Egypt Power Report – 2020
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About African Energy Reports
Egypt Power Report 2020 is the third in a series of comprehensive studies on key energy industry segments presented by African Energy ’s consultancy group.
The reports are intended to provide executives, Egypt Power Report – 2020 financiers, investors, policy-makers and other Published February 2020 stakeholders with a concise but authoritative document that provides an overview of a country’s politics and risk profile, and of the major macroeconomic and business trends that impact DRaevpido Srltaste rEditor [email protected] on projects. The reports provide data to illustrate and analysis to aid understanding of critical
JCohonn Htraibmuiltoonr, s Ajay Ubhi questions for the energy industry. Daniel Westbury-Haines About African Energy
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2 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Contents
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY ...... 12
COUNTRY SNAPSHOT ...... 15
2. RISK MANAGEMENT REPORT ...... 16
3. POLITICAL OVERVIEW ...... 18 3.1 Structure of government ...... 18 - Political ...... 18 system - April 2019 constitutional changes ...... 18 - Authoritarian trend ...... 18 3.2 Key actors ...... 19 - President Abdel Fattah El Sisi ...... 19 - Prime Minister Mostafa Kamel Madbouly ...... 20 - Minister of electricity and renewable energy Mohammed Shaker El Markabi ...... 20 - Deputy minister of electricity and renewable energy Osama Ali Asran ...... 21 - First under-secretary for research, planning & authorities follow-up Mohamed Mousa Omran ...... 21 - Egyptian Electricity Holding Company chairman Gaber Desouky ...... 21 - Egyptian Electricity Transmission Company chairwoman Sabah Mashaly ...... 21 - Electricity Utility Regulatory Authority CEO Mohamed Abdel Aziz Hassan Abdel Rahman ...... 22 - New and Renewable Energy Authority executive chairman: Mohammed El-Khayat ...... 22 3.3 Overview of main political parties ...... 22 - Governing party: Independents and Sisi loyalists ...... 22 - Main opposition: Civil Democratic Movement ...... 23 - Other parties ...... 23 3.4 Elections ...... 23 - Electoral system ...... 23 - Previous election ...... 23 - Next election ...... 23 3.5 Major policy initiatives ...... 23 3.6 Corruption ...... 24 - Transparency International rating ...... 25 - Major corruption concerns ...... 25 3.7 Security risks ...... 25 - Risk of terrorism ...... 25 - Risk of ethnic/tribal conflict ...... 26 3.8 Recent major developments ...... 26
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 3 Contents
4. MACROECONOMIC OVERVIEW ...... 27 4.1 Overview ...... 27 4.2 GDP ...... 28 - Trends/projections ...... 28 - Breakdown of economy by sector ...... 28 4.3 Inflation ...... 28 4.4 Current account ...... 29 4.5 Balance of payments ...... 29 4.6 Public debt ...... 30 - Risk of debt distress ...... 30 - Debt-to-GDP ...... 30 - Debt service as percentage of exports ...... 30 - Major creditors ...... 30 4.7 Credit ratings ...... 31 4.8 Exchange rates ...... 31 4.9 Key lending rates ...... 32 4.10 Foreign reserves ...... 32 4.11 Liquidity of local markets ...... 32 4.12 WBG Ease of Doing Business ...... 32 4.13 Major economic strategies ...... 33 - Economic reform programme ...... 33 - Flagship infrastructural initiatives ...... 34 ------Suez Canal Corridor Area Project ...... 34 ------New capital of Egypt ...... 34 4.14 Major recent developments ...... 35
5. POWER SECTOR OVERVIEW ...... 36 5.1 Overview ...... 36 5.2 Market structure ...... 37 - Future developments ...... 38 5.3 Profiles of institutions ...... 38 - Ministries ...... 38 ------Ministry of Electricity and Renewable Energy ...... 38 - Utilities ...... 38 ------Egyptian Electricity Holding Company (EEHC) ...... 38 ------Egyptian Electricity Transmission Company (EETC) ...... 38 ------New and Renewable Energy Agency (NREA) ...... 39
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------Egyptian Natural Gas Holding Company (Egas) ...... 39 ------Egyptian General Petroleum Corporation (EGPC) ...... 39 - Regulators ...... 39 ------Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) ...... 39 5.4 Market operation ...... 40 5.5 Sector history ...... 40 - Ownership and organisation history ...... 40 - EEHC five-year plans ...... 41 ------7th Five Year Plan (2012-2017) ...... 41 ------8th Five Year Plan (2017-2022) ...... 42 ------9th Five Year Plan (2022-2027) ...... 42 - Role of IPPs ...... 42 5.6 Regional electricity trade ...... 42 5.7 Financial health of the electricity supply industry ...... 43 5.8 Main consumers of electricity ...... 43
MAP: ELECTRICITY INFRASTRUCTURE ...... 44
6. POWER SECTOR POLICY AND REGULATION ...... 46 6.1 Overview ...... 46 6.2 Major legislation ...... 47 - Egyptian Electricity Law, 87/2015 ...... 47 - Executive Regulation 230/2016 to the Electricity Law 87/2015 ...... 47 - Renewable Energy Law, 2014 ...... 47 - Ministry of Finance Law, 2013 ...... 48 - Grid Codes ...... 48 6.3 Sector plans ...... 48 - Egypt Vision 2030 ...... 48 - New and Renewable Energy Strategy ...... 49 - Integrated Sustainable National Energy Strategy to 2035 ...... 49 6.4 Legal requirements ...... 50 - Generation ...... 50 - Transmission ...... 50 - Distribution ...... 50 - Local content ...... 50 6.5 Procurement ...... 51 - Feed-in tariff ...... 51 - Competitive BOO auctions ...... 52
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 5 Contents
- Net-metering ...... 52 6.6 Tariffs ...... 52 - Retail ...... 52 - Latest tariff change ...... 52 6.7 Sector programmes ...... 53 - Fiscal Consolidation, Sustainable Energy and Competitiveness ...... 53 6.8 IPP environment ...... 53 6.9 Sovereign guarantees ...... 53
7. FROM THE NEWSLETTER ...... 54
8. RESOURCE AVAILABILITY ...... 56 8.1 Overview ...... 56 8.2 Natural gas ...... 56 - Main sources of gas supply ...... 57 - Gas infrastructure ...... 57 ------Domestic pipelines ...... 57 ------Regional pipeline interconnections ...... 58 ------LNG terminals ...... 58 - Recent gas bid rounds ...... 58 - Ongoing gas expansion projects ...... 59 ------Natural Gas Connection Project ...... 59 ------Cairo and Giza Natural Gas Network Expansion ...... 59 - Imports ...... 59 - Exports ...... 60 - Gas regulation and prices ...... 60 8.3 Solar ...... 61 8.4 Wind ...... 61
