2,527 5.7 21 24,874 H10- 8,047,202 1,082,924 2,692,504 40 1,848 4.5 25 1,203,403 5#292@NRS H11- 9,539,650 668,424 3,771,046 18 952 3.4 33 1,094,386 3#522@NRS

Exhibit 4- CHP resume

After-tax Estimated total CAPEX Annual Saving Saving Hotel (EGP) (EGP/yr) (tCO2/yr) Payback IRR NPV

H5-5#318@S 7,632,835 1,941,746 1,957 5.0 18.5 11,363,631

H4-5#500@S 19,558,403 3,756,932 2,337 6.0 13.9 965,709

H3-5#400@S 15,525,296 2,980,617 1,852 6.0 13.9 -774,090

In general terms, the saving potential is high and the total CO2 saving potential will be of more than 28,500 ton CO2/year, not including CHP (more than 55,000 ton CO2/year including CHP). In terms of economical and financial results, while the payback varies from 2,8 years up to 6,2 years, the IRRs varies from 18% to 42%. Typical CHP IRRs are around 15%.

For the determination of the market potential (section 6), four prototypes of resorts were classified under the following variables:  Location: in general, Sinai resorts have higher energy consumption per guest night than the Red Sea area, including Marsa Alam.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 8 AF-MERCADOS EMI

 Connection to the electrical grid: Marsa Alam resorts are isolated from the electrical grid, affecting the electricity prices paid by the resorts.  Connection to the natural gas grid: Actually Sharm el Sheikh and in the future Hurghada area are or will be connected to the natural gas grid. This will create large investment opportunities in the connected hotels for the H5-5#318@S, H4-5#500@S and H3-5#400@S resorts.  Category of the resort at the South Sinai area: in general, 5* resorts are characterized for their luxury and exclusive facilities (guest rooms, restaurants, number of swimming pools, spas, stores, etc.).  HVAC technology: cooling represents the higher energy demand at the resorts, due to the high temperatures all throughout the year. In 5* hotels in Sinai, they normally use central chillers for common areas and guest rooms; however, 4* and 3* normally use split units for the guest rooms. In the Red Sea area, the majority of the resorts (5*, 4* and 3*) use split units for cooling the guest rooms.  Steam & hot water production: 5* SINAI´s resorts produced their hot water with central diesel boilers, while hotels in the Red Sea very often used electrical heaters for the guest rooms.

The technical market is represented in the figure below: 5* at Sinai (R-5@S); 4* and 3* at Sinai (R-43@S); 5*, 4* and 3* at North Red Sea (R-543@NRS); 5*, 4* and 3* at Marsa Alam (R-543@MA).

Exhibit 5- Technical market: Number and percentage of hotels per prototype segment

R-543@MA R-543@MA R-5@S R-5@S #44 12% #52 21%

R-543@NRS R-43@S R-43@S #146 R-543@NRS #147 39% 28%

For the estimations of the market potential and the investment plan, additional to the four prototypes, two projection scenarios are defined (conservative and optimistic), depending on how the market barriers are solved in the short-medium term (up to 2015) and long term (up to 2020). The market barriers identified are resumed in the table below.

Exhibit 6- Market Barriers and way to overcome

Time to Barriers Comments Way to overcome implement As seen in chapter 2, actually there are no laws, regulations or effective policies to promote energy efficiency and renewable energy in Egypt. Also, there is no clear and comprehensive Accelerating the adoption of the Medium- Lack of Legislative strategy and/or program for Bylaws and new directives for Long Term and Regulatory improving EE & RE. Notwithstanding energy efficiency and renewable (2-3 year at Framework the creation of the new Energy energy. least) Efficiency Unit, still there is no dedicated institution that has clear implementation and executive authority for pursuing energy efficiency objectives Financial Constrains Hotels are very much interested in Dialogue with Business Short /

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 9 AF-MERCADOS EMI

reducing energy expenditures (which Associations, Local Banks, Medium represent around 6 to 8 per cent of International Donors and IFIs to Term (1 their annual costs or even more), but individuate possible alternative year) hotel owners are facing financial financing tools or mechanisms to constraints, mainly due to reduction introduce EE&RE component into in the number of tourists in the last loan products specifically intended two years resulting from the for hotels instability in the Middle East. Energy Efficiency in hotels could be The conventional energy prices are addressed by upstream sufficient still heavily subsidized in Egypt. Due sustainable resources. This Profitability of EE to the low prices of electricity, natural Medium requires dialogue with the measures for end gas and diesel, the pay-back period of Term (2-3 Government, International users some EE measures is often beyond years ) Institutions and local banks to the acceptable level for commercial customize existing and/or newly sector end-user. financing mechanisms. Despite some subsidies in SWH, the initial investments for RE and EE Medium – Creation and implementation of High cost of initial measures remain high or very high Long Term National Funds for the promotion investment and profitability is low, which does (2 year at of EE and RE. not allow the development of a least) spontaneous market for EE measures.  Policy dialogue, requiring

cooperation with Government (and

International Donors and The penetration rate of EE and RE Institutions to introduce additional measures in the hotel sector is very Low interest and regulatory measures on energy low and almost limited to SWH Short- lack of awareness efficiency minimum requirements systems and a few EE technologies Medium of end user toward for buildings and/or specific like lighting. Effective results of these term EE and RES obligation to install EE and/or RE measures, mainly in terms of (1 year at technologies, their systems in resorts. achievable savings, are not diffused in least) economic results  Information and Egypt and are not well understood by and financial educational campaigns through the potential end-users. This limits a mechanisms different stakeholders, like wider diffusion of EE measures and governmental institutions, techniques in the hotel sector. Egyptian Hotel Association,

Engineering Associations,

Architectures, vendors, etc. Identifying national players that Though perception for ESCOS is good Short- aim to develop the first pilot (Survey, chapter 3); currently there Medium Lack of energy projects and assisting them with are no relevant ESCOs working in term services companies technical and specific know-how in Egypt that could foster the (1 year at (ESCOS) energy services contracts and risk improvement of the sustainability of least) management through international the hotels. cooperation.

For the conservative and optimistic scenario, we forecast a higher number of projects and investment in the Sinai area, mainly due to the existing natural gas extension plan in Sharm El Sheikh; the main difference between both scenarios is the success in the promotion of EE and RE financing mechanism in both areas (see section 6.5) and if in any major overhauls in a certain hotel, better isolation measures are financed.

Exhibit 7- Number of projects and associated investment in detail

Short term (up to 2015) Long term (up to 2020) Estimated Estimated Business Estimated Estimated Business number average Opportunity number average opportunity of investment (Euros) of investment (Euros)

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projects per client projects per client (n) (Euros) (n) (Euros) R-5@S 2 1,375,00 2,750,000 8 1,531,250 12,250,000 R-43@S 3 1,000,00 3,000,000 12 812,500 9,750,000 Conservative R- 2 750,00 1,500,000 6 1,083,333 6,500,000 Scenario 543@NRS R-543@MA 2 400,00 800,000 5 400,000 2,000,000 TOTAL 9 894,444 8,050,000 31 983,871 30,500,000 R-5@S 3 1,583,333 4,750,000 13 1,519,231 19,750,000 R-43@S 6 875,000 5,250,000 24 937,500 22,500,000 R- 2 750,000 1,500,000 13 1,057,692 13,750,000 Optimistic 543@NRS Scenario R-543@MA 4 400,000 1,600,000 9 400,000 3,600,000 Major 2 300,000 600,000 8 300,000 2,400,000 overhaul TOTAL 17 781,667 13,700,000 67 842,885 62,000,000 Credit financing 3 1,500,000 3,750,000 11 1,523,810 16,000,000 Average line ESCO 0 na 0 0 na 0 TOTAL 13 836,538 10,875,000 49 943,878 46,250,000

Exhibit 8 resumes both optimistic and conservative scenarios presenting the average number of project and associated investment in the short and long term for the four prototypes of hotels and potential major overhauls.

Exhibit 8- Average number of projects and associated investment

Market potential of EE Est. number of investment projects in Potential for EBRD projects Tertiary sector Typical Suitable Short Long Investment EE measures: Lighting, VF, EBRD Short term Long term term term size Boilers, AC equipment, Funding Up to Up to Cooling System (Chillers, type* Up to 2015 Up to 2020 2015 2020 refrigeration towers) (thous. (thous. (thous. SWH, Insulation (n) (n) Euros) Euros) Euros) R-5@S 3 11 11,512 1 3,750 16,000 R-43@S 5 18 906 1 4,125 16,125 R-543@NRS 2 10 908 1 1,500 10,125 R-543@MA 3 7 400 1 1,200 2,800 Major Overhaul 1 4 300 1 300 1,200 TOTAL 13 49 10,875 46,250 * Typical types of EBRD funding: 1. Credit line facility (up to MEuros 5), 2. Direct lending facility (M5 to 15) 3. Direct lending (over MEuros10) 4. ESCO

According to these investment estimations per hotel and taking into account the estimations for the total number of hotels (above 3*) in the area of the Red Sea, the total potential market for financing opportunities in sustainable energy will be close to 400-500 million Euros. If we consider that the 75% of the rooms available in Egypt are in the Red Sea area, we can estimate that the total potential for Egypt would be over 600 million Euros.

Finally, the main findings and recommendations (details in section 7) for the development of sustainable financing at the hotel sector can be summarized in the following statements: 1. ”Perception of a severe increment in the energy prices is a key driver for EE and RE projects”

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2. ”Hotel chains are key players to open the market” 3. ”High saving potential, reasonable paybacks but low penetration of energy efficiency technologies” 4. ”The expansion of the Natural Gas Grid opens the market for high efficiency natural gas technologies” 5. ”Renewable energy technologies have a great run but more “local success histories” are needed” 6. ”Potential for large investments in singular projects”

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2 Introduction

2.1 Description of the hotel sector at the Red Sea and Sinai Areas

Tourism is recognized to be one of the largest contributors to Egypt’s economic growth, where most of the sector’s new jobs and businesses are being created. According to the Central Bank of Egypt, tourism represents 11.3% of Egypt’s GDP, 36.4% of the total exported services and accounts for

23% of the country’s foreign currency income.

In Egypt, tourism has grown rapidly and almost always constantly over the past 20 years. Recreational tourism domain has grown rapidly in particular locations such as Sharm El-Sheikh, Hurghada, Safaga, Taba, Marsa Alam and others places located on the Red Sea and the Sinai areas.

European countries (Russia, United Kingdom, Germany, Italy and France) mainly are the main source of tourism in Egypt, constituting about 74.2% of the total amount of tourists, followed by the Middle East countries with a 13.6%3. However, since the economical crisis started and particularly after the “Egyptian revolution” in 2011, the number of visitors has decreased notably. Nevertheless, the Egyptian hotel Association (EHA) expects to recover 2010’s occupancy rates in the medium term.

In a survey4 made to determine the top motivations that move foreigners to travel to South Sinai, the results were: climate (82%), beaches (44%), snorkelling and water sports (with 33%), good value for money (27%) and travel time (23%). Interestingly, however, when asked about the most enjoying aspects of their holidays, tourists ranked coral reefs in the first place (73%), before climate (58%), beauty of landscape (35%), beaches (31%) and accommodation, services and food (26%).

According to EHA, there were approximately 965 hotels in Egypt, with almost 180.000 rooms (equivalent to 342,302 available beds). Of these, Sinai and Red Sea areas concentrate the 60% of the hotels in Egypt,

3 Ministry of Tourism 2009 4 the Support for Environmental Assessment and Management of Egypt,2004

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 13 AF-MERCADOS EMI representing the 75% of the room capacity (134,761 rooms).

Exhibit 9- Red Sea and Sinai distribution per hotels category

South Sinai Red Sea Suez North Sinai Total

5 stars 52 38 3 2 95 4 stars 78 77 2 0 157 3 stars 69 78 14 1 162 2 stars 43 36 4 3 86 1 stars 19 21 1 0 41 Unclassified 22 21 2 0 45 Total 283 271 26 6 586 Source: Egyptian Hotel Association (EHA)

For this study, we will focus on South Sinai (48% of the rooms available) and Red Sea (52% of the rooms) areas. In terms of the category of the hotel, we will study the 5* (32% of the rooms available in both areas), 4* (36% of the rooms) and 3* (19% of the rooms), as shown in the table below.

Exhibit 10- Red Sea and Sinai hotels distribution per room number

South Sinai Red Sea Total # % # % # % 5 stars 24,917 19% 17,685 13% 42,602 32% 4 stars 21,502 16% 26,664 20% 48,166 36% 3 stars 9,220 7% 15,480 12% 24,700 19% 2 stars 2,856 2% 3,274 2% 6,130 5% 1 stars 856 1% 1,146 1% 2,002 2% Unclassified 3,445 3% 4,956 4% 8,401 6% Total 62,796 48% 69,205 52% 132,001 100% Source: EHA

2.1.1 Sinai Hotel Segmentation5

Lying at the southern flank of the Peninsula where the both Aqaba and Suez gulfs meet with the Red Sea, Sharm El-Sheikh stands as the biggest and most important city of Sinai, considered as the most famous seaside resort in the area. The 283 hotels that can be found in Sinai are concentrated mainly at Sharm El Sheikh (194), Dahab (30), Taba (23) and Nuweiba (17), with a total capacity of 62,796 rooms.

5 For the analysis of this report, the following resort´s classification by number of rooms has been used: • Small (S) size: lower than #200 rooms • Medium (M) size: between #200 and #300 rooms • Large (L) size: between #300 and #450 rooms • Extra large (XL) size: between #450 and #700 rooms • Extra large (XXL) size: above #700 rooms

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Exhibit 11- Distribution per category according to the room capacity at the Sinai

Source: EHA

The segmentation per number of rooms in 5* hotels, represented in Exhibit 13, shows that the size of the hotels in this area is concentrated in L (#300 to #450) and XL (#450 to #700), with an average of 473 rooms per hotel; by contrast, 4* hotels they are concentrated in S (<#200) and medium size (#201 to #300), with an average of 265 rooms per hotel. The average for 3* hotels is 163 rooms.

Exhibit 12- 4* segmentation per number of rooms at Sinai

Exhibit 13- 5* segmentation per number of rooms at Sinai

Source: EHA

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 15 AF-MERCADOS EMI

2.1.2 Red Sea Hotel Segmentation

The 271 hotels at the Red Sea area are concentrated mainly at Hurghada (160), Ainsokha (22), Safaga (21), Elgouna (13) and Marsa Alam (48), with a media of 267 rooms per hotel. According to EHA’s database, the 5* and 4* hotels represent the 42% of the total hotels in the area, concentrating more than the 75% of the rooms.

Exhibit 14- Distribution per category according to the room capacity at the Red Sea

The segmentation per number of rooms in 5* hotels, represented in shows that the size of the hotels in this area is concentrated in L (#300 to #450) and XL (#450 to #700), with an average of 450 rooms per hotel, while in 4* hotels they are concentrated in S (<#200) and medium size (#201 to #300), with an average of 343 rooms per hotel. The average for 3* hotels is 177 rooms.

Exhibit 15- 4* segmentation per number of rooms at Red Sea

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 16 AF-MERCADOS EMI

Exhibit 16- 5* segmentation per number of rooms at Red Sea

Source: EHA

2.1.3 Climate conditions

Both areas have a very similar arid desert climate, with only two main seasons, both of which are dry. Exhibit 17 shows the average air and water temperatures throughout the year. The winter months go from November to March, during which the day temperature is warm but during the night can drop to about 12°C and lower in the desert. The annual rainfall is zero; during the winter months, it can rain but just for a few seconds, and every few years a storm takes place, producing floods and power cuts. The summer weather is very hot and dry with low humidity, making high temperatures a lot more bearable. The temperature during the day can be about 40ºC and decrease during the night time to about 30ºC.

Exhibit 17- Air temperatures (ºC) in Sharm El Sheikh

Source: Norwegian Meteorological Institute

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 17 AF-MERCADOS EMI

3 Background considerations for investment

3.1 Energy in Egypt

Egypt’s energy mix is dominated by oil and gas; this is expected to continue so until 2030, accounting for 95% of its primary energy demand. Energy demand in Egypt is projected to grow at an average annual growth rate of 2.6%6.

One of the critical aspects of the energy sector in Egypt is the high level of subsidies in energy prices, representing a substantial drain on Egypt’s budget (i.e. for the electricity at the commercial –hotel- sector subsidies are over 50% for electricity, 75% in natural gas and over 90% in LPG). The official statistics7 show that petroleum subsidies increased from 40 billion EGP (4.3 billion EUR) in 2005/2006 fiscal year (FY) to 68 billion EGP (7.315 billion EUR) in the 2009/2010 FY. If energy subsidies are calculated on the basis of full economic cost, the resulting number will reach 140 billion EGP (15.06 billion EUR) – equivalent to 11.9 % of GDP. As shown in Exhibit 18, more than half of the energy subsidies are attributable to petroleum products, while one-third is accounted for by electricity and about 15% by natural gas. Energy subsidies amount to about 73% of all subsidies and approximately 21% of the country’s budget.

In addition to the high budgetary cost associated with energy subsidies, artificially low energy prices result in an excessive energy consumption that has resulted in Egypt’s switch from oil exporting to an oil importing country, while also limiting the country’s ability to export natural gas. In 2009, Egypt produces 88,186 thousand tonnes of oil equivalent8 (ktoe), mainly crude oil (33,920 ktoe) and natural gas (51,479 ktoe), at the same time, Egypt imports 10,456 ktoe and exports 25,452 ktoe, for a net primary demand of 72,015 ktoe (excluding international marine and aviation bunkers).

Meanwhile, an increase in Egypt’s CO2 emissions is projected at an average annual rate of 2.6%, from 122 Mt in 2003 to 151 Mt in 2010 and 242 Mt in 20309. The main emitter of green house gases (GHG) in Egypt is fuel combustion accounting for 22% in the energy sector, 21% in the industry sector and 18% in the transport sector10. The energy sector is expected to remain the major source for GHG emissions in the future and the one to increase its share with the highest growth rate. This presents another compelling reason to monitor and reduce energy consumption in hotels and resorts.

6 IEA,. World Energy Outlook : Middle East and North Africa Insights. OECD/IEA, Paris, 7 : ESMAP (2009); World Bank (2010a); World Bank (2010b); IMF (2011); Sherif and Elsobki (2010); Abouleinein et. al (2009), Khattab (2007); Razavi (2009) 8 IEA, http://www.iea.org/stats/balancetable.asp?COUNTRY_CODE=EG 9 IEA,. World Energy Outlook : Middle East and North Africa Insights. OECD/IEA, Paris, 10 Capacity Development for the Clean Develop- ment Mechanism (CD4CDM), Ministry of Trade & Industry (MTI), Ministry of State for Environmental Affairs (MSEA)

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 18 AF-MERCADOS EMI

Exhibit 18- Approximate Amount of Egypt’s Energy Subsidies in FY 2009/2010

Source: African Development Bank

3.2 Energy and water infrastructures

Energy activities in Egypt are managed by two Ministries: the Ministry of Petroleum (MOP) and the Ministry of Electricity and Energy (MOEE). The Supreme Council for Energy,, represented by the Prime Minister’s Cabinet and reporting to the president, is the main body responsible for setting energy strategies and pricing the petroleum products and electrical energy for different sectors in the local market. Moreover, the water supply for domestic, industrial, commercial, utilities, etc. is responsibility of the Holding Company for Drinking Water and Sanitation (HCDWS). The electrical power supply through the Egyptian unified power network covers Sinai and some districts in the Red Sea area. For instance, Hurghada and Safaga are supplied by electricity via the Egyptian unified power network and the southern District in Red Sea is totally dependent on self/distributed generation

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 19 AF-MERCADOS EMI firing diesel. This distributed power generation is responsibility of individuals or group of customers willing to get their own power supply. The Egyptian Natural Gas Company (GASCO) is the agent responsible for the expansion of the transmission grid in Egypt. Eight natural gas distribution companies operate in certain concession areas in Egypt that are connected to the national gas pipeline. Actually, the gas network covers the Delta area and Upper Egypt, and it is planned to connect11 Sharm El Sheikh (connected) and Hurghada at the Sinai and Red Sea respectively. The gas supply for other districts/cities different than Hurghada or Sharm El Sheikh is not foreseen in the short-term plan (5-year plan). For the hotel sector a more detailed analysis is performed in chapter 3 and 4 of this document.

