Pyramid power: Egypt country profile
Egypt is moving forwards with several infrastructure projects
Egypt is moving forwards with several infrastructure projects. Utilities Middle East reports on the country’s progress.
Egypt’s infrastructure has undergone significant improvement over recent years. Buoyed by significant foreign aid and a number of fiscal stimulus packages, the country is driving ahead with a range of infrastructure projects to modernise its road, rail, power and water networks.
Demand for energy has risen as a result of demographic and economic growth. Its reliance on hydro-electric power (HEP), which used to provide 25% of the country’s electricity was throw into exposure during the water crisis in 1988, that followed eight years of drought in the catchment areas of the River Nile.
The government embarked on a programme to construct power stations that would depend mainly on locally-produced natural gas. Egypt’s first build-own-operate-transfer power plant at Sidi Kreir began operation in 2002, followed by two 680-mw BOOT plants at Ain Sukna and East Port Said.
In 2005 the country’s installed capacity stood at 17,000 mw, of which 84% is based on natural gas and the remaining split between HEP and thermal power.
Away from traditional methods of power generation, in 1997 an Argentinian-built $100 million, 22MW research nuclear reactor became operational, replacing the 2 mw facility constructed by the Soviet Union in 1961. Egypt also generates approximately 150MW of wind power through its site at Zafraana on the Gulf of Suez.
In June 2009, Australia-based engineering consultants Worley Parsons announced contracts to oversee projects towards Egypt’s first nuclear power plant.
In December 2008, Egypt’s Energy and Electricity Ministry announced that following an international tender, it had decided to award a $180 million contract to Bechtel to choose the reactor technology, choose the site for the plant, organise training and provide technical services over some ten years. However, the government has now transferred this contract to Worley Parsons.
Worley Parsons expects the contract to be worth $160 million over eight years. The initial phase of the contract involves site and technology selection studies and work relating to the plant’s design, construction management, commissioning and start-up.
In 2006, Egypt announced plans to build a 1000 MWe reactor for electricity generation and water desalination at El-Dabaa on the Mediterranean coast by 2015, in a project valued at between $1.5 - $2 billion, which would be open to foreign participation.
Such progressive steps do not come cheap. Fortunately, Egypt has benefited from significant international assistance in modernising and developing its infrastructure. In January 2009, the World Bank’s board of executive directors approved a loan of $600 million to support the Ain Sokhna Power project.
“Egypt has proved to be resilient during the economic crisis and the expansion of infrastructure and various utilities continued to grow,” said Bill Brubaker, senior vice president, North Africa of Hill International.
“The government financed many projects in water and wastewater, oil and gas, and energy. It also helped to get financial loans from major banks and encouraged the investment atmosphere for the private sector. In 2009 the government implemented a $2.7bn for infrastructure projects and export subsidies and is considering up to $3.3bn in 2010 to alleviate the economic pressures.”
The scheme will support the government’s expansion plan to meet the energy demand and ensure access to reliable and affordable electricity services – prerequisites for sustained economic growth and achieving the country’s social development agenda.
The Ain Sokhna Power Project aims to ensure continuous electricity supply to meet the demand in a sustainable manner through investment in a new generation and to improve the sector’s financial sustainability by providing technical assistance to Egyptian Electricity Holding Company (EEHC) to support sector revenue improvements.
The project will finance a 1,300MW supercritical steam turbine power plant comprising two 650MW steam turbine generators. The plant will fall under the management of the East Delta Production Company (EDPC), one of EEHC’s subsidiaries.
“We are particularly pleased to have such a solid partnership with the government of Egypt; this project builds on the reforms that the government is currently implementing across the energy sector,” said Emmanuel Mbi, country director for Egypt, Yemen and Djibouti.
“The World Bank’s support to the energy sector in Egypt is in line with the Bank’s Country Assistance Strategy which emphasises the provision of public goods through modernised infrastructure services to achieve sustainable growth.”
Egypt’s electrical energy consumption and peak demand has been growing rapidly over the last decade at rates of 8.6% and 8.1 % .
Anna Bjerde, World Bank Task Team Leader added the projects technological advances bring with it greater efficiency. “The project will be the first power plant in Egypt based on the supercritical technology, which will increase the overall efficiency of the power plant and has a faster responsiveness to the load and reduces emission,” she said.
In March of the same year the World Bank also approved a $270 million loan to support the Egypt National Railways Restructuring Project (ENRRP).