MAP: WIND AND SOLAR RESOURCES ...... 41 8.5 Hydro ...... 62 8.6 Geothermal ...... 62
MAP: NATIONAL OIL AND GAS FIELDS AND INFRASTRUCTURE ...... 63
MAP: OIL AND GAS IN THE NILE DELTA, WESTERN DESERT ...... 64
MAP: OIL AND GAS IN THE RED SEA ...... 65
9. COMPETITIVE LANDSCAPE ...... 66 9.1 Overview ...... 66
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9.2 Project profiles: Landmark power projects ...... 66 - First IPP: Sidi Krir Gas, HFO III and IV ...... 66 - Largest power plants: Siemens CCGT gas plants ...... 67 ------Privatisation of Siemens’ 14.4GW gas-fired plants ...... 67 - Benchmark wind PPA: Engie Gebel El Zeit Wind ...... 68 - Benchmark solar PPA: Kom Ombo Solar PV I ...... 68 - First Benban solar plant: Infinity 50 Consortium Benban 5-1 Solar PV ...... 69 - Largest state-owned plant: Giza North Gas, LFO ...... 69 - Largest hydroelectric plant: High Dam Hydro ...... 70 - Largest Emergency Power Boost Programme plant: West Assiut Gas, LFO ...... 70 - Benban solar park ...... 71 9.3 Project profiles: Under construction generation projects ...... 71 - Cairo West Gas, HFO II Extension ...... 71 - Assiut El Walidia HFO III ...... 71 - Lekela West Bakr Wind ...... 72 9.4 Project profiles: Selected planned generation projects ...... 73 - Abyodos Kom Ombo Solar PV ...... 73 - Amunet Ras Ghareb Wind ...... 73 - Dabaa Nuclear ...... 74 - Edison/Qalaa Abu Qir Gas ...... 75 - Gulf of Suez Wind I ...... 75 - Hurghada Solar PV ...... 76 - Luxor Gas ...... 76 - New Damanhour Gas II ...... 77 - Zafarana Solar PV ...... 78 8.4 Company profiles: Selected key developers ...... 78 - Access Infra Africa ...... 78 - Acwa Power ...... 78 - Amea Power ...... 78 - Elsewedy Electric ...... 78 - Engie ...... 78 - Lekela Power ...... 79 - Orascom Construction Industries ...... 79 - Scatec Solar ...... 79 - Siemens ...... 79 8.5 Selected key financiers ...... 79
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 7 Contents
- Arab African Development Bank (AAIB) ...... 79 - Arab Fund for Economic and Social Development (AFESD) ...... 79 - European Bank for Reconstruction and Development (EBRD) ...... 79 - KfW ...... 80 - National Bank of Egypt (NBE) ...... 79 - World Bank Group ...... 80
10. TRANSMISSION AND DISTRIBUTION ...... 82 10.1 Overview ...... 82 10.2 Interconnections ...... 82 - Power pools ...... 83 - Imports/exports ...... 83 10.3 T&D losses ...... 83 10.4 Planned grid improvements ...... 83
11. OFF-GRID ...... 85 11.1 Overview ...... 85 11.2 Electrification & access rates ...... 85 11.3 Regulation ...... 85 - Licensing and power purchase agreements ...... 85 11.4 Selected off-grid players/initiatives ...... 86 11.5 Barriers to entry ...... 86
12. DEMAND AND SUPPLY OUTLOOK ...... 87 12.1 Overview ...... 87 12.2 Demand projections ...... 88 12.3 Commissioning policy ...... 88 12.4 Decommissioning policy ...... 88 12.5 Reshaping the network ...... 91 12.6 Generation outlook ...... 91 - Medium-term outlook, 2020-2027 ...... 91 - Long-term outlook, 2028-2035 ...... 92 12.7 Reserve margins and surplus power ...... 93 12.8 Thermal additions and decommissioning ...... 94 12.9 Export options ...... 94 12.10 Conclusion ...... 95
13. DATA TABLES ...... 96 - Methodology ...... 96
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- Installed capacity, RE vs non-RE, 2010-2024 (MW & %) ...... 96 - Installed capacity by fuel type, 2010-2024 (MW) ...... 97 - Installed capacity by fuel type, 2010-2024 (%) ...... 97 - Installed capacity, liquid fuels breakdown, 2010-2024 (MW) ...... 98 - Installed capacity, liquid fuels breakdown, 2010-2024 (%) ...... 98 - Installed capacity by technology type, 2010-2024 (MW) ...... 99 - Installed capacity by technology type, 2010-2024 (%) ...... 99 - Installed capacity by ownership type, 2010-2024 (MW) ...... 100 - Installed capacity by ownership type, 2010-2024 (%) ...... 100 - Installed capacity by governorates, 2010-2024 (MW) ...... 101 - Installed capacity by governorates, 2010-2024 (%) ...... 102 - Installed capacity by fuel, Alexandria, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, Assiut, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, Aswan, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, Cairo, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, Dakhalia, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, Damietta, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, El Beheira, 2010-2024 (MW) ...... 103 - Installed capacity by fuel, Giza, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Ismailia, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Kafr El Sheikh, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Matruh, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Minya, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, North Sinai, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Port Said, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Qalyubia, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Qena, 2010-2024 (MW) ...... 104 - Installed capacity by fuel, Red Sea, 2010-2024 (MW) ...... 105 - Installed capacity by fuel, South Sinai, 2010-2024 (MW) ...... 105 - Installed capacity by fuel, Suez, 2010-2024 (MW) ...... 105 Project listing ...... 106 - Operating ...... 106 - Under construction ...... 110 - In development ...... 111 - Planned ...... 111
ANNEX 1 – TARIFF SCHEDULE ...... 112
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 9 1. Executive summary
The Egyptian power sector is viewed as an attractive destination for investment due to a relatively stable government, economy and policy direction. However, a number of underlying tensions and challenges mean that long-term investments in the country are far from being risk-free. Egypt Power Report 2020 outlines the market’s attractions and downsides for power developers, financiers and other industry stakeholders.
