Egypt's power sector moves toward privatization
The Egyptian government has stepped up its efforts to privatize the power sector and all new electricity plants are to be built under the BOOT system, Minister of Electricity and Energy, Ali El Sa’idi said in an interview.
“The government’s general policy is to privatize [electricity] distribution companies after they are separated from [electricity] production lines,” the minister said in an interview with Al Ahram Weekly.” But we have no intention of privatizing production lines as long as the BOOT system is used for all new power stations.
The private sector’s share of production is currently 2000 megawatts (MW) out
of Egypt’s total production of 15,000 MW.” Asked about concrete procedures taken by the ministry in this connection, El Sa’idi said the first step was the transformation of the Egyptian Electricity Authority (EEA) into a holding company in July 2000 following the approval of the
“With a total capital of LE60 billion, the EEA was formerly one of six authorities affiliated with the Ministry of Electricity,” he added.
El Sa’idi pointed out that the newly created Egyptian Electricity Holding Company owns seven companies, each of which has power stations and distribution lines.
He said another important step in preparations for privatization is to make the production lines independent of the distribution networks in these seven companies. Once this has been done, only the distribution companies will be offered for sale.
“We are moving now to replace the previous system based on monopoly [by one
company controlling the entire electricity sector] with a vertically integrated
structure, he said.
“The current system is based on generating companies and distribution companies that provide power to the consumers through a general network. We are planning to implement a new segregated structure in which electricity will be moved from generating companies—whether local, BOOT or independent—through an integrated network for transmission, owned by the state, directly to consumers or distribution companies.”
El Sa’idi expressed his hope that a specialized bourse for the sale of electricity from a network owned by the government will be established. He explained that the purpose of the bourse is to create competition between companies to provide energy at cheap prices.
He said he believed the distribution companies would be sold easily because they have no debts and they are profitable since they buy the power and then sell it with a profit margin.
“The self-sustaining Electricity Sector Regulatory and Consumers Protection
Board will fight monopoly in the electricity sector, the minister said. “It will ensure transparency in the dealings among the state, the provider of the service and consumers.
On the issue of debts, the minister said this was a big problem because Egyptian businessmen usually do not take into account electricity costs in their feasibility studies for their projects. When electricity costs turn out to be high, they simply refuse to pay their bills.
But he said his ministry always tries to avoid cutting electricity to these projects so as not to bring their activities to a halt. The ministry announced an international tender for the establishment of the first BOOT hybrid solar-fossil thermal power plant in the Kurimat region (South of Giza).
The plant, which will be the first of its kind in the Middle East, will be an integrated solar combined cycle system (ISCCS) using a natural gas fired process alongside a solar thermal power system. The ISCCS will have a total power output of 150MW.
Kurimat was chosen for its high solar radiation and existing natural gas
infrastructure. The station is to be financed by private sector investments using the BOOT system. The ministry is scheduled to announce the technical requirements that bidders need and choose the best offer for the Kurimat station by the end of 2000 .
In cooperation with the United States, another project is under way for an
experimental solar energy plant with a capacity of 10MW. A study is currently being conducted on using credit cards to pay electricity bills."We are also considering the feasibility of using prepaid electricity cards," said El
Sa'idi. "These would be especially for dwellings used seasonally rather than the year round. Such cards will be easy to use and will help rationalize the
consumption of electricity.
Locally produced equipment is of high quality and is, in fact, competing in foreign markets." A factory for producing insulators is now in its testing phase. This will meet the demand for insulators used in all low and medium voltage generators and a portion of those used by high voltage generators. This factory will be the first of its kind in the Middle East.
Moreover, all new power generation stations and those being upgraded will use
locally produced boilers, condensers desalinators and auxiliary boilers. While
materials for some of these are imported the equipment itself is manufactured in Egypt. Companies for engineering project management and construction are all
For the establishment of all power generation plants in Egypt, 45 per cent of costs were spent locally. Sidi Kreir power station consists of four units. Two of these are government-owned, each of which has a capacity of 325MW. The other two—built under the BOOT system—have a capacity of 340MW each.
With developers having been invited to bid on two BOOT projects with a combined total of 700MW for the North Cairo station, there will be a total of 8 BOOT power-generating stations in Egypt.
Meanwhile, the Egyptian Electricity Authority (EEA) and Honeywell have signed contracts for the total automation renovation by Honeywell of two EEA power generation plants in Egypt. The value of the two contracts is $28.5 million.
The contracts, won by the Honeywell Global Solution Business team supported by Honeywell Egypt, cover the upgrade of the controls at the Abu Qir and Abu Sultan 600 Mwe power generation plants. The scope of the contract includes distributed control systems, emergency shutdown, burner management, field instrumentation, engineering configuration, power generation applications, installation and commissioning, according to a Honeywell statement.
The two EEA projects are financed by a grant from the U.S. Agency for International of Development (USAID) and are managed by PSSG Parsons. USAID has provided an average $815 million annually to Egypt since 1979. – (Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)