New Market Report: Egypt Power Report Q3 2013

From: Fast Market Research, Inc.
Published: Thu Aug 29 2013

A continuous and reliable supply of electricity is paramount for Egypt's socio-economic development, and a series of politically-charged electricity outages over the second half of 2012 and in first half of 2013 has illustrated that power is a hot political issue for a government that is under pressure to improve the quality of public service provision. Yet, the challenge of ramping up supply is immense; not only does it require a re-prioritisation of natural gas feedstock away from exports and towards domestic consumption, but weak economic activity and political uncertainty are set to take a toll on the government's ability to channel investments towards the sector.

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With economic growth hinging on the provision of adequate and reliable power to vital sectors (ranging from industry and agriculture to tourism and transport), the expansion of Egypt's electricity infrastructure is a key priority for the country. An ambitious power sector investment programme has been under implementation since 2002 - aiming at additions of 7,000 megawatts (MW) and 11,850MW during the first (2002-2007) and the second phases (2007-2012) respectively; yet, power shortages have fully displayed the need to improve capacity and made the development of the sector an even more urgent policy priority for President Mohamed Morsi. Most notably, in March 2013, the Ministry of Electricity and Energy decided to maintain a state of emergency in all electricity projects nationwide to face all emergency circumstances, as well as increasing the number of diesel generators in public squares to provide electricity at the time of need.

These short-term measures aside, we reiterate our view that the state's long-term strategy for the electricity sector should be bifurcated. On the one hand, it needs to ensure more feedstock availability for existing and planned gas-fired generating capacity by prioritising domestic users. On the other hand, the government needs to push for more diversification, increasing hydro and renewables capacities given that nuclear remains off the near-term agenda.

Key trends and recent developments in the Egyptian electricity market appear indeed to suggest that the government is looking to pursue a privatisation and diversification strategy, with:

* Egypt's state-run New and Renewable Energy Authority has resumed an international contest for wind prospecting concessions at six sites in the Gabal El Zeit area of the Gulf of Suez, each earmarked for up to 100MW of development, confirming that the Egyptian government has reaffirmed its commitment to the pre-existing wind programme, including a 7.2-gigawatt wind target to 2020.

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