Sisi tightens his grip as discontent simmers Following a leadership merry-go-round – which began with the dramatic ousting of President Hosni Mubarak in 2011 and ended with the military coup which deposed the democratically-elected and first ever Islamist leader, Mohammed Morsi – the former general turned president, Abdel Fattah El Sisi, has recreated a highly authoritarian and military-led form of governance whose foundations are security, control and economic efficiency rather than popular or democratic support.
This does not mean that President Sisi has – or had – no base. It is true that his two presidential election victories in 2014 and 2018 were both formalities as no serious opposition was permitted but even so, there is believed to be a substantial minority of the population whose preference is for competent authoritarianism over what they view as incompetent and potentially radical popular Islam. The July 2013 coup which brought Sisi to power was supported by mass demonstrations. The social compact on which Sisi’s rule depends is thus identical to that which sustained Mubarak, Anwar Sadat and Gamal Abdel Nasser before him – that is the exchange of democratic freedoms for security and economic well- being.
For now, any threat to the current political settlement is unlikely to come from a resurgence of the popular Islamic movement. Millions would likely support such a movement if it emerged, but Sisi has crushed the Muslim Brotherhood (al-Ikhwan al-Muslimeen) and there is no other focus around which popular discontent can organise itself.
An unbalanced social contract? However, this does not mean that there will be no consequences should the authorities fail to deliver their side of the bargain – namely guaranteeing the economic well-being of the wider population. President Sisi is under pressure both from within the system and from a restive and frustrated population.
In the past five years, President Sisi has pushed through an impressive raft of macro-economic reforms in parallel with a statist and military-led re-energising of the command economy (the development of the Suez Canal Economic Zone being one such example).
According to its own parameters, the November 2016 to November 2019 International Monetary Fund (IMF) Extended Fund Facility (EFF) has succeeded. The devaluation of the Egyptian pound and cuts in subsidies and other spending have opened space for investment. While a great deal more structural reform is needed, at the end of 2018 foreign reserves were 19% of GDP. The government is targeting growth of 6-7% in the 2019/2020 fiscal year, while the IMF is forecasting growth of 5.9%. All three big credit rating agencies have issued upgrades between 2018-2019.
10 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Executive summary
While this performance has won the confidence of multilateral financial institutions and foreign investors, the immediate effect has been a fall in living standards. Between 2015 and 2018 the proportion of Egyptians living below the poverty line increased sharply. This means that not only are the benefits of reform not being felt, the reforms are actually causing pain. This is the driver behind the re-emergence of popular protest.
Underlying pressures A campaign of mass arrests quickly shut down the street demonstrations which flared up in September 2019 following the dissemination on social media of allegations that members of President Sisi’s close circle had enriched themselves via a lavish programme of presidential palace building. The government also eased up on some price rises and austerity measures to ease growing discontent. The first inchoate rumours of disquiet within the top ranks of the military following these protests suggest that the President is neither impregnable nor all-powerful, despite the constitutional changes passed in April 2019 which allow him to stay in power until 2030. If President Sisi cannot neutralise the source of popular anger, he could face a challenge from within, rather than from outside, the ruling structures. He may also find himself confronting the kind of leaderless social media-inspired protest that have destabilised Algeria, Sudan, Hong Kong and even some Western democracies.
Neither of these kinds of challenge would necessarily alter the system of governance. However, both could result in a less liberal outlook towards foreign investors and a reconsideration of policies such as the liberalisation of markets, including the electric power market. Alternatively, by stifling dissent while adopting more popular economic policies Sisi could ride out this period of dissatisfaction, particularly if he can find ways of better sharing the benefits of economic reform. In this latter case, the pace of reform would also be likely to slow down. These factors have contributed to African Energy issuing Egypt a ‘D’ rating for political risk, with a deterioration in ‘democratic accountability’ being offset by improvements in macroeconomic conditions.
Power sector context The political imperative to avoid blackouts and to ensure the consistent availability of electric power at peak times has been a defining feature of the Sisi presidency. The collapse of the Mubarak regime and the brief rise and fall of the Brotherhood’s Mohamed Morsi took place against a backdrop of a severe energy crisis.
