29 Renewable Energy Companies Withdrew their Investments from Egypt

Renewable energy projects in Egypt face many obstacles after halting various projects that have started two years ago

The number of companies that withdrew from the feed-in tariff projects increased to 29 companies.

Investors -who have been ready to carry out electricity production projects from solar and wind energy- said that they face delays and difficulties related to the currency.

At the same time, they had differences with the Egyptian government on the contracts’ conditions, especially the one related to Egypt’s insistence on resorting to domestic arbitration in any disputes.

The 29 foreign companies were expected to invest almost $15 billion in renewable energy projects, which was expected to reach $50 billion by 2020.

In this context, Hesham Tawfik, the managing director of Cairo Solar company, said in an exclusive interview with Al-Arabiya TV, that the renewable energy producers demand the adoption of international arbitration, especially that 75% of the renewable energy projects are financed by international entities.

He also noted that the renewable energy producers have previously agreed on reducing the tariff in exchange for international arbitration.

At an earlier time, AL-Borsa newspaper published that renewable energy producers have agreed on the reduction of the feed-in tariffs and the list included: the Italian Enel Green, the French Neon, the Canadian Damand Candina Connord Solar, the Spanish Dama, the Saudi Abdel Latif Gameel, the Egyptian Cairo Solar, the Egyptian Innovation Unlimited Egypt, the Egyptian Orascom Telecom, and Emirati company Adenium.

This list also includes Lekela Power, Nubian, Building Energy, El Serag for solar energy, Solar Direct, EgyEnergy, and Nile Solar Power.

In 2014, the Egyptian government launched the renewable energy feed-in tariff program to set up projects for producing electricity from solar and wind plants at a capacity of 4,300MW with investments worth $7bn, including 2300MW for solar projects, and 300MW for plants of less than 500KW, and 2,000MW for wind plants.

Negative messages for investors

In fact, the latest dispute between the renewable energy companies and the government send negative messages to investors especially with Egypt’s need to attract foreign investments to its struggling economy.

Egypt’s economy is facing one of the harshest crises in its history. Hard currency shortage has escalated due to withdrawal in tourism and foreign investment -the two major sources of hard currency- as a result of political instability and lack of security since the military coup in 2013.

Accordingly, Egypt secured a loan from the International Monetary Fund with $12 billion after it conducted various economic reforms as requested by the IMF.

This month, the IMF said that the first tranche of $2.75 billion can be disbursed immediately and will be added to the cash-strapped country’s international reserves.

IMF Managing Director Christine Lagarde said that Egypt in recent months has secured additional financing worth billions of dollars, floated its tightly managed currency and cut fuel subsidies, efforts that received strong support from the IMF.

Al-Sisi floated Egypt’s national currency as the budget deficit exceeded 12% of the GDP and the dollar shortage had sharply driven the value of the Egyptian pound to barely half its official price in the back market.

In the same context, Egypt has fulfilled the other two main IMF conditions only up to a point. The parliament passed a long-promised law introducing a value-added tax (VAT) last August.

The other decision was the government’s reduction of subsidies this month, “with increases of up to 50% in the local-currency price of petrol, after earlier rises in the price of electricity.”

However, Egypt needs to attract foreign investments to its country to flow dollars into its market and thus, empower the Egyptian currency against the dollar.