3.3 Opportunities for energy efficiency and renewable in Egypt

3.3.1 Current Energy Efficiency and Renewable Energy Regulation

So far in Egypt, there is no law, regulation or effective policy to promote energy efficiency and renewable energy. Also, there is no clear and comprehensive strategy and/or program for improving EE & RE. Though the new Energy Efficiency Unit has been created, there is still no dedicated institution with a clear implementation and executive authority for pursuing energy efficiency objectives.

The government is preparing the ground for developing the energy sector reform further. The new Electricity Law has been prepared and sent to the parliament, which introduces a number of changes toward strengthening the sector’s commercial orientation and its opening to private investment and competition. It also addresses the promotion of renewable energy and energy efficiency.

The law gives the authority for tariff regulation to the electricity regulatory agency; it also grants more independence to the Egyptian Electricity Transmission Company (EETC), transforming it to an independent system operator with open access for bilateral trading between generation and consumers. Finally, it also promotes the introduction of a competitive end-user market. The draft law is designed to gradually reduce the investment burden on the state by building up a competitive market and encouraging private investment. It provides for a gradual elimination of the single buyer market, by allowing third-party access to the infrastructure owned by the Ministry of Electricity and unbundling ownership of the distribution system. While the electricity transmission company will continue to be state-owned, the law provides a legal framework conducive to private sector investment in generation and distribution.

Subject to the articles of the new electricity law, the investment in EE and RE technologies from the generation’s point of view is encouraged. In spite of that, the setup for a feed in tariff for power generation using renewable energies is in progress in order to meet the investment requirements for the demand on energy in Egypt. The high potential areas for wind farms and concentrating solar power technologies are determined within the country’s national energy framework, and opens the session for the private sector to bid for the renewable projects in the Egyptian generation sector. Moreover, an obligation is set by the new law by which any surplus power from cogeneration distributed systems will be fed to the utility grid at feed in tariff.

3.3.2 Opportunities for Energy Efficiency and Renewable Energy

In the last years, many programs and projects relevant to the energy efficiency and renewable energy technologies had been executed in terms of funded projects, as demonstration for tourism sector. The main objectives concern the following points:  Increase awareness

11 The connection policy is to make the end user to pay share against the distribution network costs in his area, investment for internal network inside the end user premises as well as the pressure reducing station to demonstrate the required pressure for end user equipment

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 20 AF-MERCADOS EMI

 Capacity building  Establish database and benchmarking  Study the barriers and the instrumental tools of EE and RE  Creation for policies and restructuring of operational bodies  Providing technical assistance and grants for EE and RE technologies A resume of such projects or programs will be presented in the following sub-sections.

3.3.2.1 EGYSOL

In March 2009, Egysol began in the cooperation between United Nation Environment Programme (UNEP), Italian Ministry for Environment Land and Sea (IMELS), Egyptian New and Renewable Authority (NREA). The total budget available is of USD 500,000 (estimated roughly EGP 2.8 million); the project is targeting hotels and resorts both existing and under construction, in the Red Sea and South Sinai governorates. EGYSOL facility is based on a public-private partnership established with the aim of replacing conventional energy (electricity, LPG, natural gas) by solar energy produced through solar water heating systems (SWHSs) into the Egyptian hotel sector. EGYSOL has been designed to build a sustainable long- term framework for the solar water heaters market in Egypt. An end-user financial support mechanism has been designed to stimulate the use of SWHs in the hotel sector. The support facility has two major components:  A capital cost subsidy of 25% to SWH installations (up to 250 m² for each hotel), to be granted to the hotel.  A decreasing maintenance cost subsidy over a four-year term (4 USD/m2/yr) for the maintenance cost component for the first two years of operation (after the year of warrantee), and (3 USD/m2/yr) for the remaining two years, to be granted to the hotel in order to assure the long-term quality functionality of the installed systems. Each SWHSs supplier is allowed to install up to 1,000 m² of SWHs, while each hotel is allowed to have up to 250 m² of SWHs. Also, EGYSOL organized training courses to improve the technical knowledge of SWHS suppliers, maintenance & operation technical staff. EGYSOL successfully installed SWHs to more than 23 hotels; the program will be closed by 2014.

3.3.2.2 Green Star Hotel Initiative

The Green Star Hotel Initiative was jointly developed within the framework of the development programme; the Deutsche Gesellschaft für internationale Zusammenarbeit (GIZ) implements on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ); between Egyptian and German tourism key players: Orascom Hotels & Development; the Travco Group, TUI AG, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and AGEG Consultants. They all joined forces to establish the Green Star Hotel Initiative (GSHI) in 2007, with the aim of improving the ecological performance and competitiveness of Egypt’s hotel industry. The initiative is supported and patronized by the Ministry of Tourism and has been linked and supported by the leading international organizations in tourism from the very beginning.

The Green Star Hotel Initiative (GSHI) aims to have a profound impact on further development of the main tourism destinations in Egypt. GSHI is doing this by encouraging and motivating the hotel sector to become active and jointly move towards the conservation and protection of natural resources by implementing the Green Star Hotel System into their hotel operations, training their staff and involving their guests accordingly.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 21 AF-MERCADOS EMI

The Green Star Hotel rating system is based on a certification system where “Green Stars” are awarded according to the level of environmental performance of the hotel. Achieving a Green Star Hotel certification is not easy. Besides passing the Green Star Hotel capacity building programme, the hotel needs to accomplish all 100 mandatory criteria to a 100%. Further environmental and social actions and innovative environmental practices are additionally credited. This will be verified in an independent audit by an audit commission. If the mandatory criteria are all fulfilled and depending on how intensive the commitment for sustainability is, the hotel can obtain 3, 4 or 5 Green Stars.

Currently, 51 hotels across Egypt are actively participating in the Green, Star Hotel Initiative in five pilot destinations: El Gouna, Taba Heights Madinat Coraya, Madinat Makadi, and most recently, Sharm ElSheikh. Out of these hotels, 34 are already Green Star Hotel Certified, while another 15 are rapidly approaching certification.

3.3.2.3 Egyptian German Joint Committee on RE, EE and Environmental Protection (JCEE)

The Governments of Egypt and Germany have expanded their cooperation and agreed in 2007 to establish an Egyptian-German High Level Joint Committee for cooperation on renewable energy, energy efficiency and environmental protection. The overall objective of this Joint Committee is to help promote an environmentally sustainable economic development, based on the contribution of securing energy supplies, improving living conditions and preserving the natural environment.

In August 2011, the JCEE, with cooperation of GIZ and the Egyptian Supreme Council of Energy Initiative ,are implementing an innovative mechanism called Solar Water Heater SWH for the promotion of solar thermal technology in Egypt’s tourism sector.

The project aims to replace conventional energy (LPG, electricity, natural gas) by solar energy to get hot water, which will provide a solution for reducing greenhouse gas emissions and climate change improvement.

The idea that lies behind this initiative is to overcome the obstacles and barriers facing the SWH that are institutional, political, economical, financial, funding, technical, cultural, as well as those related to the market. Creating a new module for project implementation as a pilot project, attractive, feasible, replicable based on the proposed incentives, which encourage the investors to use the SWH.

3.3.2.4 Solar Energy Development Association (SEDA)

SEDA is an Egyptian NGO and non-profit association developed in coordination with the GIZ PSDP, founded with the mission of raising the community’s awareness about solar energy and promoting the utilization of its huge untapped potential. SEDA is working with government institutions in order to develop the application of solar energy to take the place it deserves in Egypt’s energy system.

They are acting as a “Platform” representing ALL Solar Industry stakeholders under ONE ROOF (traders, academics, government, customers, manufacturers, NGO’s, development agencies, international energy associations, etc.)

In 2012, the SEDA, with cooperation of the Ministry of Tourism, Egyptian Hotels Association (EHA) & Tourism Development Authority (TDA), implemented a National Program for promoting Solar Water Heaters in the Hospitality Industry as part of Egypt’s Green Tourism Initiative.

The main objectives of the program are:

 To articulate the vision of the tourism sector with regard to increasing its green goals to be aligned with the global and national concepts of sustainable development, as well as to establish the foundation to gradually increase the sector’s green activities with an eye on regional competitiveness for the future of Egyptian tourism.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 22 AF-MERCADOS EMI

 To identify, engage in, and promote specific activities and/or programs that facilitate end users (hotels, resorts, tour operators, etc.) transition into the Green economy, utilizing the units’ available functions and resources.  To enhance the roll of SME’s to invest in green industry, attracting international investment and creating new jobs.

3.4 Carbon market and constraints in Egypt

3.4.1 Background

The Egyptian government signed the Kyoto Protocol on March 15, 1999 and ratified it on January 12, 2005. As a signatory of the United Nations Framework Convention on Climate Change (UNFCCC), Egypt was and is still obliged to incorporate the actions of the UNFCCC within the actions of the National Environmental Action Plan (NEAP). Also, due to the high exposure of Egypt to climate change, the country needed to address these issues seriously and sought the support of the international community to mitigate the impacts of it.

For instance, the Clean Development Mechanism (CDM) applies in Egypt, which has seen a significant growth over the past years (see next Section for details). The CDM institutional structure in Egypt can be grouped according to three distinctive functions: (i) policy formulation & regulation, (ii) operational, and (iii) promotional. The responsibility for climate change policy formulation and regulation functions are under two inter-ministerial committees: the National Committee for Climate Change and Egypt’s CDM Council (EC-CDM).

3.4.2 Barriers to expansion of CDM market in Egypt

Egypt has a large potential for CDM projects development; however, its progress is considered very slow compared to other developing countries due to a number of barriers such as:  Limited CDM Awareness;  Small Scale Scattered Projects;  Insufficient Technical Capacity at the Local Level;  Institutional and Legislative Barriers;  Lack of sufficient resources for DNA operation;  High transaction cost and lengthiness of the CDM cycle;  Lack of underlying finance for CDM projects.

3.4.3 Completed & Ongoing Projects in Carbon Trading

As of May 2013, the Egyptian DNA has issued Letters of No Objection for 105 CDM projects. However, only 15 projects, in addition to 3 programs of activities (PoAs), were registered under the UNFCCC. Also, 16 projects and 11 PoA are either on on-going validation or have requested registration. Other projects in the portfolio are facing various barriers that hinder the progress of CDM cycle.

The Egyptian portfolio includes projects in the following sectors: 14 renewable energy, 2 afforestation, 2 Agriculture, 10 waste, 3 transport, 44 Fuel switching, 21 energy efficiency and 9 industry.

Once implemented, these projects are expected to achieve annual Greenhouse Gases (GHG) emission reductions of approximately 4.7 million tCO2e.

3.4.4 CO2 conversion factors in Egypt

The conversion factors for CO2 emissions are mainly dependent on the factors stated by the Intergovernmental Panel on Climate Change (IPCC – 2006). The values of IPCC are:

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 23 AF-MERCADOS EMI

Fuel Type ton CO2 per TJ ton CO2 per TOE TOE per ton ton CO2 per Fuel ton Fuel Natural Gas 56.1 2.34879 1.112 2.61139 LPG 63.1 2.64187 1.126 2.97448 Kerosene 71.9 3.01031 1.086 3.26920 Diesel 74.4 3.11498 1.066 3.32057

Concerning the above mentioned values, the power generation sector CO2 conversion factor was calculated12 considering the fuel mix utilized in the power generation sector of Egypt. The end user of electricity will have an emission factor of 0.647 kg CO2 per kWh consumed, where the emission factor at generation side is 0.558 kg CO2 per kWh generated. The difference between the two factors is related to the transmission losses from generation to end user.

12 ”The Identification of CDM Projects in the Industrial Sector of Egypt – Energy Efficiency Based Projects” – Study by Dr. Khaled Elfarra to CDM Component-CCRMP – EEAA, Egypt, September 2010.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 24 AF-MERCADOS EMI

4 Market Survey

4.1 Introduction

During the month of April, an online survey was conducted through the database given by the EHA from a range of 588 hotels at the Red Sea and Sinai areas; ninety-three hotels answered the questionnaire (16.5%), most of them 5 star (51.5%) and 4 star (41.4%) as shown in the exhibit below, showing the high interest of the hotels in this program.

Exhibit 19- Responses per hotel category

Three star 5%

Four star 42% Five star 53%

Exhibit 20- Position of the surveyed

Owner 17% General manager 11%

Others 60%

Maintenance manager 12%

The respondents include several hotels of relevant hotels international and national chains (80%) like Marriott, Intercontinental, Sheraton, Travco and Mövenpeick. The complete list of participants can be found in Annex B. The positions of the persons who answered the survey are represented in the figure above. In terms of the size of the hotel, the survey is representative for small-medium to extra-large hotels as detailed below.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 25 AF-MERCADOS EMI

Exhibit 21- Distribution of answer per guest rooms

40.00%

35.00%

30.00%

25.00%

20.00% 35.30% 15.00% 30.30% 30.30%

10.00%

5.00% 2.00% 2.00% 0.00% < 100 rooms 101 - 300 301 - 500 > 500 rooms No Responses rooms rooms

In the survey, information about the following topics was required: 1. Age of the hotels and last refurbishment practice. 2. Commitment with the environment 3. Energy control and economics 4. Fuels used and purpose 5. Existing technology and their willingness to implement energy efficiency and renewable energy projects 6. Market barriers for the promotion of sustainable energy 7. Preference for financing mechanism 8. Perception about the Energy Service Companies

4.2 Main results and findings

 Almost 75% of the hotels started operation between 1995 and 2005 and almost 50% of them have completed a general overhaul or partial renovation as shown below.

Exhibit 22- Refurbishment Classification Exhibit 23- Opening year of the resort

45% General No 40% 38% Overhaul 36% Responses 26% 35% 22%

30% Other 5% 25% Hot 20% Water 15% 12% System 10% 3% 10% Cooling Bedrooms & 5% 2% 1% System Restaurants 0% 6% 38% Before 1990 1991-1995 1996-2000 2001-2005 2006-2010 A er 2011

 Resorts operate on a regular basis of 365 days per year.  85% of the respondents consider “important that the hotel is committed with the environment”, whilst 85% declare that they periodically control the energy and water consumption.  90% of the surveyors know the ratio of energy and water costs over the hotels sales revenue, and more than 50% of the respondents say that energy costs are higher than 5% over the total cost of the hotel (40% between 5% to 9% of the energy cost over sales ratio and 10% between 10% to 15% of the energy cost over sales), as shown in the figure below..

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 26 AF-MERCADOS EMI

Exhibit 24- Energy costs over sales

45.00% 40.40% 39.30%

40.00%

p 35.00%

u

o

r g

30.00%

c

a

e

n 25.00%

i

s r

t 20.00%

o

s

e

r

f 15.00% o

10.10% 10.10% % 10.00%

5.00%

0.00% 0 to 4% 5 to 9% 10 to 15% No Responses Ra o of energy cost over sales

 On the other hand, 50% of respondents did not know whether there was an increase in fuel prices or not in the last years  According to the answer received, the cooling facilities are old. The resort´s percentage with an average age higher than 10 years is close to 65%. These units should be replaced in the short and medium term for new and more efficient equipment, as the cooling technology has improved its performance in the last ten years (see figure below).  The electricity is used for cooling in most of the resorts; however, we found a few hotels that begin to use natural gas absorption chillers as they have connected to the natural grid recently.  Only 28.2% of the hotels have a centralized cooling systems for common areas and/or guest rooms; and most of them (81%) use split units for the guest rooms where they can freely control the temperature. Exhibit 25- Age of the cooling facilities

60.00% 53.50%

50.00%

40.00% 37.30%

30.00%

20.00% 9.00% 10.00%

0.00% 0 - 10 years 11 - 20 years > 20 years

Exhibit 26- Age of the hot water facilities

60.00% 52.50%

50.00% 41.40% 40.00%

30.00%

20.00%

10.00% 6.00%

0.00% 0-10 years 10-20 years > 20 years

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 27 AF-MERCADOS EMI

 At the same time, the age of the hot water facilities is also old as in the cooling systems (see figure above).  Diesel (44%) and electricity (38%) are the main fuels used to produce steam and hot water. Only 4% of the resorts use solar water heaters13.

Exhibit 27- Distribution of the fuel use to produce hot water

Solar Energy LPG Other 4% 0% 2% Electricity 38%

Diesel 45%

Natural Gas 11%

 Generally, water is produced locally at the resorts (63%) through desalination plants or by local water distribution companies that supply to a group of resorts.  Aerators are installed in 77.7% of the hotels in a similar proportion for 4 and 5 * hotels.  According to the results, 80% of the resorts have implemented some type of energy conservation measure in the last three years: lighting (93.5%), SWH (39.7%)14, high efficiency boilers (31.1%) or high efficiency chillers (20.4%).  Nevertheless, when we asked them about “which should be the two majors conservation measures for reducing the energy and water cost” we found that HVAC was one of the less preferred, as shown below.

Exhibit 28- interest for the application of conservation measures

Laundry Spa / Swimming pool Hot water Kitchen Ligh ng HVAC 0% 10% 20% 30% 40% 50% 60% 70% 80%

 Furthermore, asking about the technologies that they would be interested in implementing, the results were solar water heaters for hot water production (91%) and efficiency lighting (80%). It is

13 We understand that the main reason for this low penetration of SWH is due to the facto f high subsides in the energy that reduce the profitability of SWH compared to Diesel or electrical boilers. 14 This percentage is somehow contradictory with the percentage of respondents (4%) that declare that they use SWH for hot water production. After our site visits, we believe that 39.7% is not realistic.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 28 AF-MERCADOS EMI

remarkable that cogeneration has reached 14% when just recently some areas are being connected to the natural gas grid.

Exhibit 29- Interest for technological investments

None Ligh ng Cogenera on Geothermal Photovoltaic panels Solar water heaters

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Challenges and market barriers to Sustainable Energy Investments in the hotel sector:  In terms of identifying market barriers for the promotion of sustainable energy, the lack of financing (74%) is considered as the main barrier to energy efficiency, far from the second barrier, lack of information, with only a 10%.  Remarkably, the lack of profitability only averages 3%; when we questioned them about the expected simple payback for investment in energy efficiency projects, it seems not to be a key decision factor for an important percentage of the respondents (see figure below).

Exhibit 30- Simple payback as a decision factor

Over 6 years Between 4 to 6 years Between 2 to 4 years Less than 2 years

0% 5% 10% 15% 20% 25% 30% 35%

 Under a financing perspective, credit line is the financing mechanism preferred for EE investments.  Finally, their perception for ESCOs is good as long as they can guarantee their results and lower energy costs.

Exhibit 31- Perception for Energy Service Companies

No Responses No Responses If cheaper, I will consider it Other I don't understand the system Only if they guarantee results No Never Yes 0.00% 0% 20.00% 10% 20% 40.00% 30% 40% 60.00% 80.00% 50% 60% 100.00% 70% 80%

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 29 AF-MERCADOS EMI

5 Walk Through Audits

5.1 Introduction

During the last week of April, two teams (two experts each) visited Sinai and Red Sea areas in order to conduct twelve walk through audits15 (WTAs) in different resorts as shown in the map below.

Exhibit 32- Location of the visited resorts for WTAs

At the Sinai area, six hotels16 - five resorts17 of 5* and one resort of 4* - were visited and the consultants interviewed general managers and/or the engineering managers, followed with a site visit of their installations: cooling facilities, boilers rooms, desalination plants, waste water treatment plants, water distribution system, guest rooms, kitchen, laundry and commons areas. The visits we performed in different locations of Sharm El Sheikh. At the same time, another team visited the Red Sea area performing six WTAs - four in 5* hotels, one in a 4* hotel and one in a 3* hotel - placed in Hurghada, Makadi, Sahl Hasheish and Marsa Alam as shown in the figure above. A resume with the general data is detailed in the following table.