The long-term mismanagement of the gas production and export industry meant that by 2012 Egypt not only had to cease gas exports, it also had insufficient production to supply domestic industry and power generation. The related balance of payments crisis made it difficult to import replacement liquid fuels. Morsi’s failure to respond to these economic challenges (conspiracy theorists have alleged that his opponents – not least in the military – may have covertly exacerbated the difficulties) was an important factor behind his downfall. It is certainly the case that after taking control in July 2013, the military swiftly resolved the most debilitating aspects of the power supply crisis. Policies to guarantee sufficient domestic gas supply and a generous reliable reserve margin for power generation have remained at the top of the agenda ever since.
Priority one: massive procurement of generation capacity The procurement drive opened with an emergency Fast Track programme to install 4,736MW of gas- fired generation capacity to meet expected demand peaks during the summer of 2015. Earlier that year in March 2015, the government had attracted billions of dollars of private sector investment pledges
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 11 Executive summary
across every sector of the economy with power supply at the forefront. The most effective programmes to emerge from this were the 1.44GW solar feed-in tariff (FiT) scheme at the Benban solar park, and a large scale tendering process for wind projects on the Gulf of Suez.
In June 2015, President Sisi oversaw the signing of an $8.1bn agreement with Germany’s Siemens for the installation of three vast gas-fired combined cycle gas turbine (CCGT) plants totalling 14.4GW. At the time there was no solid evidence that improved incentives for upstream exploration would restore domestic gas production in time to provide feedstock to the plants. Eni’s discovery of the giant 2.7bcf/d offshore Zohr field two months later virtually guaranteed the success of the government’s plans to restore gas-fired baseload capacity. As this report went to press, the government was in talks with international investors about the multibillion-dollar sale of Siemens’ three gas-fired power plants in what could be one of the biggest privatisations in Africa in any sector.
Priority two: structural reform Parliament also passed an electricity law in 2015, which provided the basis for the gradual unbundling of the transmission system operator and distribution subsidiaries from the heavily indebted state-owned utility Egyptian Electricity Holding Company (EEHC); the removal of barriers to IPP entry; abolition of costly subsidies; and divison of the supply sector into regulated and unregulated markets. The result is that installed capacity almost doubled from 30.9GW at end-2014 to 59.9GW by end-2019. With a generous reserve margin of 83% in place, the obsession for installing new power capacity by any means has been replaced by a policy of least-cost expansion.
No new gas capacity will be added during EEHC’s current five year plan (2017-2022); the focus is entirely on renewables. The government is also attempting to realise a fresh ambition to become a tri-continental hub for power exports, with interconnections planned to facilitate trade throughout North Africa, sub- Saharan Africa, the Gulf, and even Europe via an interconnection with Cyprus.
A recovery in gas production There remain significant unexploited natural resources in Egypt, both in oil and gas and renewable energies. The development of numerous gas fields has helped put Egypt on course to being a net exporter of natural gas after several years of being dependent on liquefied natural gas (LNG) imports.
The discovery of 16 gas fields in 2017/18 in the Western Desert and Nile Delta have helped satisfy the rising use of gas as a source of power generation – the sector now consumes 63% of domestic gas use as power generation moves away from liquid fuel. Parallels can be drawn between regulatory trends in the gas and power sectors; wide-ranging legislation introduced in 2017 has helped liberalise the natural gas market to reduce the burden on state entities.
Push for increased renewables Despite having a reserve margin of around 83% – which many argue represents significant over- capacity – futher capacity additions are expected in the medium-term as the government targets up to 47% of generation from renewable sources by 2035 (compared to 6% currently).
With demand expected to reach 70-85GW by 2035, the government’s long term plan implies that generation capacity could be expanded to 160GW. This would represent a reserve margin of 87% by this time, far in excess of the more modest target of 20%-30% recommended in 2015. Whether Egypt will require such a large reserve margin, or have an export market for this surplus power, will be just two of the questions which will determine government policy in this area over the coming years.
12 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Country snapshot
Arab Republic of Egypt
Capital Cairo
Population 96.98m (2018)
Area 1,010,408km 2
Official language Arabic
Head of government President Abdel Fattah El Sisi
Economy
Egyptian pound Currency (subunit: 1/100 piastres) $1=E£16.0 as of 1 January 2020
GDP (nominal) $249.56bn (2018)
GDP growth rate 5.31% (2018)
Inflation (y-o-y) 14.4% (2018)
Power sector
Installed generation 59,885MW (December 2019) capacity
Installed IPP capacity 3,815MW (December 2019)
Peak load 30,800MW (2018)
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 13 2. Risk Management Report
Overview Political risk rating • Egypt’s negative risk rating reflects the D increasingly authoritarian leadership of the Abdel Risk grade Fattah El Sisi regime, threats to government 63/100 stability and lingering credit risk. Democratic accountability Ei • While Sisi has made several moves to Stability and violence D consolidate power in the short-term, the long- Governance E term outlook for stability is somewhat bleaker, with legitimate threats from the military, civil unrest Investment risk Dh and terrorist-related political violence. Methodology • Democratic plurality and political opposition are African Energy’s political risk rating is based on an virtually non-existent, reducing leadership analysis of four categories relating to risk: 1. Democratic accountability. accountability; 2. Stability and violence; 3. Governance; and 4. Investment risk. • The implementation of the IMF-supported For each category, a country is awarded a grade of A-F, economic reform programme has resulted in with A being lowest risk (most positive) and F the improving macroeconomic conditions, helping highest risk (the most negative). Any trends are displayed in an upwards ( ) or downwards ( ) arrow. reduce overall investment risk. h i Each of the four categories are weighted equally, with a • Egypt’s credit ratings are also good by country being given an overall grade of A-F and a score continental standards. However, the risk of of 1-100 (with 1 being lowest risk and 100 the highest risk). These ratings are based on global standards. expropriation remains due to high levels of an The four categories are scored based on the following unaccountable executive power. criteria: 1. Democratic accountability Democratic accountability a. Threat of military intervention in government • : Egypt’s b. Press and other freedom of expression Threat of military intervention military is highly influential in the political sphere, c. Electoral fairness at national and local level and President Sisi’s control over factions within 2. Stability and violence the military is not entirely clear, meaning there is a. Threats to government stability through civil unrest of political violence a non-negligible threat of a challenge to his rule b. Presence of internal conflicts from within the military. c. Threat of terrorism • : Freedom of expression has 3. Governance Press freedoms worsened considerably in recent years. The a. Corruption landscape is dominated by pro-government b. Independence of the judiciary publications, which have increased in number due c. Government effectiveness to acquisitions by pro-government businessmen. 4. Investment risk a. Expropriation/breach of contract risk • : President Sisi led a military Electoral fairness b. Transfer and convertibility risk ousting of Egypt’s first democratically elected c. Commercial risk leader, Mohamed Morsi. He has won two
14 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Section
3. Political overview
3.1 Structure of government Political system: An executive presidency dominated by the military
• As president, Sisi acts as an autocratic ruler, following in the footsteps of other military-backed leaders throughout Egypt’s post-independence history.
