198 M. HOCHBERG
Long Term Contracts for Renewable Support
Within the context of renewable development, several government
schemes have been executed to support new generation capacity in Egypt.
Almost all development of renewable technologies (excluding hydro) has
taken place since 2014, when the government endorsed the Renewable
Energy Law (law 203/2014). The law creates two schemes for longterm contracting for renewable energy investment: feed-in-tariffs (FITs)
and competitive auctions. 46 Long-term contracts with creditworthy counterparties help provide investors with the confidence to undertake large
capital investments, and for markets that are not yet liberalized, FITs and
auctions also serve as a step toward increasing competition.
Beginning in 2014, the FIT schemes employed have ultimately experienced success, leading to a substantial pipeline for new solar capacity.
The two rounds of FITs held thus far demonstrate that the Egyptian
government is responsive to the investment community after a largely
unsuccessful first round FIT, in which international arbitration for dispute
resolution was disallowed. Egypt’s refusal to include terms for offshore
arbitration in the FIT contracts represented a major sticking point for
investors. This disagreement was exacerbated by currency risk issues
(with the instability of the Egyptian pound potentially impacting the
government’s ability to meet FIT payments), 47 and by the government
requirement that 85% of solar project financing and 70% of wind project
financing come from abroad in foreign currency. 48 The disagreement over
international arbitration caused many project developers and lenders to
withdraw from the contest, with only three investors achieving financial
close out of the initial 136 qualifying developers. Under a lower tariff and
with provisions for international arbitration, round two of the FIT was far
more successful. Before the end of 2017, a total of 30 solar PV projects
had reached financial close, representing approximately 1.5 GW of new
renewable capacity. 49 Round two also reduced currency risk by lowering
the minimum foreign currency funding requirement.
The offtaker for FIT projects is the Egyptian Electricity Transmission Company (EETC), which signs 25-year power purchase agreements
(PPAs) with developers for solar projects and 20-year PPAs for wind
projects. 50 While the duration of the contracts helps investors achieve
financing, cost-sharing for grid upgrades, in which grid reinforcement
costs to accommodate the new generation capacity are shared between the
Long Term Contracts for Renewable Support
Within the context of renewable development, several government
schemes have been executed to support new generation capacity in Egypt.
Almost all development of renewable technologies (excluding hydro) has
taken place since 2014, when the government endorsed the Renewable
Energy Law (law 203/2014). The law creates two schemes for longterm contracting for renewable energy investment: feed-in-tariffs (FITs)
and competitive auctions. 46 Long-term contracts with creditworthy counterparties help provide investors with the confidence to undertake large
capital investments, and for markets that are not yet liberalized, FITs and
auctions also serve as a step toward increasing competition.
Beginning in 2014, the FIT schemes employed have ultimately experienced success, leading to a substantial pipeline for new solar capacity.
The two rounds of FITs held thus far demonstrate that the Egyptian
government is responsive to the investment community after a largely
unsuccessful first round FIT, in which international arbitration for dispute
resolution was disallowed. Egypt’s refusal to include terms for offshore
arbitration in the FIT contracts represented a major sticking point for
investors. This disagreement was exacerbated by currency risk issues
(with the instability of the Egyptian pound potentially impacting the
government’s ability to meet FIT payments), 47 and by the government
requirement that 85% of solar project financing and 70% of wind project
financing come from abroad in foreign currency. 48 The disagreement over
international arbitration caused many project developers and lenders to
withdraw from the contest, with only three investors achieving financial
close out of the initial 136 qualifying developers. Under a lower tariff and
with provisions for international arbitration, round two of the FIT was far
more successful. Before the end of 2017, a total of 30 solar PV projects
had reached financial close, representing approximately 1.5 GW of new
renewable capacity. 49 Round two also reduced currency risk by lowering
the minimum foreign currency funding requirement.
The offtaker for FIT projects is the Egyptian Electricity Transmission Company (EETC), which signs 25-year power purchase agreements
(PPAs) with developers for solar projects and 20-year PPAs for wind
projects. 50 While the duration of the contracts helps investors achieve
financing, cost-sharing for grid upgrades, in which grid reinforcement
costs to accommodate the new generation capacity are shared between the