15 Track records of monthly occupancy, guest nights and energy and water consumption during the last three years were required. 16 The higher percentage of 5* hotels is due to the fact that they were more interested in the project and they were more proactive to confirm the site visits. At the same time, we believe that 5* represent the larger opportunity for investments in sustainable energy in the areas as it was confirmed during the site visits 17 Hyatt was in process for renovation during 2011 and 2012 and data record for this period

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 30 AF-MERCADOS EMI

Exhibit 33- General data of the visited hotels

General Characteristics Energy Characteristics Hotel Property Service Category Year Size Other facilities Energy Sources Renewable Water Regime Regime Owned or All Swimming Conference Electrical Gas Desalination Name Location * ad. m2 Rooms Spa Sports Golf Others Diesel Other SWH PV rented inclusive pools (m3) Center Grid Grid Plant

H0-5#410@S SHARM 5 lux. 2000 OWNED NO 45.000 410 YES YES YES YES 200 pax - YES YES YES LGP NO NO YES

Aquapark H1-4#369@S SHARM 4 - 2005 OWNED YES N.A. 369 YES YES YES NO NO YES NO YES - NO NO YES in 2013

H2-5#470@S SHARM 5 lux. 1997 OWNED YES N.A. 470 8.582 YES YES NO NO - YES NO YES LPG NO NO NO

Comercia H3-5#400@S SHARM 5 - 2001 OWNED YES 60.000 400 3.180 YES YES NO 1000 pax YES YES YES LPG NO NO YES l Street

Comercia H4-5#500@S SHARM 5 lux. 2000 OWNED NO 60.000 500 YES YES YES NO shared YES YES YES LGP NO NO YES l Street

H5-5#318@S SHARM 5 lux. 2006 OWNED YES 200.000 318 5.000 YES YES NO 3500 pax - YES NO YES LPG NO NO NO

H6-5#364@MA MARSA ALAM 5 - 2001 OWNED YES N.A. 364 YES YES YES NO YES - NO NO YES - NO NO YES

H7-4#140@MA MARSA ALAM 4 - N.A. OWNED YES N.A. 140 YES YES YES NO NO - NO NO YES - NO NO YES

H8-4#313@NRS MAKADI 5 - 1998 OWNED YES 74.000 313 YES YES YES NO NO - NO NO NO - NO NO YES

H9-5#700@NRS MAKADI 5 lux. 2005 OWNED YES 200.000 700 YES YES YES NO NO - YES NO YES - NO NO YES

SAHL H10-5#292@NRS 5 - 2008 OWNED NO 62.000 292 YES YES YES NO YES - YES NO YES LGP NO NO YES HASHEISH

H11-3#522@NRS HURGHADA 3 - 1984 OWNED YES 66.000 522 YES YES YES NO NO - YES NO YES - NO NO YES

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5.2 Room occupancy and guest-night per resort

During our visits, we required track records of monthly occupancy, guest nights and energy and water consumption during the last three years. The occupancy of all resorts is determined by the guest-to-room ratio and the room occupancy:  The guest-to-room ratio shows the average number of guests occupying one sold room. It is defined as the ratio of guest nights (GN o PAX) or bed-nights to the room-nights occupied. In the visited hotels, this parameter varies between (1.85 and 2.20) according to the data or manager explanations.  The room occupancy is defined as the number of room-nights occupied divided by the number of room-nights available, multiplied (in percentage).

Exhibit 34- Room occupancy evolution 18

In general, as shown in the figure above, the “2011 revolution” affected negatively the occupancy rates, and actually the highest occupancy rates took place in 2010. In any case, 2012 was better than 2011, but still far from the results reached in 2010. However, some hotel chains like Coral Group and Travco Group, were able to maintain high occupancy rates after the “revolution”. The average room occupancy for the hotels is shown in the figure below.

18 For the analysis of this project, it was required three years data in monthly basis, however only in a few cases the information was 100% available or representative (partial or total refurbishment).

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Exhibit 35- Average room occupancy19

According to the guest-to-room ratios, the number of guest nights per hotel is resumed in the following figure.

Exhibit 36- Average guest nights per resort

The average guest nights per resort is the parameter used to benchmark the hotels (rather than squared meter or any other parameter) that define key performances indicators used for the analysis at the hotel sectors, like total energy and water cost per guest night (EGP/PAX), the electrical consumption per guest night (kWh/PAX), diesel consumption per guest night (litres/PAX), water consumed per guest night (m3/PAX) and CO2 emissions per guest night (CO2 kg/PAX). All these parameters are presented in section 4.5.

19 The average room occupancy is the average of the occupancy for the last three years. In case of partial information, the average is calculated with the collected data.

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5.3 Main characteristics of the audited resorts

5.3.1 Architecture and design

The main characteristics are:  Maximum view of the sea and/or the swimming pools  High exposure of façades to sun radiation with nearly no attention to the type of glazing, shading and insulation  Multi-storey buildings with maximum four stories high  Materials: reinforced concrete for the skeleton and single walls and glazing for the envelope  Several swimming pools heated during winter time  Large gardens and several sport facilities (tennis courts, gyms, etc.)

5.3.2 Facilities

The main characteristics found are:  HVAC: public areas are cooled using central air condition with large chillers. Guest rooms can use either central (mainly 5*) and/or split systems (4* and 3*). All HVAC systems are power operated, except two hotels20 (absorption chillers)  Pumping and motors: low presence of variable speed drivers  Swimming pools: all resorts have more than one large unit heated during the winter time (27ª- 30ªC)  Domestic Hot Water (DHW): all the resorts use diesel boilers (5*) or electric heaters (4* and 3*) and presence of SWH is minimum  Kitchen: they can use a mix of LPG or electricity or 100% electric and they normally run on “all inclusive” basis.  Laundry: they use steam or hot water supplied by fire tube boilers.  Guest rooms: high standards (TV, lighting, minibar, hair dryer, etc.)  Indoor lighting: mix of incandescent, halogens and LEDs  Outdoor lighting: mainly metal halides and mercury vapour luminaries  All have emergency generator for cases of electricity cut-off, however consumption is negligible.  Onsite power generation plants at Marsa Alam  Onsite desalination plant: reverse osmosis plants  Waste treatment plant: standard equipment required by Law.  Large restaurants, shops, health centres and in few hotels large conference centre.

5.3.3 Energy and water

The main characteristics identified are:  Electricity is provided through the grid, except in Marsa Alam (onsite generation).  Generally, fresh water is produced onsite due to the lack of a municipal water distribution system.  The fuels used for producing steam for laundries and hot water for guest rooms and swimming pools (in winter) are diesel and electricity, except in two hotels at Sharm El Sheikh that recently have been connected to the natural gas grid.  LPG is only used in some kitchens at some hotels.  In Sharm El Sheikh, the natural gas distribution company is expanding the grid in the area and it is forecast that in few years it will connect many hotels in the area.  By law, resorts are required to treat their wastewater and to either reuse or dispose the treated effluent in an environmentally friendly way.  None or minimum presence of renewable energies (SWH, PV, wind, biogas, etc.)

20 H4-5#500@S and H3-5#400@S Resorts have been connected to the Natural Gas Grid in March 2013.

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5.4 Energy & water baselines21 and breakdown per usages

According to the information collected during the walk-through audits, the energy and water cost baselines for the last three years of the different resorts was performed and resumed in the following table and figure.

Exhibit 37- Resume of the consumption and cost baselines for selected resorts

H8- H9- H10- H11- H1-4#369@S H2-5#470@S H3-5#400@S H4-5#500@S H5-5#318@S H6-5#364@MA H7-4#140@MA 4#313@NRS 5#700@NRS 5#292@NRS 3#522@NRS Electricity EGP 2.570.112 4.955.870 4.072.631 5.130.604 2.897.153 2.236.338 611.843 1.594.720 2.699.739 1.509.506 2.314.272 % 48% 55% 62% 62% 56% 70% 67% 72% 37% 56% 61% kWh 8.159.087 15.732.922 12.928.986 16.287.633 9.197.312 4.066.070 1.942.358 5.062.603 8.570.599 4.792.083 7.346.897 EGP /kWh 0,315 0,315 0,315 0,315 0,315 0,550 0,550 0,315 0,315 0,315 0,315 Diesel EGP 618.915 1.677.280 668.898 844.089 748.507 252.633 159.325 0 2.206.780 431.186 252.633 % 12% 19% 10% 10% 14% 8% 10% 0% 30% 16% 7% l 562.650 1.524.800 608.089 767.354 680.461 229.667 144.841 0 2.006.164 391.988 229.667 EGP /l 1,10 1,10 1,10 1,10 1,10 1,10 1,10 1,10 1,10 1,10 1,10 LPG EGP 0 0 147.032 185.542 0 0 0 0 0 0 0 % 0% 0% 2% 2% 0% 0% 0% 0% 0% 0% 0% kWh 0 0 136.141 171.798 0 0 0 0 0 0 0 EGP /kWh 0,00 0,00 1,08 1,08 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Water EGP 2.125.556 2.308.888 1.647.840 2.079.420 1.570.819 727.006 359.230 633.201 2.427.248 751.811 1.204.141 % 40% 26% 25% 25% 30% 23% 23% 28% 33% 28% 32% m3 265.695 288.611 205.980 259.928 196.352 90.876 44.904 79.150 303.406 93.976 150.518 EGP /m3 8,00 8,00 8,00 8,00 8,00 8,00 8,00 8,00 8,00 8,00 8,00 TOTAL EGP 5.314.583 8.942.038 6.536.401 8.239.656 5.216.479 3.215.977 1.586.852 2.227.921 7.333.767 2.692.504 vv

In terms of costs, the distribution per hotels varies from one hotel to another, but in general terms electricity is the highest cost (average 59%), followed by water (average 28%) and diesel (13%). LPG is only used in particular hotels for the kitchens. The figure below resumes the distribution per resort.

21 The energy prices (electricity and gas) correspond to actual tariffs in 2013. For the water prices, even though that they are different form one hotel to another (different accountability criteria’s) the homogenized price is equal to 8 EGP/m3.

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Exhibit 38- Energy cost (EGP) per resort

For the breakdown of electricity, water and diesel consumption, each resort has its own profile; however, as detailed in section 5, we estimate22 standard profiles for the 5* hotels in the Sinai, for 4 and 3* resorts in Sinai, for the hotels in Norh Red Sea (Hurghada, El Gouna, Makadi and Safaga) and another one for the resorts in Marsa Alam (see Exhibit 39).

22 Unfortunately any of the visited hotels have completed a detailed energy audit and no measuring campaign has been recorded to adjust and validate our estimations.

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Exhibit 39- Energy and water breakdowns in four representative hotels23

23 In section 5.1, four representative hotels are defined to characterize the hotel sector in the area: R-5@S (5* hotels at the Sinai), R-43@S (4 and 3* hotels at the Sinai), R-543@NRS (5,4 and 3* Hurgada area), R-543@MA (5,4 and 3 * in Marsa Alam)

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5.5 Key performance indicators and benchmarking

The key performance indicator for the electricity selected is the consumption per guest/night, varying from a maximum of 74.41 kWh/PAX at the H5-5#318@S with low occupancy rates for the last two years, to a minimum of 17.13 EGP/PAX at the H9-5#700@NRSi. As shown in Exhibit 40 the electrical consumption per guest night is clearly higher in the Sinai resorts compared to the north Red Sea (Hurghada, Makadi and Sahl Hasheish) and Marsa Alam hotels.

In terms of water consumption, again the H5-5#318@S, with a demand of 1.589 m3 per guest night, is the highest and H8-4#313@NRS the minimum with 0.433 m3 per guest night. In Exhibit 40 we can observe that also in the Sinai hotels, consumption is substantially higher than in the Red Sea.

For the diesel consumption there is not a clear correlation between the consumption and the area as shown below

Exhibit 40- Electrical, diesel and water Key Performance Indicator

Finally, in terms of total cost per guest night (Exhibit 41), the average of the Sinai´s resort is 30 EGP/PAX, 20 EGP/PAX in Marsa Alam and 14 EGP/PAX in North Red Sea for the registered occupancy of the last three years (see section 4.2)

In terms of international benchmarking24, the average electrical consumption per guest night in the Egyptian resorts is lower than typical electrical consumption values in Europe (55.5 kWh/PAX) and New Zealand (43.1 kWh/PAX)) but higher than some other specific areas like Cyprus (24.2 kWh/PAX) and Majorca (14.2 kWh/PAX). However due to the specificities of the Egyptian resorts (i.e. all inclusive, 365 running days and no heating), benchmarking is not very useful.

24 Bohdanowicz, P., and Martinac, I,. Detrimants and benchmarking of resource consumption in hotels-Case study of Hilton International and Scandic in Europe. Energy and Buildings: 13, 2007

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Exhibit 41- Cost per guest night in the different resorts

Additionally, we analysed the correlation between energy consumption and room occupancy, due to the fact that in our visits we found that after the 2011, even the occupancy rates decrease notoriously in some resorts; the drop in energy consumption was not linear, due to the fact that many loads require the same amount of energy for reaching the same levels of comfort, such as the cooling and lighting in common areas (restaurants, lobby, etc.), water distribution and swimming pools, hot water for the swimming pools in winter, refrigeration, etc. Our main findings suggest that the consumption per guest- night increases with the decrease in occupancy but the relationship is not linear; it is noted that above an occupancy rate of 70-75%, the consumption rate per guest night does not vary significantly. By contrast, the consumption intensity increases significantly when the occupancy rate falls below 60-65%. This analysis clarifies the situation of the H5-5#318@S, which drops from 64% in 2011 to 42% and 50% in 2011 and 2012 respectively.

Exhibit 42- Cost per guest night in the different resorts

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5.6 Energy and water conservation measures identified

This section summarizes the potential opportunities for energy efficiency and renewable energy technologies in the Egyptian Tourism Sector, presenting an executive description for each proposed opportunity and their main technical (savings and investments) and financial parameters that have been used in the walk-through audits of the selected resorts. The scope of technologies studied in the WTAs and the associated energy conservation measures (ECMs) cover the following aspects:

1. Reduction of the energy and water demand (REM). 2. Improvement of the energy efficiency in the conversion of delivered energy to useful energy (EEM). 3. On site generation (OGM) 4. Renewable generation (RES) 5. Fuel switching strategies (FSS) 6. Operation and maintenance benefits (O&M)

Exhibit 43- Areas of Energy Efficiency

The energy and water conservation measures identified are resumed in the following table.

Exhibit 44- List of the energy conservation measures

Energy Conservation Measures Classification Code Executive Description REM EEM OGM RGM FSS O&M ECM-1 Switching from individual splits to x centralized cooling systems ECM-2 Replacement of air cooled chillers to x x x absorption chillers ECM-3 Waste heat recovery systems x ECM-4 Improving the envelope energy x x performance (windows and walls) ECM-5 Building energy management system x x

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ECM-6 Adding pressure exchangers to the x desalination plants ECM-7 More efficiency motors and pumps with x x variable speed drivers ECM-8 Replacement of central diesel boilers by x x SWH ECM-9 Replacement of single electrical heaters x x boilers by SWH ECM-10 Minimization of the evaporation and heat x losses at the swimming pools ECM-11 Water conservation x ECM-12 Relamping for indoor and outdoor common x x areas ECM-13 Photovoltaic panels for outdoor lighting x x ECM-14 Fuel switching to natural gas x x x ECM-15 Cogeneration plants x x x

The definition and description for each opportunity are presented in the following subsections.

5.6.1 Improvement of the performance of the cooling systems

Description Energy used to cover the cooling demand in Sinai and the Red Sea is the most important cost in all the resorts, due to the high temperatures registered during a long summer season. Indeed, the equivalent full load hours (EFLH) for the region assumed is between 2,800 and 3,200 hours (6 to 8 months of high temperatures) according the resorts engineers and data collected as shown in the figure below.

Exhibit 45- Typical monthly electrical consumption of a resort in Sinai and Red Sea (kWh)

Exiting situation The applied Central Air Conditioning technologies25 from the cooling load generation point of view in the hotels are:

1. Vapour Compression26 Chillers of Air Cooled Type. 2. Vapour Compression Chillers of Water Cooled Type. 3. Absorption Chillers of Water Cooled Type27.

25 The central air conditioning system consists of machine room (chillers and chilled water and condenser pumps), chilled water piping network, end terminal units and controls (Fan Coils and Air Handling Units). 26 The vapor compression system is mainly based on HCFC refrigerants where compressor, that is utilizing electricity in business as usual, drives the refrigeration cycle and in some cases the compressor is driven by engine fired by fuel. This cycle has two ways for cooling the condenser either by air or by water, giving flexibility compared to the absorption systems where water is essential for cooling the absorption cycle condenser.

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The standard technology used in the area is Air Cooled Chillers, however there was one hotel with Water Cooled Chiller (H5-5#318@S ) and two hotels with Absorption Chillers using natural gas.

The estimated28 coefficients of performance (COP) for the different cooling systems are:

Exhibit 46- Coefficient of Performance of the cooling systems

Coefficient of Performance (COP) Air Cooled Water Cooled Absorption Individual Split Chiller System Chiller System Chiller System Units 3.5 5 1.2 2.7

As we can see in the exhibit above, water-cooled chillers have the highest efficiency performance followed by the air cooled chillers, the individual splits and finally absorption chillers. However due to the price of natural gas, very often absorption chillers might me a good option for EE. In the case of water cooled even the energy savings are bigger than air cooled chillers, the higher water consumption and potential problems with legionnaires disease, in particular for the tourist sector, makes this technology not very recommendable.

In this context, the cost estimation for different technologies is presented in the following table.

Exhibit 47- Cost estimation switching air-conditioning

System Description (€/kW) Air Cooled Chiller System (Turn Key) 316 Machine Room (Chillers and Pumps) 165 Piping Distribution Network (Chilled Water) 51 Fan Coils and Air Handling Units 100 Water Cooled Chiller System (Turn Key) 376 Machine Room (Chillers and Pumps) 200 Piping Distribution Network (Chilled Water and Condenser) 51 Cooling Towers 25 Fan Coils and Air Handling Units 100 Absorption Chiller System (Turn Key) 440 Machine Room (Chillers and Pumps) 220 Piping Distribution Network (Chilled Water and Condenser) 80 Cooling Towers 40 Fan Coils and Air Handling Units 100 Individual Split Units (Turn Key) 142

The two main energy efficiency measures identified during our visits are:

27 The absorption technology is mainly based on an absorbent working as secondary fluid to absorb the primary fluid. The secondary fluid is lithium bromide and the primary fluid is water which works as refrigerant in the absorption cycle. The cooling effect takes place through the cycle evaporator where the water is evaporated and getting the heat load required from the surroundings, which is the chilled water circuit. No compression is applied in this technology where the cycle is driven by heat source. Then, the heat source for the absorption cycle could be; 1) direct firing of fossil fuels, 2) steam driven, or 3) hot water driven. One of the main features of the absorption chillers is to generate simultaneously both the cooling and heating sources to serve the operating facility. Moreover, the maintenance requirements for absorption chillers are too much less than required for vapor compression chillers. It has to be noted that the absorption technology application needs the availability of heat source such as fuel (natural gas), waste heat, or hot water. 28 This assumption was based on the technical data sheet of the installed equipment and the experts experience (due to the fact that no measure campaign was performed during our site visits.)

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5.6.1.1 Switching from individual split units to centralized air cooling systems

In all the hotels visited, there are large cooling facilities for serving cool to common areas and/or guest rooms; nevertheless, in several hotels standard split air conditioning unit for cooling the guest rooms was also found. In this kind of resorts with individual split units for the guest rooms, there is an opportunity for switching to centralized cooling systems when the cycle life is completed, due to higher COP ratios of centralized equipment and the lower equivalent full load hours (EFLH) of centralized equipment versus individual units.

In general terms, for an equivalent full load hours of 3,200 and COPs established in Exhibit 48, the annual savings for switching from guest room splits units to centralized air cooling systems are around 35% of the electrical consumption to satisfy the guest room cooling demand and simple paybacks based on incremental investments (at the end of the cycle life of the existing equipment) around 2 to 3 years (over total investment, simple payback is higher than 15 years). A detailed calculation for a representative hotel is shown below:

Exhibit 48- Savings switching air-condition

Investment Cost for Air Cooled Central System (€/kW) 316 Investment Cost for Split Unit (€/kW) 142 Air Conditioning Equivalent Full Load Hours 3,200 Proposed Chiller COP 3.5 Split Units COP 2.7 Electrical Energy Consumption of HVAC (kWh/year) 2,651,703 The existing consumption of HVAC Summing up the installed split Existing Split Units Installed Capacity (kW) 2,237 units Proposed Chiller Capacity (kW) 1,790 Based on diversity factor of 80% Savings achieved due to the Anticipated Energy Savings (kWh/year) 1,015,223 deviation in COP for both systems Incremental Investment Cost (€) 89,048 Actual Investment (EGP) 5,141,719 Electrical Energy Cost Savings (EGP/year) 319,795 Incremental Investment Cost (EGP) 809,495 Simple Payback Period based on Incremental Investment (Years) 2.53 Simple Payback Period based on Total Investment (Years) 16.08

5.6.1.2 Replacement of air cooled chillers to absorption chillers

In areas that are being connected to the natural gas grid like Sharm El Sheikh, there is a chance of saving costs for producing the cooling demand through absorption chillers switching form electricity to a cheaper fuel as natural gas. In particular, two of the resorts that have been connected to the natural gas grid have installed two units to cover partially their cooling demand (H4-5#500@S and H3-5#400@S resorts).

