Boston, MA -- (ReleaseWire) -- 05/02/2014 -- Our outlook for the Egypt power sector remains in place this quarter, as the political situation in the country remains in a state of flux. With power remaining a hot political issue, the country is in desperate need of increasing its power capacity by expanding its electricity infrastructure. However, we believe 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 high political uncertainty are set to take a toll on the country's ability to channel investments towards the sector.
Egypt's power sector is enduring a challenging period. 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 has long been a key priority for the government, and an ambitious power sector investment programme was implemented over two phases from 2002 to 2012, Adding 18,850 megawatts (MW) of new capacity. However, persistent power shortages continue to blight the sector, demonstrating the need to continue to improve capacity, and making the development of the sector an even more urgent priority for the country.
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Egypt had originally outlined plans to install 30,000MW of capacity between 2010 and 2020, with annual investment in power infrastructure initially targeted at US$3bn, including significant investments in renewable energy. However, ongoing political and social unrest have disrupted these plans, discouraging investment and draining government finances, and it is difficult to see the country meeting these targets without a dramatic turnaround in its political fortunes. Other problems include the required re-prioritisation of natural gas feedstock away from exports and towards domestic consumption, as well as the need to make pronounced reforms to domestic energy subsidies. As such, while the country's abundant supplies of natural resources and favourable demographics point to significant longer-term potential, what the country needs most - namely an end to frequent outbursts in violent unrest and greater clarity on the medium-term policy trajectory - is that for which we are the least optimistic on in the near term.
Key Trends And Developments
- Egypt's state-run New and Renewable Energy Authority 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. This confirms the government's pre-existing wind programme to 2020, with 7.2GW of capacity to be added.
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