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Massive Power Boost for Egypt

How Siemens won the biggest contract in its history

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ANALYSIS

It took just two weeks for Siemens to agree the biggest contract in the company’s history.

The German powerhouse finalised a deal last month worth EUR 8bn ($9bn) to supply Egypt with gas and wind turbines that will increase the country’s installed electricity generation capacity by around 50%.

At a ceremony in Berlin, Egyptian president Abdel Fattah el-Sisi and Minister of Electricity and Energy, Mohammed El Shaker signed on the dotted line three months after agreeing a Memorandum of Understanding (MoU) with Siemens at the Egypt Economic Development Conference. However negotiations had only begun a fortnight before the MoU was agreed at the event in the resort town of Sharm El Sheikh.

In a briefing with a small group of Middle East-based journalists after the signing in Berlin, Siemens CEO Joe Kaeser revealed it was his company’s ability to quickly design a fully integrated power package – combining conventional and renewable energy with efficient transmission and distribution - that impressed the Egyptian president and ultimately clinched the deal.

“I met the president two weeks before Sharm El Sheikh and I said, ‘look, maybe we can do more than just deliver a few turbines to your country. We not only sell power plants, we can help you get the power to where it is needed. You also need transmission and distribution to bring power to the people and also to improve the security of power supply. There is one big power line from the south to the north of the country. If something happens to this power line there’s going to be a big problem’.

“He gave us two weeks to put forward a proposal and in that time we basically designed a power system of about 14GW. We suggested a comprehensive concept that included renewables, because with gas turbines you also need to purchase the gas, so why not use a combination of renewable and baseload technology and keep the gas for fertiliser plants? We shook hands in Sharm El Sheikh two weeks later.”

Giving to society

The huge investment in power infrastructure is designed to tackle the power blackouts Egypt has been suffering over the past couple of years.

Not only will Siemens upgrade the power system with additional capacity and grid infrastructure, but it has also pledged to boost employment by building a rotor blade manufacturing facility in the Ain Soukhna region by 2017 and train local workers. For Kaeser, this integrated approach played a key role in helping Siemens to close the deal.

“This is not only about delivering some products and taking the money and running,” Kaeser said. “It’s about contributing to society. Time and again I’ve made it clear that the biggest priority in our company is to provide value to society as well as make money.

“We’ll train as many as 1,000 young people to help us operate the power plants. We will build a manufacturing plant for wind power. This is what societal development is all about: giving people a future.

“In the end that’s what made the difference. From what we’ve seen from our competitors, they’ve been busy collecting money. Even the so-called fast-tracks which were awarded a year ago were quite costly for the Egyptians.”

The deal

Siemens will build three gas-fired power plants to generate 4.8MW each, making them the largest plants of their kind in the world. Each of the plants – Beni Suef, Burullus and New Capital – will use eight H class turbines, the newest, largest and most efficient turbines to be developed by the German company.

However, another key component of the deal was the inclusion of 600 wind turbines, spread across 12 wind farms in the Gulf of Suez and West Nile, to harvest 2GW of power from Egypt’s rich renewable energy potential.

“We believe that the world going forward will be a combination of renewables with baseload secured by clean conventional power plants like combined cycle gas,” said Kaeser. “Wind is a very, very cheap source of energy in Egypt. We are reaching cost parities per kWh of around about $5 cents, which is quite a massive achievement.”

Playing it smart

Kaeser described the need for transmission and distribution grid upgrades in Egypt as ‘a real eye-opener’, though he added that Siemens’ expertise in grid management would enable it to produce and distribute power as efficiently as possible.

“It doesn’t matter how much power generation that you build, but how much you can get to the people and that’s why we laid out a whole grid and distribution plan,” he said. “And also, and this is what no one else could do, we said ‘look, every kWh of power saved by energy efficiency is a kWh that doesn’t need to be produced’.

“So we looked into smart cities and smart grids to optimise demand response to produce only as much power as is needed. That’s especially important, because when you have more renewables you have more volatility.”

Kaeser said the deal was a perfect demonstration of the wide range of capabilities that Siemens was able to offer.

“It could not be better displayed than in the work being done in Egypt. You have generation as well as energy efficient distribution and that’s the competitive advantage we have. We have a unique proposition at Siemens – we can do everything.”

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