In general terms, the savings are around 40% for covering the same cooling demand and the simple payback moves from 4 years on incremental basis (at the end of the existing cycle life of the existing equipment) up to 15 years, on a regular basis. A detailed calculation for a representative hotel is shown below.

Investment Cost for Absorption Chiller (€/kW) 220 The replacement for machine room only

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Investment Cost for Air Cooled Chiller (€/kW) 160 Air Conditioning Equivalent Full Load Hours 3,200 Absorption Chiller COP (Direct Fired Type) 1.2 Air Cooled Chiller COP 3 The existing operational COP for chillers Electrical Energy Consumption of HVAC (kWh/year) 2,651,703 The existing consumption of machine room Makeup Water Cost (EGP/m3) 4.50 Cooling Load Capacity (kW) 2,486 Investment Cost for Absorption Chiller (€) 546,914 Investment Cost for Air Cooled Chiller (€) 397,755 NG Fuel Demand to Absorption Chiller (kWh/year) 6,629,258 Water Demand to Absorption System Cooling Towers 18,922 (m3/year) Existing Air Cooled Chiller Consumption Cost (EGP/year) 835,286 NG Costs to Absorption Chiller (EGP/year) 416,625 Makeup Water Costs to Absorption Chiller (EGP/year) 85,148 Cost Savings (EGP/year) 333,513 Total Investment Cost (EGP) 4,971,774 Incremental Investment Cost (EGP) 1,355,938 Simple Payback Period based on Incremental Investment 4.07 (Years) Simple Payback Period based on Total Investment (Years) 14.91

5.6.2 Waste heat recovery systems

The heat recovery systems are mainly dependent on the waste energy (rejected heat to the atmosphere) by the different thermodynamic cycles applied in the hotels. For example, there is high energy rejected from the vapour compression chillers cycle through the condensers, from the reciprocating engine cycle represented by the exhaust gases, and also from the operation of boilers through the stack gases.

All wasted energy mentioned above could be recovered using air or gas to liquid heat exchangers. This opportunity will generate high thermal source that could be operated as base load for any heating process in the hotel such as domestic hot water, swimming pool heating, and heat supply to the laundry operations.

The application for the waste heat recovery system will avoid the fuel required generating the same quantity for the recovered heat. Therefore, the following has to be noted:

1. The rejected heat in chillers is almost the same as the supplied cooling load which means each kW of cooling meets 1 kW rejected heat, which could be recovered in form of preheating process for the domestic hot water cycle at low temperature not exceeding 40ºC. The investment cost for such heat exchanger is 220 €/kW and the simple payback period ranges between 3 to 4 years.

2. The rejected heat in boiler operation reaches about 15% of the total input fuel. In this case, the most appropriate opportunity is to install economizer at the base of chimney to preheat the makeup water of the boiler up to 85ºC. The heat content of this makeup water will reduce the input fuel to the boiler. The investment cost for the economizer is about 350 €/kW and a payback period of 2-3 years could be achieved.

3. The heat rejected from exhaust in engine generator sets is about 23%, in addition to the rejected heat in the cooling system of the engine which is about 25%. The heat recovery from the

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engine exhaust costs about 260 €/kW and the simple payback period is less than 3 years.

As an example, for a typical hotel, representative calculations are detailed below.

Input Data Investment Cost for Heat Recovery Unit (€/kW) 20 Chillers EFLH (hours/year) 3.200 Recovered Heat Load for DHW 10% Existing Hot Water Consumption (liter/year) 298.205 Output Data Estimated Fuel Savings (Liters/year) 29.820 Heat Exchanger Capacity (kW) 749 Investment Cost (EGP) 136.249 Energy Cost Savings (EGP) 32.802 Simple Payback Period based on Total Investment (Years) 4,2

5.6.3 Improving the building energy performance.

Improving the energy performance by improving the insulation of roof and facades of an existing hotel is one of the most challenging energy efficiency measures to be developed in the running hotels. The main reasons are the high investment required, their low profitability compared to other measures (e.g. renovation of the heat or cooling production units) and the impact in the business core of the hotel, which is caused by the fact that rooms under rehabilitation remain closed for a certain period.

All this leads to the recommendation of investing on these energy efficiency measures when a general overhaul of the building will be performed during its lifetime.

5.6.3.1 Replacement of windows in a major overhaul

The main improvement of this measure comes from adding multiple layers29 of glazing to the present windows in the common areas, improving the hotel energy performance. Double glazing insulates almost twice as well as single glazing (adding a third or fourth layer of glazing results in further improvement). Some of these windows use glass only while others use thin plastic film as the inner glazing layer.

Thickness of air space is another important issue, because with double-glazed windows the air space between the panes of glass has a large effect on energy performance. A thin air space does not insulate as well as a thicker one because of the conductivity through that small space. If the air space is too wide, however, convection loops between the layers of glazing occur (24 mm maximum, combining 4mm and 4mm glass).

29 2 layers and air space > 12 mm to obtain U-values between 2.4-2.8 W/m2K. Low emissivity crystal - 1.8 W/m2K

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Exhibit 49- Glazing types and low-E glass

Source: ASHI

As an example, for a simple case of changing from a single to a double-glazed window, the calculations are shown below:

2) Heat Gain through Single Glass Window (W/m 659.8 2 Heat Gain through Double Glass Window (W/m ) 332.6 Cooling System Equivalent Full Load Hours (EFLH) - Hours 3,200.00 Cooling Energy Cost (EGP/kWh)

Split Units 0.128 Packaged DX Units 0.115 Central System with water cooled Chillers 0.094 2 Energy Savings due to Double Glass Window (kWh/year/m ) 1,047.04

Energy Cost Savings due to Double Glass Window (EGP/year/m2)

Split Units 134 Packaged DX Units 121 Central System with water cooled Chillers 98 2 Investment Cost for Single Glass Window (EGP/ m ) 850 Investment Cost for Double Glass Window (EGP/ m2) 2,100 Incremental Investment Cost (EGP/m2) 1,250

For a representative hotel in the area, with 360 rooms and based on an incremental cost of double glazing versus simple glazing analysis, the simple payback is between 9 and 13 years, depending of the primary cooling system, as shown in the following table.

Average number of Rooms 360.0 Average Glass Area per Room (m2) 4.0 Total Glass Area (m2) 1,440.00 Energy Cost Savings due to Double Glass Window (EGP/year)

Split Units 192,915.0 Packaged DX Units 173,623.47 Central System with water cooled Chillers 141,470.97 Total Investment for Single Glass Window (EGP) 1,224,000 Total Investment for Single Glass Window (EGP) 3,024,000 Total Investment for Single Glass Window (Euros) 318,316

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Incremental Investment Cost (EGP) 1,800,00 Simple Payback Period based on Cooling System Applied (years)

Split units 9.33 Packaged DX Units 10.37 Central System with water cooled Chillers 12.72 Central System with water cooled Chillers

Investment Cost for Single Glass Window (EGP/ m2) Due to the high payback and the fact that none of the visited hotels will perform a major overhaul in the next three years, this energy efficiency measure was not included in the Walk-Through Audits. Nevertheless, and taking into account that this situation might repeat in other hotels, the above calculations could serve as a preliminary estimation of the associated investment in the area.

5.6.3.2 Energy Saving Window Film solutions

Besides the investment intensive passive measures in building renovation described in the previous section, simple energy efficiency could be implemented in the facades of a running hotel without affecting its operation and with interesting results, as installing solar films in windows. This practice has become more and more popular in the last years and major vendors like 3M and Schneider Electric had perform several projects30 in the area with good results in terms of energy efficiency, as well as in security.

In the hotels visited, it might be interesting to install the film in the windows of the common areas. This would achieve at least 50% of heat gain to the conditioned spaces. The analysis of this measure in the present report applies only for the common areas (lobby, restaurants and bars), and not for the rooms due to the difficulty to estimate the surfaces, investments and associated savings31. Applying this measure will allow the hotel to reduce cooling demand and its energy costs, saving around a 2 to a 3.2 % of the refrigeration consumption.

Input Data Investment Cost (EGP/m2) 80-120 Output Data Estimated Cooling Savings 2 – 3.2% Simple Payback Period based on Total Investment (Years) 5 – 6 years

The investment cost of the glazing film for common areas is about 80-120 EGP/m2 and the simple payback period is approximately 5-6 years.

5.6.4 Building energy management systems

A Building Energy Management System (BEMS) is a computer-based system that automatically monitors and controls a range of hotel services, including air conditioning, ventilation, heating, lighting and other energy consumers within the building or sometimes even groups of buildings. Some systems also provide management of gas and water use.

30 Case Studies of hotels in Egypt: J.W. Marriott Mirage, Marriott Sharm El Sheikh, Cairo Sheraton Hotel, El Gezira Sheraton Hotel, Helioplis Meridian Hotel, Meridian Le Caire Hote (lhttp://www.armashield.com/as/index.html) 31 Out of the scope of a Walk Through Audit

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 47 AF-MERCADOS EMI

The energy management programs and systems should be considered in hotels operations. These systems could be through in-house or housekeeping performance measures concerning the efficient use of energy. It provides energy analysis, management and control information. o The optimization of building and plant operations. o Provision of energy management information, for example occupancy. o Remote monitoring and control of services and functions of one or several buildings: lighting operating hours, proper controls for hot water production, etc. o It enables equipment, air conditioning, lighting, etc to be switched on and off automatically. o Monitoring of building status and environmental conditions The IPCC (2007) concludes that, concerning the BEMS technology, it is yet unclear how much the technology can reduce energy usage and at what costs. Estimates provided on the technology energy savings differ considerably and therefore the technology requires more research and development to determine the financial requirements and costs. For example, Birtles and John (1984) estimate energy savings up to 27 % compared to none BEMS implemented, while the IPCC notes estimates between 5 % and 40 % (IPCC, 2007). Additionally, Roth et al. (2005) estimate energy savings up to 20 % in space heating energy consumption and 10 % for lighting and ventilation, combining to a 5 % to 20 % overall energy savings range32. For this report, this measure is included in the ”Centralizing individual cooling system (splits in rooms) with BEMS”, due to the fact that its main goal will be control and monitoring, allowing savings of 5% of the total electrical consumption. The estimated investment is the 5% of the cooling system cost.

5.6.5 Adding pressure exchangers to the desalination plants

The current applied technology for water desalination is the reverse osmosis (RO) technology with turbine recovery unit. This technology gives specific energy consumption of 7-8.5 kWh per cubic meter of production. This specific energy index could be reduced by 50% by using a pressure exchanger unit that recovers the pressure of disposed brine to the sea water introduced to the membranes. Therefore, it is highly recommended to introduce this concept to all installed RO plants since minor modifications are required for the process (see figure below)

Exhibit 50- Reverse osmosis desalinated water plant

The investment cost for the pressure exchanger represents 15% as an additional cost compared to the cost of the RO technology with turbine recovery unit. However, the investment cost for the RO

32 http://climatetechwiki.org/technology/jiqweb-bems

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 48 AF-MERCADOS EMI technology with turbine recovery unit is about 850-1150 USD/cubic meter produced per day. The simple payback period is 2-5 years based on the capacity of production and the selling prices for the produced desalinated water. Therefore, this opportunity has to be studied case-by-case dependent on the RO plant size.. For a mid-sized hotel, which has a water consumption of 50,000 m3/year, the cost might vary between 130,000-150,000 €.

5.6.6 More efficiency motors and pumps with variable speed drivers

The presence of high efficiency motors and pumps and variable speed drivers is low at the visited resorts. Normally, they operate at full loads, even when the demand is partial. Due to this fact, there is an important potential in this standard energy efficiency measure, which, in general terms, can improve the efficiency of these electrical systems up to 30%, depending on size of the pumps and operational requirements.. The investment cost is 140-180 USD/kW for pumps in a range from 4 kW to 45 kW. The typical simple payback period is 2.5 to 4 years.

5.6.7 Solar Water Heaters for hot water production

As seen in the Survey analysis, solar water heaters (SWH) is one of the most relevant energy efficiency measures for the areas due to the high irradiation factor of 5.5 kWh/m2/day for much of the year. The proposed SWH solution for the resorts would be that the central system is designed for producing the hot water required by the swimming pools during winter time (base load); that heating capacity will be used to cover partially the domestic hot water demand in the summer time.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 49 AF-MERCADOS EMI

Exhibit 51- SWH central system in hotel

Exhibit 52- Typical figure of hot water demand in a resort at Sinai (diesel consumption, litres)

The average annual sum of irradiation in Egypt ranges from 2,200 to 2,400 kWh/m2. Based on this value of irradiation, and considering 62% for solar collector efficiency to capture the heat, a total of 1,500 kWh/m2/year could be generated by the solar collector. The two main energy efficiency measures identified during our visits were:

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 50 AF-MERCADOS EMI

Exhibit 53- Solar collector section

The main properties of the collectors are:  1.8-2.1 m2 of surface

 Black painted cooper  Ultrasonically welded cooper heat absorbers coated with titanium on asset series  Glazing (prismatic/tempered glass). Transmitivity of glass: 85% toughened 4 mm Thick

 High density insulation with rockwool

5.6.7.1 Solar water heaters versus central diesel boilers

Typical investment cost in Egypt is 175 €/m2 (including circulation pumps and accessories) and SWH installations designed for covering the heat demand of hot water for the swimming pools in winter and, additionally, producing hot domestic water for the guest rooms, which has a payback of around 8 to 9 years. In the following table we present an example of the calculations used for the hotels with a central diesel central boiler.

Cost of Solar Water Heater 175 Current SWH costs including the circulation pumps to the (€/m2) existing calorifiers installed in a facility. Solar Water Heater Capacity 1500 The SWH average generated energy subject to the (kWh/m2/year) irradiation level in Egypt. Existing Load - Output (kWh/year) 1,422,401 Swimming pool useful heat for heating Base Load to be replaced by 45% The estimated base load to be replaced by SWH SWH% Season Duration (months) 5 Swimming Pool Heating Season. SWH Size (m2) 1,024 The calculated required area for SWH collectors. Investment Cost of SWH (€) 179,223 Energy Avoided for Heating 640,080 (Swimming Pool) Energy Avoided to Domestic 896,113 Heating (kWh/year) Equivalent Fuel Savings 1,807,286 The fuel avoided from the existing heating system.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 51 AF-MERCADOS EMI

(kWh/year) Fuel Cost Savings (EGP/year) 185,411 Total Investment Cost (EGP) 1,629,240 Simple Payback Period (Years) 8.79

5.6.7.2 Solar water heaters versus electrical heaters

In the hotels with electrical heaters, compared with the previous situation, the payback decrease to 7 to 8 years for the same assumptions. In the following table we present an example of the calculations used for the hotels with electrical heaters.

Cost of Solar Water Heater (€/m2) 175 Current SWH costs including the circulation pumps to the existing calorifiers installed in a facility. Solar Water Heater Capacity 1500 The SWH average generated energy subject to the (kWh/m2/year) irradiation level in Egypt. Existing Load - Output (kWh/year) 1,422,401 Swimming pool useful heat for heating Base Load to be replaced by SWH% 45% The estimated base load to be replaced by SWH Season Duration (months) 5 Swimming Pool Heating Season. SWH Size (m2) 1,024 The calculated required area for SWH collectors. Investment Cost of SWH (€) 179,223 Energy Avoided for Heating 640,080 (Swimming Pool) Energy Avoided to Domestic Heating 896,113 (kWh/year) Equivalent Fuel Savings (kWh/year) 2,048,257 The fuel avoided from the existing heating system. Fuel Cost Savings (EGP/year) 210,151 ELECTRICIY PRICE Total Investment Cost (EGP) 1,629,240 Simple Payback Period (Years) 7.7

5.6.8 Minimization of the evaporation and heat losses at the swimming pools

The presence of huge surface areas of swimming pools increases the makeup water in the summer season and the surface heat loss in the winter season. From the energy efficiency’s viewpoint, it is highly recommended to install full cover for the swimming pools for off use periods (from 7:00 pm to 7:00 am), which will reduce the evaporation rate or heat loss from the surface in winter. This cover could be made by plastic sheets or by plastic balls floating on the surface of the swimming pool. This method will achieve energy reduction for heating between 5-10% related to the pool surface losses, and 25-30% of makeup water to the pool. The investment estimated is 75-125 EGP per m2. The savings can be calculated through the fuel input for heating the pools and an estimation of makeup water saved. In general, the simple payback period is less than 1.5 years. Nevertheless, this energy conservation measure is not very accepted in all hotels, for very often it is considered to have a negative visual impact to the guest.

Input Data Investment Cost for Pool Cover (EGP/m2) 100 Makeup water to the pool (m3/year) 41.196 Pool Heating Consumption (kWh/year) 1.902.292 Estimated Savings in makeup water 25% Estimated Savings for Pool Heating 5% Swimming Pool Area (m2) 1.000 Water Cost (EGP/m3) 4,50

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 52 AF-MERCADOS EMI

Output Data Estimated Fuel Savings (Liters/year) - Diesel 7.601 Estimated Fuel Savings (kg/year) - LPG 1.021 Estimated Water Savings (m3/year) 10.299 Investment Cost (EGP) 100.000 Energy Cost Savings (EGP) 55.809 Simple Payback Period based on Total Investment (Years) 1,8

5.6.9 Water conservation

To reduce water demand, the hotels must have efficient equipment; another way would be to educate both in-house staff and customers. To improve equipment, the following is recommended:  Upgrade or retrofit equipment with efficient laundering;  Upgrade dishwashers, ice machines, and steam cookers to ENERGY STAR® qualified models where appropriate. These models reduce water and energy use by at least 10%, by reusing water throughout cycles;  Use faucet aerators in the rooms, bar, restaurant, etc;  Look for efficient pre-rinse spray valves, food disposal systems, combination ovens, steam kettles, and steam cookers to use significantly less water;  Consider replacing equipment that normally discharges water continuously, such as dipper wells or wok stoves, with more efficient models; another way would be to turn this equipment off when not in use. For the guest:  leave open the possibility of reusing towels and bed linens in order to cut down the amount of water used in laundry equipment;  Awareness campaign (in rooms, toilets, etc.) For the staff:  Educate users on proper dishware prep and loading techniques, in order to reduce the overall amount of water used. The savings could amount to 10% of the water used for the guest and in the kitchen. In general, the simple payback period is 2 years, but this is only estimation; this measure depends on the guest’s behaviour and the staff operation.

5.6.10 LED relamping for indoor and outdoor common areas (+8 working hours/day)

The presence of large landscape areas in hotels and the decorative lighting system draws attention to the utilization of efficient lighting technologies. During our site visits, many differences between each other where found, i.e.: the Hyatt Sharm has already carried out a LED replacement in common areas to some others like H2-5#470@S that in 2011 completed a full renovation but the lighting is very inefficient (halogens and incandescent lamps). In general, there is an important potential for electricity saving in the actual lighting facilities with the existing available technology in Egypt. The LED technology has promoted different lamp types that could replace any of the conventional/inefficient lighting units. To this regard, LED lighting technology implementation is highly recommended in outdoor and indoor lighting systems, in hotels where the daily operating hours exceed 8 hours to achieve short payback period. However, the LED implementation in guest rooms will have high payback period because the daily operating hours are very low and most of the hotels have Low Consumption Bulbs (LCB) installed. Typical renovation for incandescent lamps, halogens and metal halides is lower than 3 to 4 years and different investment opportunities were found in the resorts, as presented in section 4.1. For a representative case, calculations are detailed below.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 53 AF-MERCADOS EMI

Input Data Outdoor Common areas Cost of LED Lighting (€/Lamp of 6 Watt) 9 9 Lighting Consumption (kWh/year) 285.480 177.000 % of Lighting Retrofit 30% 30% Operating Hours Daily 10 10 Output Data Number of Lamps to be Replaced 469 291 Investment Cost (€) 4.224 2.619 Energy Avoided (kWh) 75.367 46.728 Electrical Energy Cost Savings (EGP/year) 23.741 14.719 Total Investment Cost (EGP) 38.395 23.805 Simple Payback Period (Years) 1,62 1,62

5.6.11 PV panels for outdoor lighting

The main opportunity of PV application is considered to serve the demand of landscape and the outdoor lighting system due to the high irradiation factor in Egypt (above 5.5 kWh/m2/day). Indeed, it is considered standard modules of 15 kW capacity with storage system in order to feed energy supply to the different lighting circuits. Typical investment cost is 2.50 €/W and, with the actual electrical tariff, the payback is over 15 years. An example of the calculations used in the WTAs is resumed in the following table.

