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Ten companies to compete in Egypt wind farm bid

CAIRO: In an effort to beef up its alternative energy sources, the Egyptian government has established a list of 10 bidders to build a wind farm in the country. The farm will have a capacity of 250 megawatts and is expected to be built on the Gulf of Suez. El Sewedy Cables, as part of …


CAIRO: In an effort to beef up its alternative energy sources, the Egyptian government has established a list of 10 bidders to build a wind farm in the country.

The farm will have a capacity of 250 megawatts and is expected to be built on the Gulf of Suez.

El Sewedy Cables, as part of a consortium, is among the contenders. Orascom Construction, Enel Green Power SpA, and Electricite de France, are also all in the running, according to Bloomberg.

With this list now established, the bidders will compile their final bids, which they will each submit in the first quarter of 2011, in advance of 2014, when the plant is expected to be fully operational.

The project is being carried out under the auspices of the Ministry of Electricity.

This project is part of a broader effort by the Ministry of Electricity, and the Egyptian government at large, to increase the amount of energy it generates from renewable sources, including wind, hydro and solar.

It is part of the government’s long-stated plan to harvest 20 percent of its energy from alternative sources. Wind is expected to take the lead among the renewable sources, filling 12 percent of Egypt’s energy needs.

The sale of the rights for this wind farm is for a build-operate-own (BOO) operation, meaning that whichever company wins the bidding will be responsible for the design, construction, and operation of the facility. As part of its licensing agreement, it will sell the electricity to the Egyptian Electricity Transmission Company.

Making it to the final list of 10 was a substantial feat, considering reports that there were 34 countries that initially offered bids. Minister of Electricity Hassan Younes said that 72 companies had expressed interest.

A number of the brokerage firms have been cooing about one bidder in particular: Sewedy Cables. According to CI Capital, wind represents 27 percent of Sewedy’s value.

“We reiterate our ‘strong buy’ recommendation for Sewedy, wrote the firm in a note.

Broadly speaking, this bidding war over the new wind energy plant is part of a general strategy by the Ministry of Electricity to move energy production from the public to the private sector.

The Electricity Holding Company, which is state owned, has an annual deficit of LE 7 billion because of heavy subsidies.

“The government is liberalizing the energy sector gradually to reduce its debt and subsidy burden, and restructure the sector to allow more private sector participation. Electricity is subsidized twice through the subsidy of the natural gas or mazot used in powering the plants and the subsidy on electricity prices, wrote Beltone Financial in a note.

While the majority of this liberalization has resulted in non-renewable electricity plants being transferred to private hands. But with renewable sources – all under the control of the private sector – expected to account for 20 percent of energy production, wind power is contributing to the march towards privatization.

The Red Sea coast is not the only area that the Egyptian government is moving aggressively to allocate for clean energy. This August, the Ministry of Electricity announced that it was dedicating 1.5 million feddans to electricity production from wind.

That announcement came on the heels of a June announcement of 300,000 feddans on the Red Sea coast for wind farms.

The government has said it is pursuing renewable energy as a means of cost control, since non-renewable sources cost the government billions every year in subsidies. It’s also part of an early effort to move away from energy sources that may dry up in the coming decades.

Egypt has catching up to do when compared to some of its neighbors. Morocco, for example, already generates 20 percent of its energy from renewable sources, a benchmark that Egypt hopes to reach in a decade.

But with all the interest in the latest Red Sea wind project, it is clear that the investment appetite is there.

Topics: FJP

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