The first component of which will finance the modernisation of signalling along the Arab el-Rami to Alexandria line and a computerised Central Traffic Control system (CTC).
The second component will finance priority track-renewal works for 200 km of track along the Cair-Aswan line and the Benha-Port Said line. This will significantly decrease the risk of derailments and track maintenance costs while increasing train speed.
Alternative technologies represent a key policy of its energy production. The country aims to generate one fifth of its electricity from renewable sources by 2020 including wind power. To reach this goal, it is tapping into the World Bank Clean Technology Fund.
Aside from the World Bank, Egypt has also been the recipient of substantial assistance from the United States, which since 1975 has contributed $5.6bn to improve Egypt’s water and wastewater, electric power and telecommunications services through the United States Agency for International Development (USAID).
USAID’s infrastructure programme assisted the Egyptian government to construct facilities to expand utility services and coverage, helps the utilities operate more efficiently, supports legal and regulatory reform and promotes private sector participation in the financing and management of Egypt’s infrastructure services.
The programme concluded in 2006 but in that time USAID claim that approximately 22 million people will have benefited from improved water and wastewater systems in Cairo, Alexandria, Aswan, Luxor, South Sinai, Daqahliya, Beni Suef, Fayoum and Minya governorates.
More than 20 million people will have benefited from newly constructed or modernised electric power plants that have increased Egypt’s electric power capacity by 35 per cent. A further 8 million have benefited from an expanded telecommunications network and improved telephone service.
Such aid is necessary in a country, which has struggled during the ongoing global economic crisis.
A new report by Business Monitor International reveals the country’s construction sector has been hit hard, with industry growth of just 1.73 per cent in 2009, compared to 10.32 per cent in 2008. Activity is expected to slow even further in 2010 before a small increase in 2011.
In October 2009, Egypt announced that it was looking to increase private investment in the country by 75 per cent by 2012/2013 to $36.6bn. This plan will include promoting 52 infrastructure projects to investors in the Middle East, Europe and the US.
Before the financial crisis, Egypt’s foreign investment was climbing steadily, and had reached $24.4bn in 2007/2008 before falling to $20.83bn in 2008/2009. The projects being promoted include port development, renewable energy and road building.
In response to these declining figures, the Egyptian government announced plans for a third stimulus package in January valued at 11.2bn Egyptian pounds ($2bn). This package has been increased from the 10bn Egyptian pounds unveiled in October.
It is the third adopted by the government since the financial crisis broke out. The first two packages – announced in October 2008 and June 2009 – were for 15bn and 8bn pounds respectively and were introduced to mitigate the impact of falling revenues from the Suez Canal, a decline in tourism and reduced foreign investment.
Away from energy production, Egypt is in the process of developing its first wastewater public-private partnership (PPP), the new Cairo plant. A consortium of Egypt’s Orascom Construction and Spain’s Aqualia was awarded the contract to develop the plant in May 2009.
It is now in talks with banks to finance the $470 million project. The plant will be developed on a build-operate-transfer (BOT) basis with a capacity of 250,000 cubic metres a day (cm/d) of wastewater. At a later stage this is set to be expanded to 1.25 million cm/d.
In the wider context, the government has implemented an overarching water-plan says Brubaker, with the government highly concerned with increasing access to water supply and sanitation: “Power is undergoing major development in Egypt which is generally adequate and covers most of the populated areas.
On the other hand, water needs more planning and to better enhance the water and sewage infrastructure.
“The implementation of the National Water Resources Plan, which should be completed in 2017 is expected to cost $26.56bn,” he says.
“In addition, a vigorous plan by the Ministry of Petroleum is announced to invest $6bn of oil and gas exploration and fields development in 2010. The ministry also unveiled a plan to drill 520 exploratory oil and gas wells involving investments of $2bn in 2010. Furthermore, the 20-year national master plan for petrochemical industry is determined to be $20bn.”
Besides implementing a modern and stable country-wide infrastructure network, in the long-term the key challenge for Egypt said Brubaker will be ensuring such technological advances does not take its toil on the country itself, with a move away from traditional energy-production key. “Environment is the most important challenge.
Securing energy activities in order to preserve the ecosystem is a fundamental goal for the industry. This means that looking at renewable energy is extremeley significant for the country of Egypt.
“Supply of safe and clean water to all parts of Egypt is also a vital goal to improve the country water infrastructure,” he concludes.