Cost of LED Lighting (€/Lamp of 6 Watt) 9 Lighting Consumption (kWh/year) 250,000 Consumption for public areas. % of Lighting Retrofit 30% Estimated value for consumption to be retrofitted. Operating Hours Daily 10 Number of Lamps to be Replaced 411 Investment Cost (€) 3,699 Energy Avoided (kWh) 66,000 Electrical Energy Cost Savings (EGP/year) 20,790 Total Investment Cost (EGP) 33,623 Simple Payback Period (Years) 1.62

5.6.12 Fuel switching to natural gas

As was previously mentioned, some regions in the Sinai are being connected to the natural gas grid, as it is being expanded by the gas utility. Most of the hotels in the Red Sea and South Sinai area are utilizing diesel in their combustion systems. The benefits in this energy conservation measure are clear: less greenhouse gas emissions, combustion efficiency improvement, removal for risks in fuel oil loading, transportation and unloading. Nowadays, the actual price for diesel is 1.1 EGP/ litre or 0.1026 EGP/kWh33; by contrast, the actual gas tariff is 2.65 USD/million Btu at 0.0628 EGP/kWh34. Therefore, the energy cost savings due to switching to natural gas will be of 0.0398 EGP/kWh (38% savings) considering the same efficiency for both systems firing natural gas and diesel. Typical investment cost in Egypt are presented in the following tables, paybacks use to be lower than 4 years or the connected resorts.

33 Conversion rate is 1 liter of diesel is equal to 10.72 kWh heating value 34 Conversion rate:10.11 kWh/m3 – heating value

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 54 AF-MERCADOS EMI

Gas Pressure Regulating Station - PRS (m3/hr) 91 Investment cost for PRS (€/m3) 90 Internal Distribution Network (€/m3) 55 Dual Fuel Burner Cost (€/m3) 70 External Piping Network Cost (€/m3) 600

As an example, the calculation module for hotel consuming 450,000 liter of diesel per year is: Diesel Consumption (liter/year) 450,000 The existing Diesel Consumption Equivalent Natural Gas Consumption (m3/yr.) 477,198 Energy generated by Natural Gas (kWh/yr.) 4,825,000 Anticipated Energy Cost Savings (EGP/yr.) 191,766 Gas Pressure Regulating Station - PRS (m3/hr) 91 Investment cost for PRS (€/m3) 90 Internal Distribution Network (€/m3) 55 Dual Fuel Burner Cost (€/m3) 70 External Piping Network Cost (€/m3) 600 Total Investment Cost (EGP) 672,656 Simple Payback Period (years) 3.51 It has to be noted that the simple payback will be shorter than 3 years in case of hotel high consumption because the cost for external piping falls below 400 €/m3.

5.6.13 Cogeneration or trigeneration plants for natural gas grid connected areas

Cogeneration (or combined heat and power, CHP) is the simultaneous production of electricity and thermal energy from the same fuel source. It can be applied to any hotel that is going to be connected to the natural gas grid in Sharm El Sheikh, where there is a need for both heat energy and electrical power. Moreover, the trigeneration (or combined cooling, heat and power, CCHP) is simultaneous conversion of a fuel into three useful products: electricity, hot water or steam and chilled water. The application of both systems is significantly increasing the overall system efficiency, which double the efficiency of the single generation system. This improvement in system efficiency reduces the input fuel to the system and severe reduction in GHG emissions.

Exhibit 54- Cogeneration or trigeneration systems

Source: USEPA

The viability of CHP (sometimes termed utilization factor), especially in smaller CHP installations similar to the ones required for the resorts, depends on a good base load of operation, both in terms of an on-site

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 55 AF-MERCADOS EMI electrical demand and heat or cooling demand. In practice, an exact match between the heat and electricity needs rarely exists. The systems selected for the visited hotels are gas engine CHP plants use a reciprocating gas engine operating in topping cycle35, since they are generally more competitive than a gas turbine up to about 5 MW. These plants are generally manufactured as fully packaged units that can be installed within a plant room or external plant compound with simple connections to the site's gas supply and electrical distribution and heating systems. A typical example is reproduced in the picture.

For a typical hotel of the area, the decision for the cogeneration technology application in hotels is mainly dependent on the thermal to electric consumption ratio (TER). This ratio leads to the technology to be selected if it would go for gas engines, gas turbines, or steam turbines. Therefore, the selection criteria is:

Type Available Process TER Heat Steam Turbine 120°C to 400°C 2:l to 30:1 Gas Turbine 120°C to 500°C 1.2:1 to 4:l Reciprocating 80°C to 120°C 0.8:1 Engine

For hotels, and according to their consumption records, the TER is 1:1 in most cases, where the reciprocating engines are the most appropriate technology for cogeneration. The calculation module is as follows:

Investment Cost for Gas Engine Generator Set (€/kW) 550 Investment Cost for Waste Heat Recovery Boiler (€/kW) 160 Investment Cost for the balance of Cogeneration Plant 100 (€/kW) Thermal to Electric Ratio of Gas Engine 1 Engine technical data sheet Electricity Efficiency of Cogeneration System 35% Facility Load Factor (Ratio between Average and Peak 70% From hotel invoices to be Demand) calculated Electrical Energy Consumption of Facility (kWh/year) 3,500,000 Facility Average Demand (kW) 400

Facility Peak Demand (kW) - Cogeneration Size 571 Electrical Energy Generated by Cogeneration (kWh/year) 3,500,000 Demonstrated Thermal Energy by Cogeneration (kWh/year) 3,500,000 Facility Thermal Energy by Cogeneration (kWh/year) 3,500,000 Useful heat Gas Demand for Cogeneration Unit (kWh/year) 10,000,000 Avoided Fuel to thermal energy demand (kWh/year) 4,117,647 Input heat considering the overall thermal efficiency of existing system, i.e. boilers/heaters. Cogeneration Fuel Cost (EGP/year) 628,464

35 In a topping cycle the generation of electricity is leading to match the facility electrical load and the thermal energy is following to supply the facility thermal load

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 56 AF-MERCADOS EMI

Avoided Electrical Energy Costs (EGP/year) 1,102,500 The costs by utility Avoided Thermal Energy Costs (EGP/year) 422,432 The costs of fuel used by the existing system Cogeneration Maintenance Cost (EGP/year) 142,689 Cogeneration Overall Efficiency 70.0% Cost Savings (EGP/year) 753,779 Total Investment Cost (EGP) 4,202,846 Simple Payback Period based on Total Investment (Years) 5.58

The hotels that have an actual potential of cogeneration are the H4-5#500@S , H3-5#400@S and H5- 5#318@S ; a brief analysis was performed in order to evaluate the investments, energy savings and financial parameters, their results being shown in the table below.

Exhibit 55- Resume of the cogeneration investments

Input Data SAVOY 5* SIERRA 5* MARITIME 5* Investment Cost for Gas Engine Generator Set (€/kW) 550 550 550 Investment Cost for Waste Heat Recovery Boiler (€/kW) 160 160 160 Investment Cost for the balance of Cogeneration Plant (€/kW) 100 100 100 Thermal to Electric Ratio of Gas Engine 1.2 1.2 1.2 Electricity Efficiency of Cogeneration System 35% 35% 35% Facility Load Factor (Ratio between Average and Peak Demand) 70% 70% 70% Output Data Facility Average Demand (kW) 1,859 1,476 700 Facility Peak Demand (kW) - Cogeneration Size 2,656 2,108 1,000 Electrical Energy Generated by Cogeneration (kWh/year) 16,287,633 12,928,986 6,131,541 Gas Demand for Gogeneration Unit (kWh/year) 46,536,093 36,939,960 1 7,518,689 Cogeneration Maintenance Cost (EGP/year) 6 64,020 5 27,093 2 49,973 Total Investment Cost (EGP) 19,558,403 15,525,296 7,362,835 Cost Savings (EGP/year) 2,621,038 2,079,109 1,328,982 Simple Payback Period based on Total Investment (Years) 7.46 7.47 5.54

5.6.14 Additional energy conservation measures

During our site visits, we identified some additional energy conservation measures that may be possible to implement; however, they require a deeper analysis due to the lack of references (investment and savings) in Egypt. The two main measures are: 1. Producing biogas from the sludge produced at the wastewater plants, which will be used to produce heat and/or electricity. 2. Investing in a cogeneration of electricity and desalinated sea water using Concentrated Solar Power (CSP), as presented in the following picture. (see Annex F for a typical case in Egypt)

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 57 AF-MERCADOS EMI

Exhibit 56- CSP-DSW Plant Conceptual Design with added RO modality

Source: The Cyprus Institute

5.7 Feasibility studies per resort

To evaluate the economic impact of the measures assessed as part of this project, the Consultant has developed a simplified financial model, following a free cash flow to the project perspective. Individual financial models for each measure are presented in Annexes D to N of this report. Indeed, resorts with CHP potential include two versions of the files (with or without CHP numbers). In the following section, the CHP investment is not included in order to facilitate benchmark analysis. In addition to gas and electricity prices presented in Annex A, performing the financial analysis requires defining two additional parameters that were considered as input data in the model. These parameters are presented in the table below:

Input Parameter Value Discount rate 15% Corporate profit tax 20%

A resume of the WTA per each resort is provided in Annex D of this report.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 58 AF-MERCADOS EMI

5.8 Main outcomes of the WTAs

According to the results analysed in the previous sections and Annex D, the tables below resume the outcome of the resorts visited.

Exhibit 57- WTAs resume (CHP results not included)

After-tax Estimated Anual Energy Cost Energy Saving Hotel total CAPEX saving (EGP) Savings (%) (tCO2/yr) (EGP) (EGP/year) Payback IRR NPV

H1-4#369@S 10,218,403 1,446,796 5,314,583 27% 2,107 4.0 30 2,862,519

H2-5#470@S 7,107,423 1,640,347 8,942,038 18% 2,879 6.1 19 1,171,445

H3-5#400@S 7,694,964 1,946,738 6,536,401 30% 2,040 4.8 22 2,953,766

H4-5#500@S 7,913,852 1,650,492 8,239,656 20% 1,351 5.5 18 1,275,746

H5-5#318@S 4,831,141 1,134,248 5,216,479 22% 1,516 5.3 20 1,194,817

H6-5#364@MA 4,779,158 774,392 3,215,977 24% 721 2.8 42 1,632,833

H7-4#140@MA 3,922,888 531,795 1,586,852 34% 659 3.4 36 803,102

H8-4#313@NRS 6,323,826 564,855 2,227,921 25% 820 3.1 34 1,142,773

H9-5#700@NRS 13,567,560 1,482,180 7,333,767 20% 2,527 5.7 21 24,874

H10-5#292@NRS 8,047,202 1,082,924 2,692,504 40% 1,848 4.5 25 1,203,403 H11-3#522@NRS 9,539,650 668,424 3,771,046 18% 952 3.4 33 1,094,386

Exhibit 58- CHP resume

Estimated Anual After-tax Saving Hotel total CAPEX saving (tCO2/yr) (EGP) (EGP/year) Payback IRR NPV

H5-5#318@S 7,362,835 1,941,746 1,957 5.0 18.5 1,363,631 H4-5#500@S 19,558,403 3,756,932 2,337 6.0 13.9 965,709 H3-5#400@S 15,525,296 2,980,617 1,852 6.0 13.9 -774,090

For the eleven WTAs, the total investment in sustainable energy (not including CHP) is over 82 million EGP (8.8 million EUR), with a minimum investment per resort of 3.9 million EGP (0.11 million EUR) up to 13.5 million EGP (1,45 million EUR), being the solar water heaters and the central chillers the main investments for the majority of the resorts. This investment will increase notoriously in the hotels that are being connected to the natural gas grid, as can be seen in Exhibit 57 In general terms, the saving potential is high and the total CO2 saving potential will be more than 28,500 tCO2/year, not including CHP (more than 55,000 tCO2/year including CHP).

In terms of economical and financial results, while the payback varies from 2,8 years up to 6,2 years, the IRRs varies from 18% to 42%. Typical CHP IRRs are around 15%.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 59 AF-MERCADOS EMI

6 Technical and Market Potential

In order to determine the market potential and the investment plan, due to the fact of relevant differences (energy characterization and energy efficiency solutions) detected during the WTAs in the different resorts, as well as some common characteristics and energy conservation measures, we will forecast the market potential based in for representative resorts or prototypes (see section 5.1) and a “pool” of different technologies that will improve the sustainability of the hotels (see section 5.2). At the same time two different scenarios (section 5.4) will be defined in order to estimate the number of projects per year, being one more conservative and the second one more optimistic depending on how the actual market barriers could be mitigated (see section 5.3).

6.1 Energy characterization: prototypes definition

As presented in the previous section, each hotel analysis is different to the others due to varying size, occupancy rates, energy and water breakdowns, energy prices, facilities, etc. However, it is also true that we identified some common issues that allow us to define a few patterns or prototypes that allow us to represent a large portion of the 586 resorts in the area; particularly 5*, 4* and 3*, which account for almost the 90% of the rooms available in the area which represents the technical market. The determining variables for the identification of the prototypes are:  Location: In general, Sinai resorts have higher energy consumption per guest night than the Red Sea area including Marsa Alam.  Connection to the electrical grid: Marsa Alam resorts are isolated from the electrical grid and this affects the electricity prices paid by the resorts.  Connection to the natural gas grid: Actually Sharm el Sheikh and in the future Hurghada area are or will be connected to the natural gas grid. This will create large investments opportunities in the connected hotels for the H5-5#318@S , H4-5#500@S and H3-5#400@S resorts.  Category of the resort at the South Sinai area: In general, 5* resorts are characterized for their luxury and exclusive facilities (guest rooms, restaurants, number of swimming pools, spas, stores, etc.).  HVAC technology: Cooling represents the higher energy demand at the resorts, due to the high temperatures all throughout the year. In 5* hotels in Sinai, they normally use central chillers for common areas and guest rooms; however, 4* and 3* normally use split units for the guest rooms. At the Red Sea area, the majority of the resorts (5*, 4* and 3*) used split units for cooling the guest rooms.  Steam & hot water production: 5* SINAI´s resorts produced their hot water with central diesel boilers, while hotels in the Red Sea very often used electrical heaters for the guest rooms.

According to the variables described above, the 5*, 4* and 3* in the South Sinai and Red Sea are divided into four segments: 5* at Sinai; 4* and 3* at Sinai; 5*, 4* and 3* at North Red Sea; 5*, 4* and 3* at Marsa Alam. For the estimations of the market potential and the investment plan, we assign one prototype for each segment, as shown in the exhibit below. That characterization will facilitate the decision by which energy efficiency measures correspond to each prototype (see section 5.2), as well as the average investment and financial results per resort.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 60 AF-MERCADOS EMI

Exhibit 59- Prototypes defined according to the main variables that affect energy consumption

CONNECTION TO THE LOCATION CATEGORY HVAC HOT WATER PROTOTYPES ELECTRICAL GRID 5* SINAI Centralized HVAC Diesel for DHW R-5@S SINAI 4*-3* SINAI Split units for GR Diesel for DHW R-43@S

North RD 5*-4*-3*North RD Split units for GR Electricity for DHW R-543@NRS RED SEA Marsa Alam 5* 4*-3* Marsa Alam Split units for GR Electricity for DHW R-543@MA

At the same time, these prototypes would represent the 90% of the room capacity of the study (technical market), and each prototype would define one of the segments defined, as illustrated in the following figure.

Exhibit 60- Technical market: Number and percentage of hotels per prototype segment

R-543@MA R-5@S R-543@MA R-5@S #44 #52 12% 21%

R-543@NRS R-43@S R-543@NRS #146 39% R-43@S #147 28%

6.2 Energy efficiency solutions

Mixes of the energy conservation measures identified in the WTAS and resumed in at section 4.6 are selected, if applicable, for each prototype.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 61 AF-MERCADOS EMI

Exhibit 61- List of the energy conservation measures36

Energy Conservation Measures Clasification Code Executive Description REM EEM OGM RGM FSS O&M ECM-1 Switching from individual splits to centralized cooling systems x ECM-2 Replacement of air cooled chillers to absorption chilers x x x ECM-3 Waste heat recovey systems x ECM-4 Improving the envelope energy performance (windows and walls) x x ECM-5 Building energy management system x x ECM-6 Adding pressure exchangers to the desalination plants x ECM-7 More efficiency motors and pumps with variable speed drivers x x ECM-8 Replacement of central diesel boilers by SWH x x ECM-9 Replacement of single electrical heaters boilers by SWH x x ECM-10 Minimization of the evaporation and heat losses at the swimming pools x ECM-11 Water conservation x ECM-12 Relamping for indoor and outdoor common areas x x ECM-13 Photovoltaic panels for outdoor lighting x x ECM-14 Fuel switching to natural gas x x x ECM-15 Cogeneration plants x x x Cogeneration of Desalinated Sea Water (DSW) and electricity using ECM-16 x x x x Concentrated Solar Power (CSP) ECM-17 Centralized biogas plants x x x

Therefore for each prototype, we can estimate the investment and the expected savings resulting from the economical/financial results in average with the WTAs.

6.3 Market barriers and constraints

The following table summarizes the main barriers to EE and RE investments in the Commercial sector.

Exhibit 62- Market Barriers and way to overcome

Time to BARRIERS Comments Way to overcome implemen t As seen in chapter 2, actually there are no laws, regulations or effective policies to promote energy efficiency and renewable Accelerating the adoption Lack of energy in Egypt. Also, there is no clear and Medium- of the Bylaws and new Legislative and comprehensive strategy and/or program for Long Term directives for energy Regulatory improving EE & RE. Notwithstanding the (2-3 year at efficiency and renewable Framework creation of the new Energy Efficiency Unit, still least) energy. there is no dedicated institution that has clear implementation and executive authority for pursuing energy efficiency objectives Dialogue with Business Hotels are very much interested in reducing Associations, Local Banks, energy expenditures (which represent around International Donors and Short / 6 to 8 per cent of their annual costs or even IFIs to individuate possible Medium Financial more), but hotels owners are facing with alternative financing tools Term (1 Constrains financial constraints, mainly due to reduction or mechanisms to introduce year) in the number of tourist in the last two years EE&RE component into loan resulting from the instability in the Middle products specifically East. intended for hotels

36 REM: Reduction of the energy and water demand; EEM: improvement of the energy efficiency in the conversion of delivered energy to useful energy; OGM: on site generation; RES: renewable generation, FSS: fuel switching strategies and O&M: operation and maintenance benefits

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 62 AF-MERCADOS EMI

Energy Efficiency in hotels could be addressed by The conventional energy prices are still heavily upstream sufficient subsidized in Egypt. Due to the low prices of sustainable resources. This Profitability of Medium electricity, natural gas and diesel, the pay-back requires dialogue with the EE measures for Term (2-3 period of some EE measures is often beyond Government, International end users years ) the acceptable level for commercial sector Institutions and local banks end-user. to customize existing and/or newly financing mechanisms. Despite some subsidies in SWH, the initial Creation and Medium – High cost of investments for RE and EE measures remain implementation of National Long Term initial high or very high and profitability is low, which Funds for the promotion of (2 year at investment does not allow the development of a EE and RE. least) spontaneous market for EE measures.  Policy dialogue, requiring cooperation with Government (and

International Donors and

Institutions to introduce Low interest additional regulatory and lack of The penetration rate of EE and RE measures in measures on energy awareness of the hotel sector is very low and almost limited Short- efficiency minimum end user to SWH systems and a few EE technologies like Medium requirements for buildings toward EE and lighting. Effective results of these measures, term and/or specific obligation to RES mainly in terms of achievable savings, are not (1 year at install EE and/or RE systems technologies, diffused in Egypt and are not well understood least) in resorts. their economic by the potential end-users. This limits a wider  Information and results and diffusion of EE measures and techniques in the educational campaigns financial hotel sector. through different mechanisms stakeholders, like

governmental institutions,

Egyptian Hotel Association, Engineering Associations, Architectures, vendors, etc. Identifying national players that aim to develop the first Short- Though perception for ESCOS is good (Survey, pilot projects and assisting Lack of energy Medium chapter 3), actually there are no relevant them with technical and services term ESCOs working in Egypt that could foster the specific know-how in companies (1 year at improvement of the sustainability of the energy services contracts (ESCOS) least) hotels. and risk management

through international cooperation.