• The president appoints both the prime minister – with whom the head of state officially shares executive powers – and the cabinet. In practise, the PM and ministers are appointed at the president’s whim.
April 2019 constitutional changes
• Constitutional amendments approved in April 2019 awarded additional authority to the already powerful president, and to the military, while weakening the powers and independence of the judiciary.
• The presidential term was extended from four to six years and the incumbent was permitted to run again in 2024. Sisi could hold office until 2030 when he will be 75 years old.
• The military was named as the guardian of the constitution and democracy, a role which some critics said would potentially put it above the law.
• Military courts were given broader rights to try civilians, while the president secured greater rights to appoint judges and prosecutors.
• The size of the lower house of parliament (Majlis al-Nuwab) was reduced, while the upper house (Senate or Majlis as-Shura) was recreated and will reconvene following elections in April 2020. A corrupt and nepotistic body, the former Senate was abolished in post-2011 constitutional revisions. The resuscitated assembly, whose members will be protected by full immunity, is more likely to serve as a useful vehicle for patronage than a meaningful check on executive power.
• In an April 2019 referendum, the constitutional amendments were approved by 89% of votes on a turnout of 44%. While the turnout was similar to that in the seminal 2012 vote which brought Morsi to power and in which voters queued into the evening, polling stations were sparsely attended.
Authoritarian trend
• The constitutional amendments formalised an already well-established authoritarian tendency. In recent years, the security forces have acted outside the rule of law.
• For instance, in the aftermath of the 2013 ousting of former president Morsi, hundreds of protestors were killed and thousands more Muslim Brotherhood (MB) supporters were imprisoned.
• In January 2016, parliament approved an anti-terrorism law which protects police over the use of ‘proportionate use of force’ and allows the authorities to fine journalists who contradict official accounts of terrorist attacks.
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 15 SPeoclittiiocns
• Legislation introduced in 2017 gave the president power of appointment to key judicial bodies: the State Lawsuits Authority, Administrative Prosecution, and the Court of Cassation and State Council. The constitutional changes have now increased that power.
• The state of emergency, first declared in April 2017 and extended for the tenth time by presidential decree in October 2019, grants authority to government-controlled Emergency State Security Courts.
• Sisi secured his second presidential term in 2018 with a 97.08% majority. His only opposition was the pro-Sisi Ghad Party chairman Moussa Mostafa Moussa. Other genuine opposition candidates were disqualified (notably former PM and 2012 presidential candidate Ahmed Shafik) or withdrew.
• The ousted president Mohammed Morsi died on 17 June 2019 while standing trial. Morsi was found guilty of several charges including detention and torture of protestors, leading an illegal group, insulting the judiciary, and conspiring to commit terrorist acts with foreign organisations to undermine national security. He was also sentenced to death after being found guilty of colluding with foreign militants to organise mass prison breaks during the 2011 Egyptian Revolution. The sentence was quashed by an appeals court in 2016 and a retrial ordered.
• Unexpectedly large street demonstrations flared up in September 2019 following allegations of corruption in the close circle of the President. The regime squashed this renewed dissent by imprisoning more than 4,000 activists, journalists and lawyers. They joined tens of thousands of already incarcerated political opponents.
• The Islamist/Jihadist insurgency in Northern Sinai continues despite military and police operations. UK flights to the Sharm el-Sheikh resort in southern Sinai resumed in November 2019. It is protected by a ring of steel.
3.2 Key actors President: Abdel Fattah El Sisi (since June 2014)
• President Abdel Fattah El Sisi served in the Egyptian military from 1977-2014. He graduated from the military academy and was later sent to US and UK war colleges. He held various brigade and divisional commands. His most senior role was director of the Military Intelligence and Reconnaissance Department.
• For most of his career he attracted little public attention. When the Supreme Council of the Armed Forces (Scaf) assumed control of the transition after the fall of President Mubarak in February 2011, Sisi was one of its 25 members. In one of his first acts in June 2012, President Morsi dissolved the Scaf. Two months later, he made Sisi minister of defence.
• One year later in August 2013, Sisi took advantage of widespread popular protests to stage a military coup against Morsi.
• Sources have told African Energy that Sisi was the driving force behind Morsi’s overthrow, canvassing senior officers and promising them either gilded retirements or important new posts. Keeping his military/security allies on board as his personal style of rule gets ever more entrenched remains a key key issue for Sisi.
