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Strong investor interest in Egypt power project

Government offers better investment conditions.

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Egypt, News

Investor interest has been strong in Egypt's first build-own-operate (BOO)-based combined-cycle power plant project, with 19 companies and consortia submitting pre-qualification applications, reports Reuters.

The Electricity and Energy Ministry will now evaluate the submissions, with an announcement of the bidder short-list expected during June, after which the pre-qualified companies will be able to submit their formal bids for the project.

The planned power plant is to mainly use gas for feedstock, but will have the ability to run on diesel in the event of gas shortages. It will have two 750-MW units and include an option for a third, according to the Ministry. The Ministry will enter into a 20-year electricity offtake agreement with the operator, at mutually agreed prices.

Egypt has already awarded a number of build-own-operate-transfer (BOOT)-based projects. It has chosen the BOO route for this project in order to improve the investor terms by offering some additional longevity, says Sam Ciszuk, Middle East energy analyst at IHS Global Insight.

“In the wake of the recent global recession—and because of chronic fears over a shortage of gas feedstock in Egypt—investors have been more reluctant to take on long-term projects where they will be shut into a 20-year set-price electricity offtake contract with the state, but might perhaps have to even out gas feedstock fluctuations with more expensive diesel for prolonged periods, and see their profit margin being wrecked,” says Ciszuk.

While offshore gas development is rising again in Egypt after it agreed to pay upstream producers more for expensive deepwater gas in 2008, analysts believe that adding longevity to the projects and making the ownership situation stable has helped to attract the large number of bidders.
 

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