6.4 SWOT analysis

In the perspective of a SWOT analysis the following table summarizes the main aspects:

Strengths Weaknesses Lack of interest and lack of awareness in EE and RE High occupancy rates technologies Excellent qualitative services Lack of expertise Qualified technical experts/engineers High initial investment New technologies available at the local markets Low profitability International and national chains that include Financial constraints of local markets “sustainability” in their social responsibility

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 63 AF-MERCADOS EMI

Opportunities Threats Energy Efficiency Regulation Government keeps subsidizing Energy Efficiency Action Plan Political instability Financing European economical crisis Natural Gas pipeline

6.5 Investment plans

In order to forecast the success of the energy efficiency and renewable energy program in the hotel sector in Egypt, two different scenarios are defined depending on how the market barriers are solved in the short-medium term (up to 2015) and long term (up to 2020).

1. Conservative scenario: a. Subsidies are removed smoothly and energy prices increase at CPI annually. b. For SWH, promotion and subsidies continue in the same amount as exiting plans. c. Awareness and promotion campaign increases gradually. d. For energy efficiency technologies (high efficiency chillers, motors, speed variable drives), custom taxes are gradually removed. e. A National Energy Efficiency Action Plan (NEEAP) is operative in the medium term. f. Funding for EE and RE projects are available 2. Optimistic scenario: a. Subsidies are removed more aggressively in the short term. b. A National Energy Efficiency Action Plan (NEEAP) is operative in the short term. c. The building standards are more restrictive in terms of energy consumption per m2. d. Incentives for investing in energy efficiency and renewable energy are available in the short term (fiscal incentives, grants, custom exemptions, etc.). e. Large funding for EE and RE projects are available f. Awareness and promotion campaign increases substantially. g. International Carbon Markets reach CO2 prices around 15 to 20 €/ton. h. International tourists and/or tour operators demand higher “green” commitment from the resorts and hotels step forward to a “ecofriendly” positioning. i. Growth of the natural gas network in the areas. j. The EBRD also finance double/triple glazing in major overhauls.

According to these scenarios and the number of hotels per prototype segment presented in section 5.1‎ we assume the following percentages for full renovation up to 2020 per prototype segment (over the actual number of hotels): Market Potential: Conservative scenario:  20% of the R-5@S segment  10% of the R-43@S segment  5% of the R-543@NRS segment  15% of the R-543@MA segment

Optimistic scenario:  30% of the R-5@S segment  20% of the R-43@S segment  10% of the R-543@NRS segment  30% of the R-543@MA segment  10 major overhauls up to 2020

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 64 AF-MERCADOS EMI

Exhibit 63- Number of projects and associated investment -Conservative Scenario

20 14,000,000 12,000,000 15 R-5@S 10,000,000 R-5@S

10 R-43@S 8,000,000 R-43@S R-543@NRS 6,000,000 R-543@NRS 4,000,000 5 R-543@MA R-543@MA 2,000,000 0 0 Short term (up to 2015) Long Term (up to 2020) Short term (up to 2015) Long Term (up to 2020)

For the conservative scenario, we forecast a higher number of projects and investment in the Sinai area, mainly due to the existing natural gas extension plan in Sharm El Sheikh.

Exhibit 64- Number of projects and associated investment -Optimistic Scenario

20 14,000,000 18 16 12,000,000 R-5@S R-5@S 14 10,000,000 12 R-43@S R-43@S 8,000,000 10 R-543@NRS R-543@NRS 8 6,000,000 R-543@MA R-543@MA 6 4,000,000 4 Major Overhaul Major Overhaul 2,000,000 2 0 0 Short term (up to 2015) Long Term (up to 2020) Short term (up to 2015) Long Term (up to 2020)

For the conservative and optimistic scenario, we forecast a higher number of projects and investment in the Sinai area, mainly due to the existing natural gas extension plan in Sharm El Sheikh; the main difference between both scenarios is the success in the promotion of EE and RE financing mechanism in both areas.

Exhibit 65 - Number of projects and associated investment in detail

Short term (up to 2015) Long term (up to 2020) Estimated Estimated Business Estimated Estimated Business number average Opportunity number average opportunity of investment (Euros) of investment (Euros) projects per client projects per client (n) (Euros) (n) (Euros) R-5@S 2 1,375,00 2,750,000 8 1,531,250 12,250,000 R-43@S 3 1,000,00 3,000,000 12 812,500 9,750,000 Conservative R-543@NRS 2 750,00 1,500,000 6 1,083,333 6,500,000 Scenario R-543@MA 2 400,00 800,000 5 400,000 2,000,000 TOTAL 9 894,444 8,050,000 31 983,871 30,500,000 R-5@S 3 1,583,333 4,750,000 13 1,519,231 19,750,000 R-43@S 6 875,000 5,250,000 24 937,500 22,500,000 R-543@NRS 2 750,000 1,500,000 13 1,057,692 13,750,000 Optimistic R-543@MA Scenario 4 400,000 1,600,000 9 400,000 3,600,000 Major 2 300,000 600,000 8 300,000 2,400,000 overhaul TOTAL 17 781,667 13,700,000 67 842,885 62,000,000 Credit financing 3 1,500,000 3,750,000 11 1,523,810 16,000,000 Average line ESCO 0 na 0 0 na 0 TOTAL 13 836,538 10,875,000 49 943,878 46,250,000

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 65 AF-MERCADOS EMI

Finally, Exhibit 66 resumes both optimistic and conservative scenarios presenting the average number of project and associated investment in the short and long term for the four prototypes of hotels and potential major overhauls.

Exhibit 66- Average number of projects and associated investment

Market potential of EE investment Est. number of projects Potential for EBRD projects in Tertiary sector Typical Suitable Investment EE measures: Lighitng, VFD, Boilers,AC Short term Long term EBRD Short term Long term equipment, Cooling System (Chillers, size Funding up to 2015 up to 2020 up to 2015 up to 2020 refrigeration towers, ), SWH, Insulation type* (n) (n) (thous. €) (thous. €) (thous. €) R-5@S 3 11 1,512 1 3,750 16,000 R-43@S 5 18 906 1 4,125 16,125 R-543@NRS 2 10 908 1 1,500 10,125 R-543@MA 3 7 400 1 1,200 2,800 Major Overhaul 1 4 300 1 300 1,200 TOTAL 13 49 10,875 46,250 (*) Typical types of EBRD funding: 1. Credit line facility (up to M€ 5), 2. Direct lending facility (M 5 to 15), 3. Direct lending (over M€ 10), 4. ESCO.

According to these investment estimations per hotel and taking into the account the estimations for the total number of hotels (above 3*) in the area in the Red Sea, the total potential market for financing opportunities in sustainable energy will be close to 400-500 million Euros. If we consider that the 75% of the rooms available in Egypt are in the Red Sea area, we can estimate that the total potential for Egypt would be over 600 million Euros.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 66 AF-MERCADOS EMI

7 Main findings and recommendations

During the elaboration of this study some relevant findings were identified, which are summarised in the following sections.

7.1 Perception of a severe increments in the energy prices is a key driver for EE and RE projects

The hotel industry is aware that the energy prices are highly subsidized. Indeed, February this year, the government raised the price of fuel oil, which is widely used in energy-intensive local industries, to 1,500 EGP per tonne (an increase of about 50% the previous quotes). The perception of the hotel sector is that energy prices will increase notoriously in the short term. The energy cost represents 5% of their sales for more than 50% of resorts in the area; an increase in the energy costs will affect negatively their profitability due to actual constraints to increase the sale price per room in a competitive market. Owners and general managers are very concerned about the impact of these future increments in the total operational costs of their facilities, as well as on how to control or minimize the effect in annual budgets. They are becoming proactive in the research of energy efficiency solutions and stand with their “ears and eyes” opened to new technologies that save energy and reduce costs. Implications This could generate an interesting potential demand for loan products with EE components. Recommendations Obviously, such a demand needs to be further investigated. Any involvement in this sector could require dialogue with the Business Association, local banks and an in-depth analysis of the competitive framework to assess particular opportunities.

7.2 Hotel chains are key players to open the market

Some international and national hotel chains have a relevant presence in both areas, as Travco Group, Marriot, Intercontinental, Sheraton and Mövenpeick; some of them already show a high interest in survey and in collaborating with the study offering us to visit their resorts, like Travco Group. Indeed, we had a meeting with them in their headquarters in Cairo37: we found them to be very encouraged in the identification of energy efficiency and renewable energy improvement at their hotels and they were very enthusiastic in participating in the study. Our experience in the hotel sector indicates that there are “leaders” for the implementation of innovative projects that can open the market for the rest of the resorts that are waiting to know the results of these projects, and if a positive experience is proven, they will try to implement in the future. Implications This could generate an interesting potential demand for loan products with EE components for large companies (direct lending facilities), but also open the market for the rest of the resorts. Recommendations Identify and negotiate with key players and leaders that are keen to develop energy efficiency and renewable energy projects at some of their hotels in order to define with them customized plans in the short to medium term.

37 Meeting with Mr. Wael Ahmed, General Manager Energy & Utilities ([email protected])

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 67 AF-MERCADOS EMI

7.3 High saving potential, reasonable paybacks but low penetration of energy efficiency technologies

As reviewed in the walk through audits and in the characterization of EE and RE measures, the potential in the tertiary sector is high (over 15% and up to 50%) and the paybacks are interesting with the actual energy prices for large consumers). However, the penetration of mature energy efficiency and renewable energy (SWH) technologies is still low. Implications The low penetration for EE and RE projects points out the existing constraints in different sub-sectors (lack of interest, high initial investment costs compared to limited financial resources, lack of demonstration projects and references, etc.) and the persistent difficulties to achieve concrete results due to the lack of a spontaneous market for EE and RES. Recommendations We recommend further concentrated efforts with the National Institutions and International Donors, in order to set out possible packages of mature EE and RE technologies in the hotel sector.

7.4 The expansion of the Natural Gas Grid opens the market for high efficiency natural gas technologies

The expansion of the natural gas network in Sharm El Sheikh and Hurghada is opening markets for natural gas technologies as cogeneration or trigeneration plants, absorption chillers of high efficiency boilers (low temperature boilers). This conversion from diesel or electrical technologies to natural gas technologies requires large investments after detail a feasibility study is performed. Implications Manufacturing38 companies have already detected the relevance of this new market. However, the lack of financing is a barrier for the penetration of these new technologies. At the same time, the NG Distribution Company (DSO) is not financing the upfront cost of connection from the end users. Recommendations We recommend further investigating these issues with the vendors and DSO, to set out possible packages for the promotion of high EE gas technologies including the connection costs in the hotel sector.

7.5 Renewable energy technologies have a great run but more “local success histories” are needed

SWH, Solar PV panels, concentrated solar power plants, biogas plants and small wind turbines have a great future in the area due to the optimal conditions for these technologies in the Sinai and Red Sea. Implications In the meantime, while international prices of the technologies decrease and the performance improves, it is time to promote these technologies so the lack of awareness and references will not be a problem in the future with an increasing energy prices perspective. Recommendations We recommend further investigating these issues with the National Institutions and International Donors, to set out possible pilots projects of promising renewable technologies in the hotel sector.

38 Hitachi sell already absorption chillers in some hotels

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 68 AF-MERCADOS EMI

7.6 Potential for large investments in singular projects

There are some specificities in the sector that would require a different approach of the one by one hotel or chain of hotels that should be analysed in detail, but could probably demand high investments with high returns a huge CO2 savings. One example might be a cogeneration of Desalinated Sea Water (DSW) and electricity using Concentrated Solar Power (CSP) in isolated areas, such as Marsa Alam or large CHP plants with district cooling in Sharm El Sheikh or Hurghada. Implications These singular projects cannot be upfront by individual resorts; they require the coordination and integration of several groups of hotels with a common target, which is reducing the energy costs, guarantee of supply and sustainability. Recommendations We recommend identifying key players and leaders that would be proactive in large scale projects, as well as analyse the possibility of collecting international funds for this kind of projects.

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 69 AF-MERCADOS EMI

ANNEXES

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8 Annex A: Energy prices

The energy prices used for the calculations are detailed in the following bullets.

8.1 Electrical Prices

8.1.1 Electrical Tariff for connected areas

The average electrical energy prices for hotels connected to the utility grid is 0.31 EGP/kWh including taxes.

8.1.2 Electrical Prices for non-connected areas

For customers who generate their electricity, the applied costs are:  0.35 EGP/kWh for variable costs (fuel).  0.38 EGP/kWh for fixed costs (amortization and depreciation, operation and maintenance).

For independent power providers in remote areas, the electrical energy selling prices to customers are:  0.55 to 0.62 EGP/kWh.

8.2 Fuel Prices

8.2.1 Natural Gas

The natural gas cost for connected hotels is 2.65 USD/million Btu.

8.2.2 Diesel

The diesel costs are 1.1 EGP/ litre

8.2.3 Liquefied Petroleum Gas (LPG)

The LPG cost is 1080 EGP/ton for distance from Cairo not exceeding 550 km and for longer distances the cost reaches 2250 EGP/ton. 80% of the supply cost is related to the transportation fees, which shows the severe subsidy in LPG cost.

8.3 Water Prices

The water price for hotels connected to the governmental utility is rated at 3 EGP/m3. For the hotels in Sinai and Red Sea, the water supply is self-generated via water desalination plants. The costs for this water supply ranges from 4.5 to 14 EGP/m3. This variation in water costs is caused by the source of the electrical power supply, depending whether it comes from the utility grid or self power generation plants or the independent power providers.

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9 Annex B: List of resorts that participate in the survey

1 Iberotel Dahabeya - 2 Tulip Beach Resort Marsa Alam 3 H8-4#313@NRS Saraya 4 H8-4#313@NRS 5 Sol Y Mar Club Makadi 6 Iberotel Coraya Beach. 7 Iberotel Lamaya 8 Iberotel Samaya beach 9 Sol Y Mar Solaya 10 H6-5#364@MA 11 Iberotel Lamaya Resort 12 Iberotel Samaya Resort 13 Sol Y Mar Dar El Madina 14 Jaz Makadi Star 15 Solymar Sea Star - 16 Sol Y Mar Makadi Sun 17 SensiMar Makadi 18 H8-4#313@NRS Oasis 19 Jaz Makadi Bayview 20 Renissance Golden View, 21 Alibaba palce 22 H4-5#500@S Sharm El Shiekh Resort 23 Swiss Inn Resort El Arish 24 Sheraton Miramar Hotel, 25 Aladdin Beach Resort 26 Palm Beach Resort 27 Soly Mar Club Makadi 28 Achtegnburger 29 Sheraton Miramar 30 Movenpeick Hotel 31 Sun Rise garden Beach 32 Sun Rise Festival 33 Sunrise Select Royal Makadi Resort 34 Titanic Resort&Aqua Park 35 Kiriazi Touristic Vilage 36 Pichalpatros hotels 37 Albatros Club 38 Albatros Palace 39 H6-5#364@MA 40 Solymar Dar El Madina 41 Intercotinemtal 42 Jaz Makadi Bayview 43 Iberotel Lamaya Resort 44 Helton El-Nour Resort 45 Elsamaka village 46 Jasmin Resort 47 Royal palace Hotel 48 Gand Hotel Resort 49 Siva Grand Hotel Resort 50 Conrad Hotel 51 Marriot Hotel 52 Helton Hurghada Hotel 53 Desert Rose Resort

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54 Almass GOLDEN fIVE hotel 55 Golden Five Hotel 56 Panorama Panglos Hotel 57 Grand Makadi Hotel 58 Prima life makadi Hotel 59 REBENSON ABU SOMA HOTEL 60 Sheraton Soma BAY 61 Movenpik hotel 62 Kahramana Resort 63 Blu Reef Resort 64 Alfiston VALIGE 65 Coral Beach Diving 66 Shams ALAM Resort 67 Dana Beach Hotel 68 H8-4#313@NRS 69 H8-4#313@NRS Oasis 70 Saraya Palms hotel 71 Iberotel Samaya Resort 72 SensiMar Makadi 73 Sol Y Mar Solaya 74 Jaz Makadi Star 75 SEA STAR BOREVAGE HOTEL 76 Sindbad Valiage 77 Obray Sahel Hasheesh 78 Xperience Kiroseiz Parkland 79 Concorde El Salam Hotel sharm El Sheikh 80 Sonesta Club - Sharm El Shiekh 81 Akassia Swiss Resort - Lti-Club Calimara Sonesta Beach Resort&Casino - Sharm 82 ElSheikh 83 Hurghada Marriott - 84 Sheraton Soma Bay Resort, 85 Gafy resort Sharm 86 Sheraton sharm hotel 87 Hotel Ali Baba Palace, 88 Zahabia Hotel 89 Sunrise Garden Crystal Bay - 90 KING TUT RESORT 91 HAWAY RESORT 92 Aladdin Beach Resort 93 Tia Heights Makady Bay

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 73 AF-MERCADOS EMI

10 Annex C: Market Survey

The results are presented below:

Survey Name: Apr 09 2013 Survey Response Status: Partial & Completed Filter: None May 06, 2013 6:46:58 AM

1. Please, indicate the name of the hotel and your email address to receive the global results of the survey and a personal invitation to assist to the final workshop:

93 Response(s)

2. Indicate the position you have in the hotel :

Response Ratio Owner 17.10% General manager 11.10% Front desk manager 0.00% Maintenance manager 12.10% Others 59.50% No Responses 0.00% Total 100%

3. Does your hotel belong to a chain or group of hotels?

Response Ratio No 7.0% Yes- Specify: 80.8% No Responses 12.1% Total 100% 94 Comment(s)

4. Year of construction of the hotel AND/OR

97 Response(s)

5. Year of the last important refurbishment

80%

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6. If any refurbishment, please specify which:

Response Ratio General Overhaul 26.20% Bedrooms & Restaurants 37.30% Cooling System 6.00% Hot Water System 3.00% Other 5.00% No Responses 22.20% Total 100%

7. Please, indicate the category of the hotel:

Response Ratio Five star 51.50% Four star 41.40% Three star 5.00% Two star 0.0% One star 0.0% Unclassified 0.0% No Responses 2.0% Total 100%

8. Please, indicate the number of rooms:

Response Ratio < 100 rooms 2.00% 101 - 300 rooms 30.30% 301 - 500 rooms 35.30% > 500 rooms 30.30% No Responses 2.00% Total 100%

9. The hotel is operating:

Response Ratio 365 days 96.9% Between 300 and 350 days 0.0% Between 240 and 300 days 1.0% Less than 240 days 0.0% No Responses 2.0% Total 100%

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10. Our guest considers important that the hotel is committed with the environment

Response Ratio Yes 84.8% No 0.0% Only for some 11.1% I don't care 1.0% No Responses 3.0% Total 100%

11. Do you periodically control energy and water consumption?

Response Ratio Yes 85.8% No 2.0% Partially 9.0% No Responses 3.0% Total 100%

12. Do you know the ratio of energy and water costs over the hotel regarding sales?

Response Ratio Yes 82.8% No 8.0% Partially 7.0% No Responses 2.0% Total 100%

13. If yes, what is the percentage?

Response Ratio 0 to 4% 40.40% 5 to 9% 39.30% 10 to 15% 10.10% No Responses 10.10% Total 100%

14. Cooling facilities are:

Response Ratio Between 0 to 10 years 37.30% Between 10 to 20 years 53.50%

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 76 AF-MERCADOS EMI

> 20 years 9.00% No Responses 0.00% Total 100%

15. The age of hot water installations (boiler, tanks and pumps) is:

Response Ratio Between 0 to 10 years 41.40% Between 10 to 20 years 52.50% > 20 years 6.00% No Responses 0.00% Total 100%

16. Please specify the fuel used by the hotel for the HVAC:

Response Ratio Electricity 91.90% Natural Gas 4.00% Others 2.00% No Responses 2.00% Total 100%

17. Please specify the fuels used to heat the hot water in the hotel:

Response Ratio Electricity 38.30% Natural Gas 11.10% Diesel 44.40% Solar Energy 4.00% LPG 0.00% Other 2.00% No Responses 1.00% Total 100%

18. If any, identify additional facilities at the hotel:

Response Ratio Heated swimming pool 64.6% Laundry 18.1% Convention center 1.0% Spa 0.0% Sport Facilities 7.0% Other 8.0% No Responses 1.0% Total 100%

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19. What was the increase of the electricity cost last year?