• In 2014, he was elected president with 96.91% of the vote. In 2018 he was re-elected with a 97.08% majority.
16 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Section
5. Power sector overview
5.1 Overview Key sector statistics Egypt’s electricity supply industry (ESI) is currently vertically integrated, with the Egyptian Electricity Installed capacity: 59,885MW (December 2019) Holding Company responsible for the majority of of which IPPs : 3,815MW (December 2019) generation, transmission and distribution. Peak load : 30,800MW (2018) • This is changing however, and the sector has entered a gradual phase of transition, Supply : 196,760GWh (2018) implemented through the Electricity Law 87/2015. No. of customers : 35.1m This law has started the unbundling of the sector and a reduction in costly government subsidies. Network losses : 14.5% (2018)
• Subsidy reform has progressed gradually over Market structure : Vertically integrated (transitioning to several years and the largest consumers of power semi-unbundled) no longer receive any subsidy. Average cost of production : 8.4US¢/kWh (est. 2018) • Despite the ongoing changes, a history of high Average consumer tariff : 5US¢/kWh (est. 2019) generation costs, long-term government
Egypt’s existing electricity supply industry market structure
Egyptian Electric Utility and Ministry of Electricity and Governance & Consumer Protection Regulatory Renewable Energy regulation Agency (EgyptERA) i
Generation Imports EEHC NREA IPP BOOT
i i Transmission/ Egyptian Electricity Transmission Company (EETC) offtaker i Distribution Nine distribution companies EEHC
i Residential, icommercial and i Exports HV customers Consumers industrial
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 17 6. Power sector policy & regulation
6.1 Overview The ongoing liberalisation of Egypt’s power market has introduced a variety of investor-friendly mechanisms designed to improve the operating environment for IPPs.
The government holds long-term ambitions to become a regional hub of power transactions in North Africa – outlined in Egypt’s overarching Vision:2030 – and plans are being mobilised with a host of policy and regulatory changes, largely passed between 2012 and 2015, resulting in a gradual phase out of the traditional single-buyer model and dominant state-led monopolies.
This change is being enacted through the passage of major reformative legislation such as the Electricity Law 87/2015, which initiated the shift towards liberalisation and unbundling of state utilities and laid the groundwork for Egypt to create a more competitive environment for generation and distribution.
In addition to broad stroke reformations to the structure of the sector, substantial reforms have also been focused on the regulatory space to encourage private sector participation – namely through feed- in tariffs, licensing, sovereign guarantees, and other investor support mechanisms.
However, now that the market is buoyed by a healthy power supply surplus, the policy direction has shifted away from large-scale generation increases towards long-term projects for baseload power, with minimising costs now at the forefront of the decision-making process.
Table 5: Legislation governing the Egyptian power sector e y e y t g c r r n t n n e o a n n n n t o r e n i o i e r o c o i a d i e s i c i t s
a t e t i u s r m f s f u i e e s f a a g f l l i
n g l P r
b r - e i c m b e o u e f n
P r t a r f s I u a t i g y n g T a i n v s O e N e g w v i e a r i n e R r r G r D e E n T e P n v e E o R S
Egyptian Electricity Law, No. 87, 2015 X X X X X X X X
Renewable Energy Law, Law No.203, 2014 X X X
Grid Codes X X
Circular No.1/2013 Net Metering X X X X
Ministry of Finance Law, Law No.14 2013 X
Environment Law, No.4, 1994 X
Source: Various
18 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Section
8. Resource availability
Key resources statistics
Oil : 670,000b/d (production ), 400m bbl (reserves ) Hydro potential : 50,000GWh Gas : 5.3bcf/d (production ), 75.5tcf (reserves ) Wind potential : 10.5m/s (100 metres) Geothermal potential : unknown Solar potential : 2,208-2,554kWh/m 2/yr
8.1 Overview Egypt has significant resource potential in each of oil, gas, wind, solar and hydro.
In relation to gas, the 21.5trn cubic feet (tcf) Zohr field in the Mediterranean and gas agreements with Israel and Cyprus are indicative of ambitious plans to grow into a regional gas an oil hub.
Egypt is a significant oil producer at around 670,000 barrels per day (b/d) in 2018, equal to 0.7% of global oil production. Much of Egypt’s 400m tonnes of proven reserves are concentrated in oil fields in the North-west (onshore) and the Red Sea (offshore).
However, with the discovery of major new oil fields and a resurgence in investment in the oil and gas sector over the past half decade, dual-fuel power generation that is dependent partly on liquid fuels are gradually being reduced in favour of single-fuel gas-fired generation.
Geothermal potential is also being explored. However, Egypt is lacking natural resources for planned nuclear and coal generation, which will use imported fuel.
8.2 Natural Gas • Domestic proven natural gas reserves are estimated at 75.5tcf, with sales gas during FY2017/18 an estimated 5,285mcf/d.
• In October 2018, after several years being a net importer of gas, Egypt’s ramping up of production restored its status as a net gas exporter.
• The state-owned Egyptian Natural Gas Holding Company (Egas) plans to increase natural gas supply to 4.8bcf/day by 2022 through a number of proposed upstream developments.
• Continuing to export gas while meeting domestic demand will depend on the discovery and development of new gas fields. The commercial exploitation of already discovered small-scale fields is also possible.
• Local consumption of gas totalled 2.1tcf in FY2017/18. The power sector was the main consumer with 63% of the total, while industrial use accounted for 22%, petrochemicals 10% and residential/compressed natural gas 5%.
• Gas is delivered to customers through Egypt’s national gas grid and licensed distribution companies. The gas grid is operated by the Egyptian Natural Gas Company (Gasco) – a subsidiary of EGAS.
