OBG talks to Giuseppe De Beni, Managing Director, Italgen

 Giuseppe De Beni, Managing Director, Italgen

 Interview: Giuseppe De Beni

How can the efficiency of Egypt’s electricity sector and its investment potential be improved?

GIUSEPPE DE BENI: Egypt has set a very ambitious target to have 20% of total energy capacity installed from renewable energy in 2020. This would mean 7000 MW installed before 2020, and the contribution of the private sector is crucial to meet the target. In order to attract foreign investors, the country has to quickly define a clear legislative framework, which is one of the key requirements. UNCTAD’s “World Investment Report 2010” proposed a global partnership to galvanise low-carbon investment and advocated concrete initiatives. Only with such conditions can multinational corporations contribute significantly. In terms of infrastructure, Egypt has to work to further strengthen its grid connection.

What makes you bullish about Egypt and what types of challenges do you expect to face?

DE BENI: We are ready to provide our contribution to the “new Egypt”, and we trust that the new era will mean a favourable and more dynamic business environment.

We are now ready for an investment of about € 120mto an installed capacity of 120 MW, to be located at Gulf El Zeit (a desert area 80 km north of Hurghada). We are not planning any change. Egypt is a priority and a key country in our international strategy.

With reference to the wind energy sector, the detailed measurement campaign we have been conducting in the assigned area for more than one year confirms that wind conditions in the Red Sea region are among the best that can be found worldwide.

Of course in the short term we are facing several challenges related to the uncertain political situation, but we are confident that Egypt can become an even more attractive country for foreign investors when the new institutional framework is completely defined. We are already receiving very detailed offers from all the leading international suppliers, which are keen to provide their technology for our project in the Red Sea area.

How will easing energy subsidies impact the potential for new renewable projects?

DE BENI: The main focus of international players is on countries where energy demand is forecast to grow at a high rate, renewable energy sources are abundant and high-quality, and local governments are adopting new regulatory frameworks to support this development and attract foreign direct investment. Egypt can boast the first two pre-conditions to attract the private sector. When a legislative framework is defined, the country will be able to become a leader in the development of renewable energy.

What role will renewables play in the energy mix?

DE BENI: Egypt’s electricity demand is projected to increase in the coming years. Due to limited fossil fuel resources, it is expected that their price will continue to rise (also because the subsidies previously guaranteed by local authorities to reduce the final price for consumers are not sustainable for the public budget). Renewables are the only rational alternative to fossil fuels, especially because of Egypt’s wind and solar resources. We also have to consider the potential for production cost reduction that renewables still have.

What are the biggest challenges to successful implementation of public-private partnership projects in the Middle East and Africa?

DE BENI: This requires the capability to effectively combine the strengths and resources of the public and private sectors. From an industrial point of view, the biggest challenges are the development of a reliable grid connection and the availability and growth of a local industry with adequate know-how. However, the essential prerequisite for the expansion of the sector is a clear legal framework in the medium to long term.

In terms of incentives, the most rational and feasible ones are in-kind contributions (rather than financial), tax-free zones, exemption on import duties, tax exemption for a period of time and support.

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The Report: Egypt 2012

Energy chapter from The Report: Egypt 2012

Cover of The Report Egypt 2012

The Report

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