Response Ratio Not known 51.5% Less than 5% 21.2% Between 5 to 10% 16.1% More than 10% 10.1% No Responses 1.0% Total 100%

20. What was the increase of fuel last year?

Response Ratio Not known 43.4% Less than 5% 30.3% Between 5 to 10% 15.1% More than 10% 10.1% No Responses 1.0% Total 100%

21. In the last three years, did you implement any energy conservation measures in the hotel?

Response Ratio Yes 80.8% No 10.1% I am not sure; I have to check 6.0% No Responses 3.0% Total 100%

22. If yes, please indicate which of the following measures has been implemented:

Response Ratio Lighting 93.5% Better glazing/windows 3.2% Smart thermostats in rooms 8.6% Solar water heaters 39.7% High efficiency boilers 31.1% High efficiency chillers 20.4% Other 3.2% Total 100%

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23. Which should be the two major conservation measures for reducing energy and water costs at your hotel? (Indicate the two most important)

Response Ratio HVAC 31.60% Lighting 56.10% Kitchen 69.30% Hot water 74.40% Spa / Swimming pool 21.40% Laundry 33.60% Other 0.0% Total 100%

24. Indicate the system used for cooling the rooms:

Response Ratio They have no air conditioning 3.0% Fan-coils with water pipes 9.0% Split units 80.8% Only fresh air 4.0% No Responses 3.0% Total 100%

25. Does the hotel have a centralized cooling system?

Response Ratio Yes 28.2% No 67.6% I am not sure 3.0% No Responses 1.0% Total 100%

26. If yes, please specify the brand name of the cooling system:

25 Response(s)

27. The temperature in the rooms is controlled by an energy managing system

Response Ratio Yes 46.4% No 49.4% I am not sure; I have to check 3.0% No Responses 1.0%

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 79 AF-MERCADOS EMI

Total 100%

28. Can the client manipulate the temperature in his/her room?

Response Ratio There is no air conditioning 0.0% Yes, freely 82.8% Only from 22 to 26 ºC 4.0% Only +/- 3ºC 0.0% Yes 11.1% No 0.0% I am not sure; I have to check 1.0% No Responses 1.0% Total 100%

29. Water supply in the hotel is:

Response Ratio External 32.3% Own, by osmosis or by means of a desalinization plant 62.6% Own, water extracted from wells 3.0% Discontinuous external supply and water tank truck 0.0% No Responses 2.0% Total 100%

30. The water quality is negatively affecting the installations

Response Ratio No, the quality is good 48.4% Yes, it affects the customer's opinion and produces continuous breakdowns 8.0% Partially, equipment is replaced on a regular basis but the customer does not perceive it 41.4% No Responses 2.0% Total 100%

31. Did you install water saving devices (aerators) in the bathroom taps?

Response Ratio Yes 77.7% No 16.1% I am not sure 3.0% No Responses 3.0% Total 100%

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32. Select the technologies that you would be interested in implementing in the hotel:

Response Ratio Solar water heaters 90.70% Photovoltaic panels 8.20% Geothermal 3.00% Cogeneration 14.40% Lighting 79.30% None 1.00% Total 100%

33. Which is the most important barrier when implementing an energy efficiency project?

Response Ratio Lack of finance 74.70% Lack of knowledge 4.00% Lack of guaranties 0.00% Lack of profitability 3.00% Lack of information 10.10% Other 7.00% No Responses 1.00% Total 100%

34. I will invest in an energy efficiency (EE) project in the case the simple payback is:

Response Ratio Less than 2 years 9.00% Between 2 to 4 years 32.30% Between 4 to 6 years 22.20% Over 6 years 33.30% No Responses 3.20% Total 100%

35. If you decide to invest, will you do it with own resources or with bank financing?

Response Ratio Own resources 10.1% Credit line 85.8% Other 1.0% No Responses 3.0% Total 100%

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 81 AF-MERCADOS EMI

36. Will you allow a third company to invest in an EE project in your hotel signing a long term services contract?

Response Ratio Never 3.00% Only if they guarantee results 91.90% Other 1.00% No Responses 4.00% Total 100%

37. Would you prefer to pay your hot water demand rather than producing your own hot water?

Response Ratio Yes 5.0% No 11.10% I don't understand the system 3.00% If cheaper, I will consider it 78.70% No Responses 2.00% Total 100%

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 82 AF-MERCADOS EMI

11 Annex D: Walk Trough Audits in eleven seven resorts

11.1 H1-4#369@S (Sharm El Sheikh, 4*, #369) Concept EGP 2.570.112 % 48% Electricity kWh 8.159.087 EGP 0,315 /kWh EGP 618.915 % 12% Diesel l 562.650 EGP /l 1,10 EGP 2.125.556 % 40% Water m3 265.695 EGP 8,00 /m3 TOTAL EGP 5.314.583 PERFORMANCE INDICATORS

Occupancy % 78% PAX # 255.259 Cost per PAX EGP 20,8 Electricity per PAX kWh 31,96 NG per PAX kWh 0 Diesel per PAX l 2,20 LPG per PAX kWh 0 Water per PAX m3 1,041

Estimated Estimated Estimated Estimated CO2 Financial results Anual Anual Electricity Diesel Water Size CAPEX CAPEX Saving Measure Saving Saving savings savings savings Pre-tax After-tax (EGP) (EUR) (tCO2/yr) ID Measure Description (EGP) (EUR) Payback IRR NPV Payback IRR NPV ECM-2 CentralizingSolar Water individualHeater cooling system (splits in rooms) with 1126 m2 1,837,715 197,689 264,457 28,448 0.0% 36.8% 0.0% 570 6 14.4 -48,783 7 12.2 -234,040 ECM-3 HeatBMS recovery at the central cooling system to produce hot 1101 kW 3,164,135 340,376 228,360 24,565 7.7% 0.0% 0.0% 367 2 46.2 904,596 2 38.8 670,814 ECM-4 Improvementwater of the insulation of distribution systems and - 150,000 16,136 38,063 4,095 0.0% 5.3% 0.0% 82 4 26.6 92,547 4 22.5 58,120 ECM-5 tanks - 150,000 16,136 34,257 3,685 0.0% 4.8% 0.0% 74 4 24.0 70,249 5 20.3 40,282 Improvement the efficienciency of the reverse osmosis (RO) ECM-6 desalination plant through a pressure exchanger - 650,000 69,923 178,939 19,249 6.0% 0.0% 0.0% 287 3 28.7 483,035 4 24.4 317,452 Reducing cooling demand in common areas by temperature ECM-7 control - 60,000 6,454 44,735 4,812 1.5% 0.0% 0.0% 72 1 72.4 209,889 1 60.1 161,544 ECM-8 Improvement of the lighting system in outdoor areas 469 units 131,680 14,165 104,349 11,225 3.5% 0.0% 0.0% 168 1 76.7 496,788 1 63.5 383,457 ECM-9 Improvement of the lighting system in common areas 291 units 88,000 9,466 64,697 6,960 2.2% 0.0% 0.0% 104 1 71.5 302,485 1 59.3 232,649 Improvement the performance of the pumping system (inverter ECM-10 technology) - 150,000 16,136 35,748 3,846 1.2% 0.0% 0.0% 57 4 25.0 78,982 4 21.2 47,268 ECM-11 Glazing and double glass windows - 210,000 22,590 47,717 5,133 1.6% 0.0% 0.0% 77 4 23.8 96,925 5 20.2 55,256 ECM-12 Water conservation - 420,000 45,181 246,646 26,532 0.0% 0.0% 10.0% 125 1 58.0 1,079,674 2 48.5 819,170 ECM-13 Cover for the pools - 200,000 21,515 134,814 14,502 0.0% 1.6% 5.0% 87 1 65.9 615,849 1 54.9 471,456 ECM-14 Photovoltaic pannels 15 kW 340,890 36,671 24,015 2,583 0.8% 0.0% 0.0% 39 11 3.8 -155,744 12 3.1 -160,908

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 83 AF-MERCADOS EMI

11.2 H2-5#470@S (Sharm El Sheikh, 5*, #470)

Concept EGP 4.955.870 % 55% Electricity kWh 15.732.922 EGP /kWh 0,315 EGP 1.677.280 % 19% Diesel l 1.524.800 EGP /l 1,10 EGP 2.308.888 % 26% Water m3 288.611 EGP /m3 8,00

TOTAL EGP 8.942.038

PERFORMANCE INDICATORS

Occupancy % 92% PAX # 367.598 Cost per PAX EGP 24,3 Electricity per kWh 42,80 PAX NG per PAX kWh 0 Diesel per PAX l 4,15 LPG per PAX kWh 0 Water per PAX m3 0,785

Estimated Estimated CO2 Estimated Estimate Financial Results Measure Anual Anual Electricity Diesel Water Saving Measure Description Size CAPEX d CAPEX Pre-tax After-tax ID Saving Saving savings savings savings (tCO2/y (EGP) (EUR) (EGP) (EUR) r) Payback IRR NPV Payback IRR NPV ECM-1 Solar Water Heater 3.090 m2 4,915,753 528,803 735,696 79,141 0.0% 37.8% 0.0% 1,585 6 15.1 35,261 7 12.8 -493,438 Heat recovery at central cooling system for hot water ECM-2 production - 348,339 37,472 97,314 10,468 0.0% 5.0% 0.0% 210 3 29.1 267,180 4 24.7 176,779 Optimization of the hot water production and ECM-3 distribution systems - 220,000 23,666 48,657 5,234 0.0% 2.5% 0.0% 105 4 23.2 93,737 5 19.7 51,644 ECM-4 Reducing the cooling demand in common areas - 85,000 9,144 51,756 5,568 0.9% 0.0% 0.0% 83 1 60.0 229,284 2 50.1 174,407 ECM-5 Improvement of the lighting system in outdoor areas 3,103 253,912 27,314 182,182 19,598 3.2% 0.0% 0.0% 293 1 69.4 635,523 1 57.9 486,422 ECM-6 Improvement of the lighting system in common areas 2,793 228,521 24,583 122,973 13,229 2.1% 0.0% 0.0% 197 2 52.5 379,299 2 44.0 283,643 ECM-7 Glazing and double glass windows at common areas - 185,000 19,901 51,756 5,568 0.9% 0.0% 0.0% 83 3 26.3 82,402 4 22.1 49,895 ECM-8 Improvement the performance of the pumping system - 175,000 18,825 57,507 6,186 1.0% 0.0% 0.0% 92 3 31.6 118,128 3 26.6 79,342 ECM-9 Water conservation - 235,000 25,280 147,356 15,852 0.0% 0.0% 5.5% 75 1 53.1 219,393 1 44.0 162,045 ECM-10 Cover for the pools - 120,000 12,909 121,134 13,031 0.0% 1.8% 3.3% 117 1 96.2 465,021 1 79.6 361,621 ECM-11 Photovoltaic panels 15 kW 340,898 36,671 24,015 2,583 0.4% 0.0% 0.0% 39 11 3.8 -155,751 12 3.1 -160,914

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 84 AF-MERCADOS EMI

11.3 H4-5#500@S (Sharm El Sheikh, 5*, #500)

EGP 5.130.604 % 62% Electricity kWh 16.287.633 EGP /kWh 0,315 EGP 844.089 % 10% Diesel l 767.354 EGP /l 1,10 EGP 185.542 % 2% LPG kg 171.798 EGP /kWh 1,08 EGP 2.079.420 % 25% Water m3 259.928 EGP /m3 8,00

TOTAL EGP 8.239.656

PERFORMANCE INDICATORS

Occupancy % 83% PAX # 247.672 Cost per PAX EGP 33,3 Electricity per kWh 65,76 PAX NG per PAX kWh 0 Diesel per PAX l 3,10 LPG per PAX kg 0,69 Water per PAX m3 1,049

Estimated Estimated CO2 Financial Results Estimated Estimated Anual Anual Electricity Diesel Water Saving Measure ID Measure Description Size CAPEX CAPEX Saving Saving savings savings savings (tCO2/y Pre-tax After-tax (EGP) (EUR) (EGP) (EUR) r) Payback IRR NPV Payback IRR NPV ECM-1 Solar Water Heater 1.155 m2 1,837,715 197,689 264,456 28,448 0.0% 27.0% 0.0% 570 6 14.4 -48,787 7 12.2 -234,043 Heat recovery system for the central cooling ECM-2 system from Absorption Chiller exhausts - 350,000 37,651 53,871 5,795 0.0% 5.5% 0.0% 116 6 15.7 11,235 6 13.3 -28,153 ECM-4 Absorption Chillers 9500 kW 4,798,871 516,230 1,048,940 112,838 55.0% 0.0% -24.6% 466 4 22.9 1,971,933 5 19.5 1,068,303 ECM-5 PV pannels 10 kW 227,265 24,448 16,010 1,722 0.3% 0.0% 0.0% 26 11 3.8 -103,834 12 3.1 -107,276 ECM-6 Cover for the pools - 250,000 26,893 134,504 14,469 0.0% 1.3% 5.0% 87 2 53.5 570,556 2 44.8 429,916 ECM-8 Water conservation - 450,000 48,408 132,711 14,276 0.0% 0.0% 5.5% 67 3 28.0 232,479 3 23.5 147,000

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 85 AF-MERCADOS EMI

11.4 H3-5#400@S (Sharm El Sheikh, 5*, #400)

Estimated CO2 Estimated Estimated Financial Results Estimated Anual Electricity Diesel Water Saving Measure ID Measure Description Size CAPEX Anual Saving CAPEX (EGP) Saving savings savings savings (tCO2/yr Pre-tax After-tax (EUR) (EGP) (EUR) ) Payback IRR NPV Payback IRR NPV ECM-2 Solar Water Heater 391 m2 622,349 66,948 93,141 10,020 0.0% 12.0% 0.0% 201 6 15.1 4,464 7 12.8 -62,471 ECM-3 Cooling system (Network) 700,000 75,301 129,960 13,980 2.8% 0.0% 0.0% 209 5 19.3 152,630 6 16.4 47,822 ECM-4 Absorption Chillers 7.111 kW 3,555,350 382,460 950,410 102,239 55.0% 0.0% -23.0% 624 3 27.9 2,476,051 4 23.7 1,603,556 Heat recovery system for the central cooling system From Absorption ECM-5 Chiller exhausts for hot water - 380,000 40,878 52,927 5,693 0.0% 5.5% 0.0% 92 6 13.9 -20,382 7 11.7 -56,630 ECM-6 Glazzing and double glass - 560,000 60,241 129,960 13,980 2.8% 0.0% 0.0% 209 4 24.3 274,369 5 20.7 160,069 ECM-7 Reducing water demand - 450,000 48,408 219,894 23,655 0.0% 0.0% 11.5% 111 2 49.0 896,873 2 41.1 669,745 ECM-8 PV pannels 10 kW 227,265 24,448 16,010 1,722 0.3% 0.0% 0.0% 26 11 3.8 -103,834 12 3.1 -107,276 Improvement the efficienciency of the reverse osmosis (RO) desalination ECM-9 plant through a pressure exchanger - 1,200,000 129,088 354,436 38,128 7.5% 0.0% 0.0% 569 3 30.7 1,032,864 4 26.0 698,950

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 86 AF-MERCADOS EMI

11.5 H5-5#318@S (Sharm El Sheikh, 5*, #318)

Baseline EGP 2.897.153 % 56% Electricity kWh 9.197.312 EGP 0,315 /kWh EGP 748.507 % 14% Diesel l 680.461 EGP /l 1,10 EGP 1.570.819 % 30% Water m3 196.352 EGP 8,00 /m3 TOTAL EGP 5.216.479

PERFORMANCE INDICATORS

Occupancy % 52% PAX # 123.604 Cost per PAX EGP 42,2 Electricity per kWh 74,41 PAX NG per PAX kWh 0 Diesel per PAX l 5,51 LPG per PAX kWh 0 Water per PAX m3 1,589

Estimated Estimated CO2 Including Subsidy Estimate Estimated Anual Anual Electricity Diesel Water Saving Measure ID Measure Description Size Pre-tax After-tax d CAPEX CAPEX Saving Saving savings savings savings (tCO2/yr (EGP) (EUR) (EGP) (EUR) ) Payback IRR NPV Payback IRR NPV ECM-1 Fuel switching (from diesel to natural gas) - 2,000,000 215,146 382,311 41,126 0.0% 100.0% 0.0% 408 5 21.6 740,927 5 18.5 380,506 ECM-2 Solar Water Heater 613 m2 974,984 104,882 145,917 15,697 0.0% 16.8% 0.0% 314 6 15.1 6,991 7 12.8 -97,870 Heat recovery at the central cooling system to produce ECM-3 hot water - 202,085 21,739 56,456 6,073 0.0% 6.5% 0.0% 122 3 29.1 155,002 4 24.7 102,557 ECM-5 House settings oppotunities - 150,000 16,136 45,384 4,882 1.4% 0.0% 0.0% 73 3 31.4 135,434 4 26.6 92,430 ECM-6 Improvement of the lighting system in outdoor areas 605 units 49,478 5,323 35,501 3,819 1.1% 0.0% 0.0% 57 1 69.4 123,841 1 57.9 94,787 ECM-7 Improvement of the lighting system in common areas 1512 units 123,696 13,306 88,752 9,547 2.6% 0.0% 0.0% 143 1 69.4 309,600 1 57.9 236,964 ECM-8 Glazzing and double glass windows - 280,000 30,120 75,641 8,137 2.3% 0.0% 0.0% 121 3 28.2 199,637 4 23.9 129,997 ECM-9 Water conservation - 385,000 41,416 127,593 13,726 0.0% 0.0% 7.0% 65 3 31.9 264,944 3 26.8 178,603 ECM-10 Air curtains - 165,000 17,750 75,641 8,137 2.3% 0.0% 0.0% 121 2 44.8 212,057 2 37.6 155,352 ECM-11 PV pannels 15 kW 340,898 36,671 24,015 2,583 0.7% 0.0% 0.0% 39 11 3.8 -155,751 12 3.1 -160,914 ECM-12 Cover for the pools 160,000 17,212 77,039 8,287 0.0% 1.0% 3.8% 53 2 41.2 115,852 2 34.2 82,406

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 87 AF-MERCADOS EMI

11.6 H6-5#364@MA (Marsa Alam, 5*, #364)

Baseline EGP 2.236.338 % 70% Electricity kWh 4.066.070 EGP 0,550 /kWh EGP 252.633 % 8% Diesel l 229.667 EGP /l 1,10 EGP 727.006 % 23% Water m3 90.876 EGP 8,00 /m3 TOTAL EGP 3.215.977

PERFORMANCE INDICATORS

Occupancy % 57% PAX # 152.122 Cost per PAX EGP 21,1 Electricity per kWh 26,73 PAX NG per PAX kWh 0 Diesel per PAX l 1,51 LPG per PAX kWh 0 Water per PAX m3 0,597

Estimated Estimated Estimated Estimated Including Subsidy Anual Anual Electricity Diesel Water CO2 Saving Measure ID Measure Description Size CAPEX CAPEX Pre-tax After-tax Saving Saving savings savings savings (tCO2/yr) (EGP) (EUR) (EGP) (EGP) Payback IRR NPV Payback IRR NPV Centralizing individual cooling system (splits in rooms) with ECM-1 692 kW 1,590,000 171,041 200,362 21,554 7.7% 0.0% 0.0% 184 1 77.4 956,078 1 64.1 738,298 BMS ECM-2 Solar Water Heater 492 m2 782,939 84,223 317,913 34,199 10.6% 14.7% 0.0% 346 2 41.3 1,181,567 3 34.8 862,170 ECM-3 Improvement of the lighting system in common areas 3,064 250,642 26,962 35,682 3,838 1.4% 0.0% 0.0% 33 6 9.1 -50,234 7 7.5 -61,900 ECM-4 Improvement of the lighting system in outdoor areas 4,289 350,899 37,747 49,954 5,374 1.9% 0.0% 0.0% 46 6 9.1 -70,328 7 7.5 -86,661 ECM-5 Improvement the performance of the pumping system - 70,000 7,530 15,700 1,689 0.6% 0.0% 0.0% 14 4 19.9 12,925 5 16.7 4,276 ECM-6 Water conservation - 180,000 19,363 69,632 7,490 0.0% 0.0% 8.3% 35 2 25.9 43,713 2 21.3 24,653 ECM-7 Glazzing and double glass windows - 155,000 16,674 29,307 3,153 1.1% 0.0% 0.0% 27 5 15.5 2,968 5 13.0 -11,053 ECM-8 Cover for the pools - 60,000 6,454 55,843 6,007 0.0% 1.6% 6.1% 36 1 89.0 210,308 1 73.8 163,049

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 88 AF-MERCADOS EMI

11.7 H7-4#140@MA (Marsa Alam, 4*, #140)

Baseline EGP 1.068.297 % 67% Electricity kWh 1.942.358 EGP 0,550 /kWh EGP 159.325 % 10% Diesel l 144.841 EGP /l 1,10 EGP 359.230 % 23% Water m3 44.904 EGP 8,00 /m3 TOTAL EGP 1.586.852