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 19 9. Competitive landscape
9.1 Overview The power generation landscape of Egypt has shifted radically in recent years, with total installed capacity almost doubling from 30GW to 59GW between 2013 and 2019. The introduction of three major CCGT projects built by a Siemens-led consortium boosted generation by 14.4GW in less than three years. Historically, the energy sector has been almost entirely dominated by the state, with the exception of three BOOT projects built by France’s EDF and Italy’s Edison between 2001 and 2003.
This has begun to change as a number of solar and wind IPP projects have come online in 2018 and 2019, adding to the private sector’s role in Egypt’s power industry. However, the large glut of new generation which has come online over the past four years means that beyond some outstanding private sector-led renewable projects, little new capacity is expected online in the short term.
Egypt enjoys strong support from multilateral organisations, such as the World Bank and associated investment arms, as well as Arabic financial institutions. Substantial amounts of finance are also sourced domestically.
The three massive CCGT projects located at Beni Suef , Burullus and the New Capital developed by Siemens and local partners, for example, were boosted by finance from multilateral banks such as London-headquartered private multinational HSBC, German state-owned development bank KfW, the Arab African International Bank and the Central Bank of Egypt, amongst other sources.
9.2 Landmark power projects First IPP: Sidi Krir Gas, HFO III and IV
Sidi Krir Location: 682.5MW Capacity: Gas, HFO Fuel: Steam turbine Technology: BOOT Ownership: On-grid Connection type: 2001, 2002 Commissioning date: The Sidi Krir gas and HFO plant comprises of two 341.25MW steam turbine units built in 2001 and 2002 as an expansion of the existing Sidi Krir plant. The project was developed by InterGen Sidi Krir Generating Company and Italy’s Edison. First Arabian Development & Investment and Kato investments were also partners. Intergen sold the plant to Globeleq in 2004, who carried out a $250m refinancing in 2006 and exited in 2007, selling the plant to Pendekar Energy, which at the time was 55% owned by Malaysia’s Tanjong Energy and 45% Saudi Arabia’s Aljomaih Automotive Company. Tanjong sold out to Malaysia’s 1MDB in 2012, which in turn divested to China General Nuclear Power Corporation in 2016.
20 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Section
10. Transmission and distribution
10.1 Overview Transmission infrastructure statistics Egypt has achieved universal electrification Network length : 46,890km and most households and businesses are grid- tied. The grid encompasses almost 47,000km Network voltage : 400-500kV (4,110km) of high voltage transmission lines as of 220kV (18,465km) 2017/18, with an additional 487,000km of 132kV (2,485km) distribution lines. There were 670 substations in total and 2,612 transformers. Medium 66kV (20,019km) voltage overhead lines have increased at a rate 33kV (1,790km) of around 4.2% annually between 2013 to 22kV (21km) 2017, compared to an annual growth rate of 3.1% for low voltage overhead cables during Substations : 670 (130,868MVA the same period. capacity) Egypt’s much publicised plans for massive Existing increases in generation, international exports interconnections : Jordan (400kV) and enhancing the contribution of renewable energy has necessitated grid development in Libya (220kV) Egypt. Transmission has seen significant Planned investment and improvement in recent years, with total 500kV transmission lines increasing interconnections : Saudia Arabia (500kV) from 2,364km in 2014 to 3,514km by end- Sudan (220kV) 2018.
The energy ministry has ambitious plans to continue the growth of transmission and distribution networks, including cross-border trade into North Africa, sub-Saharan Africa, Gulf states and Europe.
10.2 Interconnections • The Egyptian grid is interconnected to Maghreb and Arab regions via Tobruk (Libya) and Aqaba (Jordan). Additional interconnections are planned to connect Egypt to Saudi Arabia, to Europe via Cyprus and to East Africa through Sudan, in line with Egypt’s long-term ambition to become an energy hub between three continents.
• A 220kV interconnection with Libya was installed in May 1998, followed by a 400kV Jordanian interconnection in October of the same year, with the latter also connecting Egypt to Syria and Lebanon.
• The Saudi Arabia interconnection aims to exchange a capacity of 3GW via the 500kV Badr substation in Egypt, connecting to Saudi substations at Medina and Tabuk. Phase one of the interconnection is expected to begin in 2020-2021 after being postponed in late-2018. This will connect Egypt to grids in the Gulf states of Kuwait, United Arab Emirates, Qatar, Bahrain, Oman, and also Yemen.
• The 220kV Sudanese interconnection will link Toshka and Wadi Halfa and is making good progress, with Toshka substation coming online in early-2019, enabling the exchange of 50MW. This is expected
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 21 Section
12. Demand and supply outlook
12.1 Overview Egypt currently enjoys what is widely regarded as an electricity oversupply. Installed capacity stood at 55.9GW in 2018 to meet a peak demand of 30.8GW. Generation capacity has increased by a further 3.6GW in 2019 to reach 59.5GW as of February 2020.
Egypt’s demand and supply outlook over the medium-term is very much uncertain. Plans developed in 2015 appear to have been rapidly superseded by events. The most notable example was the intention to introduce 23.2GW of coal to the energy mix by 2030; African Energy understands that the inclusion of any coal in the energy mix has now been shelved by the government. What does appear to remain in the government’s thinking however is the expansion of renewables’ share of the energy mix. This is targeted to increase from 10% in 2019 to 42% in 2035. To achieve this, installed capacity would need to reach 93GW, assuming that no new thermal generation is added, or existing plants decommissioned.
