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African Development Bank continues investment in Egypt energy sector - ASHARQ AL-AWSAT English Archive
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A man walks over a bridge by the construction of Ethiopia's Great Renaissance Dam in Guba Woreda, some 40 km (25 miles) from Ethiopia's border with Sudan, June 28, 2013. REUTERS/Tiksa Negeri

A man walks over a bridge by the construction of Ethiopia’s Great Renaissance Dam in Guba Woreda, some 40 km (25 miles) from Ethiopia’s border with Sudan, June 28, 2013. REUTERS/Tiksa Negeri

Cairo, Asharq Al-Awsat—Khalid Al-Askari, energy section official at the African Development Bank (AfDB) in Egypt has said the bank was conducting studies on a Ethiopia–Sudan–Egypt electricity link project, following the success of an initial feasibility study for the project. He added that the bank’s ten-year plan, which ends in 2022, prioritized regional integration between African countries, especially in the energy sector.

Askari revealed that Egypt had asked the bank to participate in a feasibility study regarding the establishment of a shipping line between Lake Victoria and the Mediterranean, through the Nile.

Askari told Asharq Al-Awsat that the bank was one of the largest fund providers in the electricity sector in Egypt, where 70% of its funding goes to the electricity sector. He added: “We have provided the energy sector in Egypt with USD 1.3 billion since 2009,” and that “there is a project which was concluded in 2012, which is the third phase in the Kuraymat Power Station, with a capacity of 750 megawatts.” He revealed that other projects the bank is “currently working on are the Abu-Kir plant in Alexandria, the Ain Soukhneh plant and Suez plant–which is still under construction. These three projects will supply the Egyptian electricity grid with 3,250 megawatts, while the current shortfall in electricity in Egypt is between 2,000 and 2,500 megawatts.”

The official said the bank did not only fund the building of new plants, but also contributed to increasing the efficiency of current ones, adding that “there is a study we are conducting to increase the efficiency of old power plants. This leads to reducing fuel consumption at the plants, to an output increase, or both.”

Askari said “the AfDB has conducted a study about infrastructure needs in Africa, which showed the continent needed investment of around USD 100 million a year in this sector to reach the required level, while current investments were well below that, even almost as low as a third.”

He added: “Governments are unable alone to provide the required volume of funding needed for the infrastructure, and the private sector is a fundamental part of the funding in this sector. Investment in this sector could be from the government or the private sector, or even both. All these options have to be used, in order to achieve the required goals.”

Egypt suffers from constant electricity shortages, especially during the summer, due to the shortage in fuel supplies needed to operate the plants and the increase in internal energy consumption. This has been the source of people’s anger in a time of serious political tensions.

Direct foreign investment in Egypt during the current year is expected to reach USD 400 million, according to Egyptian government officials.

On this, Askari said that attracting any investment relies on a number of factors, and political and economic stability is the most important among them, especially in infrastructure projects which are long term, some reaching 20 years. They need large investments in the early stages, and the risks are higher than in other projects. There must be a clear long-term plan to enable investors to fund these projects. Despite the turmoil in Egypt, Askari does not see any indications of investors’ reluctance to invest in infrastructure projects.

Askari added that there should be a system of governance in place for the way infrastructure projects are planned in the country, to ensure the private sector does not monopolize any one sector, and guarantee fair competition between government and private sectors when they bid for projects. He said the AfDB bank had approved a 10-year plan, 2013-2022, with one of its most important strategies being the achievement of regional integration in Africa, especially in the electricity sector.

Askari also revealed that the bank had contributed to a special feasibility study into linking the grids of Egypt, Sudan and Ethiopia, and that the result was that there was a benefit to all countries in linking them together. The bank is currently carrying out concluding studies into this project. Askari also said “the bank will no doubt be happy to participate in these projects, and the size of the investment will be governed by some technical issues, such as the lines, and the types of these lines, and the study will decide these at the conclusion of the studies.”

Askari added “the bank contributes to projects outside Egypt which will help achieve regional integration in Africa in the electricity sector. For example, it is currently investing in the unified electric grid for East African states, and is also working on a project to link electricity in Ethiopia and Kenya.” He added: “Each country in Africa has its own sources of generate energy, and this will create opportunities to share electricity power between African countries, and creates opportunities to export excess electricity to outside the continent.”

The Egyptian government’s economic reform program revealed plans to build nuclear power plants to generate electricity. Asked about these projects, Askari said that “the bank does not finance nuclear power projects. We have an energy strategy which does not include using nuclear power. The reason is that the use of nuclear energy is limited. Only South Africa uses nuclear energy on the continent, and what is more important is that there are other sources of energy available which should be used before thinking about nuclear energy.”