PERFORMANCE INDICATORS

Occupancy % 82% PAX # 87.680 Cost per PAX EGP 18,1 Electricity per kWh 22,15 PAX NG per PAX kWh 0 Diesel per PAX l 1,65 LPG per PAX kWh 0 Water per PAX m3 0,512

Estimated Estimated Estimated Estimated CO2 Including Subsidy Anual Electricity Diesel Water Measure ID Measure Description Size CAPEX CAPEX Anual Saving Saving Pre-tax After-tax Saving savings savings savings (EGP) (EUR) (EGP) (tCO2/yr) (EUR) Payback IRR NPV Payback IRR NPV Centralizing individual cooling system (splits in ECM-1 492 kW 1,129,884 121,545 142,381 15,316 11.5% 0.0% 0.0% 131 1 77.4 679,408 1 64.1 524,650 rooms) with BMS ECM-2 Solar Water Heater 783 m2 1,618,759 174,135 317,151 34,117 15.1% 70.0% 0.0% 451 5 20.5 450,308 5 17.4 188,468 Improvement of the lighting system in common ECM-3 192 units 15,674 1,686 2,231 240 0.2% 0.0% 0.0% 2 6 9.1 -3,142 7 7.5 -3,872 areas Improvement of the lighting system in outdoor ECM-4 447 units 36,572 3,934 5,207 560 0.4% 0.0% 0.0% 5 6 9.1 -7,329 7 7.5 -9,032 areas ECM-5 Cover for the pools - 45,000 4,841 20,340 2,188 0.0% 3.5% 3.3% 21 2 44.2 56,476 2 37.1 41,282 ECM-6 Water conservation - 60,000 6,454 25,890 2,785 0.0% 0.0% 6.2% 13 2 31.3 22,276 2 25.8 14,382 Improvement the performance of the pumping ECM-7 - 65,000 6,992 18,595 2,000 1.5% 0.0% 0.0% 17 3 30.6 66,069 4 26.7 47,224 system

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 89 AF-MERCADOS EMI

11.8 H8-4#313@NRS (Makadi, 5*, #313)

Baseline EGP 1.594.720 % 72% Electricity kWh 5.062.603 EGP 0,315 /kWh EGP 633.201 % 28% Water m3 79.150 EGP 8,00 /m3 TOTAL EGP 2.227.921

PERFORMANCE INDICATORS

Occupancy % 70% PAX # 182.985 Cost per PAX EGP 12,2 Electricity per kWh 27,67 PAX NG per PAX kWh 0 Diesel per PAX l 0,00 LPG per PAX kWh 0 Water per PAX m3 0,433

Estimated Estimated Estimated Estimated CO2 Including Subsidy Measure Anual Anual Electricity Diesel Water Measure Description Size CAPEX CAPEX Saving Pre-tax After-tax ID Saving Saving savings savings savings (EGP) (EUR) (tCO2/yr) (EGP) (EGP) Payback IRR NPV Payback IRR NPV Centralizing individual cooling system (splits in rooms) ECM-1 1184 kW 2,719,919 292,590 196,300 21,117 10.6% 0.0% 0.0% 315 2 46.2 777,599 2 38.8 576,638 with BMS ECM-2 Solar Water Heater 388 m2 803,352 86,419 224,187 24,117 12.1% 0.0% 0.0% 360 3 29.1 614,760 4 24.7 406,558

ECM-3 Improvement of the lighting system in common areas 1,612 131,926 14,192 10,756 1,157 0.6% 0.0% 0.0% 17 10 5.7 -51,705 11 4.8 -55,364

ECM-4 Improvement of the lighting system in outdoor areas 1,612 131,926 14,192 10,756 1,157 0.6% 0.0% 0.0% 17 10 5.7 -51,705 11 4.8 -55,364 ECM-5 Cover for the pools - 100,000 10,757 88,936 9,567 0.5% 0.0% 10.8% 56 1 85.2 331,069 1 70.7 256,193

ECM-6 Improvement the performance of the pumping system - 75,000 8,068 11,832 1,273 0.6% 0.0% 0.0% 19 6 11.3 -9,603 6 9.4 -14,179 ECM-7 Glazing and double glass windows at common areas - 70,000 7,530 22,087 2,376 1.2% 0.0% 0.0% 35 3 30.2 42,945 3 25.4 28,292

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 90 AF-MERCADOS EMI

11.9 H9-5#700@NRSi (Makadi, 5*, #700)

Baseline EGP 2.699.739 % 37% Electricity kWh 8.570.599 EGP 0,315 /kWh EGP 2.206.780 % 30% Diesel l 2.006.164 EGP /l 1,10 EGP 2.427.248 % 33% Water m3 303.406 EGP 8,00 /m3 TOTAL EGP 7.333.767

PERFORMANCE INDICATORS

Occupancy % 94% PAX # 500.456 Cost per PAX EGP 14,7 Electricity per kWh 17,13 PAX NG per PAX kWh 0 Diesel per PAX l 4,01 LPG per PAX kWh 0 Water per PAX m3 0,606

Estimated Estimated Including Subsidy Estimated Estimated Anual Anual Electricity Diesel Water CO2 Saving Measure ID Measure Description Size CAPEX CAPEX Pre-tax After-tax Saving Saving savings savings savings (tCO2/yr) (EGP) (EUR) (EGP) (EUR) Payback IRR NPV Payback IRR NPV Centralizing individual cooling system (splits in rooms) with ECM-1 1157 kW 3,323,721 357,543 239,878 25,804 7.7% 0.0% 0.0% 385 2 46.2 950,220 2 38.8 704,647 BMS ECM-2 Solar Water Heater 2305 m2 3,666,148 394,379 441,768 47,522 0.0% 17.3% 0.0% 952 7 11.4 -600,006 8 9.7 -869,047 ECM-3 Improvement of the lighting system in common areas 10246 units 523,940 56,362 42,719 4,595 1.4% 0.0% 0.0% 69 10 5.7 -205,345 11 4.8 -219,875 ECM-4 Improvement of the lighting system in outdoor areas 6404 units 838,305 90,179 68,350 7,353 2.2% 0.0% 0.0% 110 10 5.7 -328,552 11 4.8 -351,801 Improvement of the insulation of distribution systems and ECM-6 - 1,500,000 161,360 287,938 30,974 0.0% 11.2% 0.0% 620 5 20.0 382,439 5 17.0 146,775 tanks ECM-7 Improvement the performance of the pumping system - 250,000 26,893 46,991 5,055 1.5% 0.0% 0.0% 75 5 15.4 3,481 5 12.8 -18,872 ECM-8 Cover for the pools - 250,000 26,893 177,669 19,112 0.0% 1.5% 4.9% 153 1 68.7 617,710 1 57.4 472,511 ECM-9 Reducing water demand - 175,000 18,825 126,744 13,634 0.0% 0.0% 4.5% 64 1 63.3 212,295 1 52.5 159,806 ECM-10 Glazing and double glass Windows - 240,000 25,818 50,124 5,392 1.6% 0.0% 0.0% 80 4 18.0 26,902 5 15.1 730

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 91 AF-MERCADOS EMI

11.10 H10-5#292@NRS (Sahl Hasheish, 5*,#292)

Baseline EGP 1.509.506 % 56% Electricity kWh 4.792.083 EGP 0,315 /kWh EGP 431.186 % 16% Diesel l 391.988 EGP /l 1,10 EGP 751.811 % 28% Water m3 93.976 EGP 8,00 /m3 TOTAL EGP 2.692.504

PERFORMANCE INDICATORS

Occupancy % 58% PAX # 128.133 Cost per PAX EGP 21,0 Electricity per kWh 37,40 PAX NG per PAX kWh 0 Diesel per PAX l 3,06 LPG per PAX kWh 0 Water per PAX m3 0,733

Estimated CO2 Estimated Estimated Estimated Including Subsidy Anual Electricity Diesel Water Saving Measure ID Measure Description Size CAPEX CAPEX Anual Saving Pre-tax After-tax Saving savings savings savings (tCO2/yr (EGP) (EUR) (EGP) (EUR) ) Payback IRR NPV Payback IRR NPV Centralizing individual cooling system (splits in rooms) with ECM-1 716 kW 2,055,366 221,102 148,339 15,957 8.5% 0.0% 0.0% 238 2 46.2 587,610 2 38.8 435,749 BMS Improvement the performance of the pumping system ECM-2 - 187,650 20,186 39,411 4,240 2.3% 0.0% 0.0% 63 4 18.2 22,071 5 15.2 1,401 (inverter technology) ECM-3 Solar Water Heater 1821 m2 2,896,568 311,593 382,502 41,147 0.0% 37.0% 0.0% 824 7 13.0 -277,993 7 10.9 -529,771 ECM-4 Recover cool air in ventilation systems - 500,000 53,787 174,353 18,756 10.0% 0.0% 0.0% 280 3 35.9 586,607 3 30.4 416,227 ECM-5 Improvement of the lighting system in common areas 1742 units 71,280 7,668 51,144 5,502 2.9% 0.0% 0.0% 82 1 69.4 178,409 1 57.9 136,552 ECM-6 Improvement of the lighting system in outdoor areas 871 units 142,561 15,336 102,287 11,003 5.8% 0.0% 0.0% 164 1 69.4 356,817 1 57.9 273,104 Improvement of the insulation of distribution systems and ECM-7 - 110,000 11,833 45,031 4,844 0.0% 9.0% 0.0% 97 2 41.6 168,145 3 35.1 122,843 tanks ECM-8 Water conservation - 137,000 14,738 59,992 6,454 0.0% 0.0% 6.9% 30 2 44.3 232,313 2 37.3 171,312 ECM-9 Glazing and double glass Windows - 135,000 14,522 30,828 3,316 1.8% 0.0% 0.0% 50 4 20.4 27,511 4 17.1 10,314 ECM-10 Cover for the pools - 80,000 8,606 49,037 5,275 0.0% 0.0% 0.0% 19 1 60.4 217,700 2 50.4 165,671

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 92 AF-MERCADOS EMI

11.11 H11-3#522@NRS (Hurghada, 3*, #522)

Estimated Estimated Estimated Estimated Including Subsidy Measure Anual Anual Electricity Diesel Water CO2 Saving Measure Description Size CAPEX CAPEX Pre-tax After-tax ID Saving Saving savings savings savings (tCO2/yr) (EGP) (EUR) (EGP) (EUR) Payback IRR NPV Payback IRR NPV Centralizing individual cooling system (splits in rooms) with ECM-1 1488 kW 4,273,745 459,740 308,442 49,456 11.5% 0.0% 0.0% 495 2 46.2 1,221,824 2 38.8 906,058 BMS ECM-2 Solar Water Heater 588 m2 988,458 106,332 112,670 11,438 0.0% 38.4% 0.0% 243 8 10.6 -199,491 8 8.9 -264,486 ECM-3 Improvement of the lighting system in common areas 14130 units 71,280 7,668 5,812 825 0.2% 0.0% 0.0% 9 10 5.7 -27,936 11 4.8 -29,913 ECM-4 Improvement of the lighting system in outdoor areas 7841 units 115,267 12,400 10,473 1,334 0.4% 0.0% 0.0% 17 9 7.2 -38,878 10 6.0 -43,334 ECM-5 Cover for the pools - 110,000 11,833 93,170 1,273 0.0% 4.8% 5.7% 70 1 81.3 342,276 1 67.6 264,292 ECM-6 Reducing water demand - 150,000 16,136 94,890 1,736 0.0% 0.0% 6.8% 48 1 61.5 315,579 2 51.4 239,469 ECM-7 Glazing and double glass Windows - 120,000 12,909 16,113 1,389 0.6% 0.0% 0.0% 26 7 7.9 -28,613 7 6.5 -33,286 ECM-8 Improvement the performance of the pumping system - 110,000 11,833 26,854 1,273 1.0% 0.0% 0.0% 43 4 26.6 81,395 4 23.3 55,587

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 93 AF-MERCADOS EMI

12 Annex E: KPIs per square meter

The KPIs used in the hotels sector are related always to the guest per night, due to the main fact that having an empty room or not will change substantially the energy and water consumption. In any case the table below summarize the KPIs per square meter in the hotels visited.

H7- H9- H10- H11- H1-4#369@S H2-5#470@S H3-5#400@S H4-5#500@S H5-5#318@S H6-5#364@MA H7-4#140@MA 4#140@MA 5#700@NRS 5#292@NRS 3#522@NRS

Electricity EGP 2,570,112 4,955,870 4,072,631 5,130,604 2,897,153 2,236,338 611,843 1,594,720 2,699,739 1,509,506 2,314,272 % 48% 55% 62% 62% 56% 70% 67% 72% 37% 56% 61% kWh 8,159,087 15,732,922 12,928,986 16,287,633 9,197,312 4,066,070 1,942,358 5,062,603 8,570,599 4,792,083 7,346,897 EGP /kWh 0.315 0.315 0.315 0.315 0.315 0.550 0.550 0.315 0.315 0.315 0.315 Diesel EGP 618,915 1,677,280 668,898 844,089 748,507 252,633 159,325 0 2,206,780 431,186 252,633 % 12% 19% 10% 10% 14% 8% 10% 0% 30% 16% 7% l 562,650 1,524,800 608,089 767,354 680,461 229,667 144,841 0 2,006,164 391,988 229,667 EGP /l 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 1.10 LPG EGP 0 0 147,032 185,542 0 0 0 0 0 0 0 % 0% 0% 2% 2% 0% 0% 0% 0% 0% 0% 0% kWh 0 0 136,141 171,798 0 0 0 0 0 0 0 EGP /kWh 0.00 0.00 1.08 1.08 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Water EGP 2,125,556 2,308,888 1,647,840 2,079,420 1,570,819 727,006 359,230 633,201 2,427,248 751,811 1,204,141 % 40% 26% 25% 25% 30% 23% 23% 28% 33% 28% 32% m3 265,695 288,611 205,980 259,928 196,352 90,876 44,904 79,150 303,406 93,976 150,518 EGP /m3 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 TOTAL EGP 5,314,583 8,942,038 6,536,401 8,239,656 5,216,479 3,215,977 1,586,852 2,227,921 7,333,767 2,692,504 3,771,046 Est. Surface # 45,000.0 80,000.0 60,000.0 60,000.0 55,000.0 40,000.0 20,000.0 74,000.0 200,000.0 62,000.0 66,000.0 Cost per EGP 118.1 111.8 108.9 137.3 94.8 80.4 79.3 30.1 36.7 43.4 57.1 sqm Electricity kWh 181.3 196.7 215.5 271.5 167.2 101.7 97.1 68.4 42.9 77.3 111.3 per sqm Diesel per l 12.5 19.1 10.1 12.8 12.4 5.7 7.2 0.0 10.0 6.3 3.5 sqm Water per m3 5.9 3.6 3.4 4.3 3.6 2.3 2.2 1.1 1.5 1.5 2.3 sqm

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 94 AF-MERCADOS EMI

13 Annex F: Concentrated Solar Power

Cogeneration Project Items Concentrated Sol a r I n s t a l l e1d0 ,C0a0p0acity (kW) Thermal Load Levelized Cost Distribu on Electricity Levelized Cost Distribu on Operating Load Factor for Cog9e0n%eration Plant 2.48% 16.67% Electricity Efficiency 40% Minor Overhaul T i m e I n t e r1v0a,l0 (0h0rs) 26.29% This sheet calculates for cogeneration plant of Major Overhaul T i m e I n t e r 3v0a,l0 (0h0rs) Concentrated Solar Power Technology rated at Operating Hours p e r y e a r 8,500 9.13% 10 MW. The selling price (levelized cost) is Fuel Minor Overhaul Cost (% of Coge5n% Cost) calculated at 1.125 EGP/kWh for electrical Major Overhaul Cost (% of EG2S0 C%ost) energy and at 10.65 EGP/m3 for desalinated Maintenance Overhaul Suplementary Fuel for Peak Av1a0i%lability water. This selling price would achieve 15% Staff NG Cost (USD/mi l l i o n B t u ) 3.00 IRR. Moreover, the beneficiary hotels would Staff Cogen Cost (USD/ k W ) 6,500 have severe reduction in their carbon foot 4.13% Investment Daily Production o f D e s a l i n a 5t,e0d0 0Water (m3) print. 74.20% Investment Discount Rate 15% Depreciation Peri o d ( y e a r s ) 20 67.10% Escalation Rate for Costs 3% Fuel Escalation Rate 5% Exchange Rate (EG P / U S D ) 6.95 Electricity Escalation Rate 5%

Years Operational Parameters 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Generated Electrical Energy (MWh) 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 7 6,500 Suplementary Fuel Demand of Cogen Plant (million BTU of NG) 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 6 5,261 Generated Water (m3) 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 1,825,000 Minor Overhaul X X X X X X Major Overhaul X X X X Fuel Prices Change (USD/million Btu) 3 .00 3 .15 3 .31 3 .47 3 .65 3 .83 4 .02 4 .22 4 .43 4 .65 4 .89 5 .13 5 .39 5 .66 5 .94 6 .24 6 .55 6 .88 7 .22 7 .58

Chemicals and Maintence for Desal Water Production (EGP/m3) 1 .50 1 .55 1 .59 1 .64 1 .69 1 .74 1 .79 1 .84 1 .90 1 .96 2 .02 2 .08 2 .14 2 .20 2 .27 2 .34 2 .41 2 .48 2 .55 2 .63 Years Operational Expenses (EGP) 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Investment Cost (451,750,000) Investment Dedic a t e (3d6 t1o, 4E0le0c,t0r0ic0i)ty Generation Investment Dedic a t e d (9 t0o,3 T5h0e,r0m00a)l Generation Electricity Generation Fuel Cost 1,595,025 1,674,776 1,758,515 1,846,441 1,938,763 2,035,701 2,137,486 2,244,360 2,356,578 2,474,407 2,598,128 2,728,034 2,864,436 3,007,658 3,158,040 3,315,942 3,481,740 3,655,827 3,838,618 4,030,549 Minor Overhaul - 19,170,463 - - - 21,576,525 - - - 24,284,569 - 25,763,499 - - - 28,997,045 - - - 32,636,430 Major Overhaul - - - 81,351,777 - - - 91,562,141 - - - - - 1 09,329,985 - - - 1 23,051,862 - - Staff Cost 3,000,000 3,090,000 3,182,700 3,278,181 3,376,526 3,477,822 3,582,157 3,689,622 3,800,310 3,914,320 4,031,749 4,152,702 4,277,283 4,405,601 4,537,769 4,673,902 4,814,119 4,958,543 5,107,299 5,260,518 Total Costs 4,595,025 23,935,239 4,941,215 86,476,399 5,315,289 27,090,048 5,719,643 97,496,123 6,156,889 30,673,296 6,629,877 32,644,235 7,141,718 1 16,743,244 7,695,810 36,986,890 8,295,859 1 31,666,231 8,945,917 41,927,497 Desalinated Water Generation Maintenance Cost 2,737,500 2,819,625 2,904,214 2,991,340 3,081,080 3,173,513 3,268,718 3,366,780 3,467,783 3,571,817 3,678,971 3,789,340 3,903,020 4,020,111 4,140,714 4,264,936 4,392,884 4,524,670 4,660,411 4,800,223 Staff Cost 1,500,000 1,545,000 1,591,350 1,639,091 1,688,263 1,738,911 1,791,078 1,844,811 1,900,155 1,957,160 2,015,875 2,076,351 2,138,641 2,202,801 2,268,885 2,336,951 2,407,060 2,479,271 2,553,650 2,630,259 Total Costs 4,237,500 4,364,625 4,495,564 4,630,431 4,769,344 4,912,424 5,059,797 5,211,591 5,367,938 5,528,976 5,694,846 5,865,691 6,041,662 6,222,912 6,409,599 6,601,887 6,799,944 7,003,942 7,214,060 7,430,482 FCF ( 903,500,000) 1 7,665,050 5 6,599,729 1 8,873,558 182,213,659 2 0,169,266 6 4,004,944 2 1,558,879 205,415,428 2 3,049,654 7 2,404,544 2 4,649,445 7 7,019,852 2 6,366,760 245,932,311 2 8,210,817 8 7,177,554 3 0,191,605 277,340,346 3 2,319,954 9 8,715,958 TIR 5.4% NPV ( 422,877,157)

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 95 AF-MERCADOS EMI

SUSTAINABLE ENERGY OPPORTUNITIES AT THE HOTEL SECTOR IN EGYPT – DRAFT FINAL REPORT 96