OBG talks to Ahmed Mostafa Emam Shaaban, Minister of Electricity and Energy

Interview: Ahmed Mostafa Emam Shaaban

What are the priorities for liberalisation of the transmission and distribution network?

AHMED MOSTAFA EMAM SHAABAN: The current priority is the liberalisation of the network, which aims at opening the way for the private sector to establish traditional or renewable energy generation stations – either through independent power producers (IPPs) or build-operate-own (BOO) structures. These independent producers will be linked to the national grid network carrying electricity to load centres via the Egyptian Company for Transferring Electricity. Liberalisation of the energy market, or restructuring in the energy field in general, aims at creating free and competitive market conditions. This will improve quality and performance – and crucially, it will help us to meet the nation’s increasing electricity demands.

What regulatory reforms are offered to help incentivise private sector participation?

EMAM: There are plenty of incentives offered by the government to encourage investments, one of which is the law giving the Egyptian Electricity Holding Company the ability to sign contracts with private sector companies or its financing entities that are guaranteed by the state for private investments. Another is the commitment by the state to buy energy produced from these new independent stations for a period of 25 years with a tender price. In addition, we are facilitating land acquisitions for construction. Last but not least, the Egyptian Electricity Holding Company is actively cooperating with the oil and gas sector in sourcing the fuel necessary for electricity stations to guarantee a long-term supply of fuel feed for the stations.

How is the government working to develop renewable energy sources?

EMAM: The government has planned to generate 20% of its energy needs from renewable sources by 2027 and hopes to attract $110bn in the process. We are doing the best we can to increase the share of renewable energy in the overall energy production of Egypt. The sector has seen particular success in production of wind energy under both BOO and IPP structures. We are tendering more wind projects for private producers, but our challenge is determining the optimal tariff rate to be used by the sector in the near future.

Right now, the ministry is preparing several tenders in both wind and solar projects. One is a solar energy station with 200-MW photovoltaic capacity plant under a BOO ownership structure. Another tender is to establish a wind energy station with 250 MW, again under a BOO structure. So far, 10 international companies have been qualified for this tender. These are important projects because they will determine the future price of electricity tariffs. We are committed to the sector’s targets of achieving its pre-determined goals.

Nevertheless we have had a strong start; we already have commitments on several major projects. Most notable of these is the 1140-MW wind energy project, which is to be established with the cooperation of the governments of Japan, Spain, France and EU. Also, a new 200-MW wind energy project is being established in cooperation with the European Investment Bank, the German Reconstruction Bank and the European Commission. In solar energy, a 100-MW plant is being prepared and to be executed in Kom Ombo, also 40 MW out of photovoltaic cells in Hurghada. These are examples of private and foreign interest in Egypt’s renewable energy sector, and is encouraging to see projects being initiated and implemented today.

How will the fiscal need to cut energy subsidies affect the electricity segment in particular?

EMAM: No doubt the energy subsidy represents a great challenge to the electricity sector, and finding the equilibrium price between the production cost and consumption is a goal we will actively pursue. The sector has succeeded recently in heavy electricity consumption for industries; however, subsidies are a sensitive issue that need to be addressed with a more cohesive and coordinated effort from different state bodies.