Whether these ambitious figures will be achieved over the next 15 years will be influenced by three separate factors:
1) the rate of overall economic growth and the likelihood that demand for power will continue to increase at historic rates;
2) the impact of the amount of power built over the past five years which has already taken installed capacity well beyond what is needed to safely meet current demand levels; and
3) the solidity of government intentions to shift the energy mix decisively in favour of wind and solar generation.
Taken together, these factors imply the construction of a vast amount of additional renewable generation capacity. They also leave open the possibility of the decommissioning or mothballing of a proportion of existing thermal generators. Indeed, Egypt has already begun a process of steadily decommissioning thermal units in recent years. With a vast expansion of variable renewable power, some gas-fired plants may be relegated from the provision of baseload to the task of balancing the grid and meeting peak loads.
Analysis by African Energy and a look at the Integrated Sustainable Energy Strategy 2035 (ISES), published in 2015, suggests total on-grid capacity could reach between 142GW-160GW by 2035. Should electricity demand grow at 6.2% per year, as per EgyptERA forecasts, peak demand will stand at 86GW in 2035. This level of capacity would represent a reserve margin of between 65% and 87%. While this does appear excessive, it is consistent with the estimated 83% reserve margin currently enjoyed in the system.
These figures do however raise several questions: Will Egypt require such a large reserve margin? Are redundant plans for coal-fired generation to be replaced by other thermal sources? Is there likely to be a significant increase in electricity demand growth? Does a long-term export market exist for such a vast surplus of power? These issues, among many others, will define a demand and supply outlook which is likely to remain in a state of flux over the medium term.
22 AFRICAN ENERGY • EGYPT POWER REPORT • 2020 Section Section
13. Data tables
Methodology
The following data tables are based on generation project pipeline data sourced from African Energy Live Data . The pipeline (2019-2024) displays installed on-grid capacity at years-end, and only includes those generation projects which are in development and are considered to have a realistic prospect of reaching commercial operations within the announced timeframes.
Renewables vs non-renewables
(MW) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Non-renewable 22,564 24,954 26,529 27,155 28,805 34,521 35,821 41,421 51,721 54,011 55,491 55,491 55,491 59,541 59,541
Renewable 3,345 3,345 3,345 3,345 3,345 3,355 3,555 3,577 4,039 5,734 6,034 6,254 6,504 6,504 6,504
Hybrid 0 140 140 140 140 140 140 140 140 140 140 140 140 140 140
(%) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Non-renewable 87.1 88.2 88.8 89.0 89.6 91.1 91.0 92.1 92.8 90.4 90.2 89.9 89.5 90.2 90.2
Renewable 12.9 11.8 11.2 11.0 10.4 8.9 9.0 7.9 7.2 9.6 9.8 10.1 10.5 9.8 9.8
Hybrid 0.0 0.5 0.5 0.5 0.4 0.4 0.4 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2
Non-renewable Renewable Hybrid
2010 2018 2024
Data observations l Solar generation will amount to 1.8GW, hydro 2.8GW and wind 1.9GW. Total share of renewable l African Energy Live Data analysis shows the government’s 2022 renewable targets will not be generation will be less than 10%, compared to the achieved. 20% targeted by the government.
AFRICAN ENERGY • EGYPT POWER REPORT • 2020 23 SPeocwteiorn plants: Operating
Operating plants (as of February 2020)
Installed Commercial Project Capacity Fuels Technology operations (MW) date
6 October Gas, LFO I-II 1,200.00 Liquid fuels, natural gas OCGT 2016
6 October Gas I-II CCGT Conversion 340.00 Natural gas CCGT 2019
Abu Qir Gas, HFO I 911.00 Liquid fuels, natural gas Steam turbine 1990
Abu Qir LFO II 24.27 Liquid fuels OCGT 1983
Abu Sultan Gas, HFO 600.00 Liquid fuels, natural gas Steam turbine 1986
Access/Eren Benban 8-1 Solar PV I 50.00 Solar PV 2019
Access/Eren Benban 9-2 Solar PV II 50.00 Solar PV 2019
Acciona Benban 10-2 Solar PV II 50.00 Solar PV 2019
Acciona Benban 18-3 Solar PV III 50.00 Solar PV 2019
Acwa Benban 3-1 Solar PV III 50.00 Solar PV 2019
Acwa Benban 43-4 Solar PV I 50.00 Solar PV 2019
Ain Sokhna Gas, HFO 1,300.00 Liquid fuels, natural gas Steam turbine 2015
Al Subh Benban 28-4 Solar PV 50.00 Solar PV 2019
Alcazar Aten Benban 7-1 Solar PV IV 50.00 Solar PV 2019
Alcazar Benban 13-2 Solar PV I 50.00 Solar PV 2019
Alcazar Delta Benban 19-3 Solar PV 50.00 Solar PV 2019
Alcazar Horus Benban 29-4 Solar PV III 50.00 Solar PV 2019
Alfa Benban 23-3 Solar PV 50.00 Solar PV 2019
Al Tawakol Electric 42-4 Benban Solar PV 25.00 Solar PV 2019
ARC Benban 2-1 Solar PV 50.00 Solar PV 2019
Arish Gas, HFO 66.00 Liquid fuels, natural gas Steam turbine 1996
Arinna Benban 1-1 Solar PV II 20.00 Solar PV 2019
Assiut El Walidia HFO, LFO II 600.00 Liquid fuels Steam turbine 1997
Assiut Mobile Gas, Diesel 100.00 Liquid fuels, natural gas OCGT 2015
Aswan 16-2 Solar PV 50.00 Solar PV 2019
Aswan Dam Hydro I 280.00 Hydro Conventional hydro 1960
Aswan Dam Hydro II 270.00 Hydro Conventional hydro 1986
Ataka Gas, HFO I 900.00 Liquid fuels, natural gas Steam turbine 1989
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