The funds will be used to finance 13 large-scale PV projects being developed from both public and private companies.

Mouayed Makhlouf, IFC Director for the Middle East and North Africa said: “This landmark investment demonstrates that when you have the right reform policies, and a government willing to allow greater involvement by the private sector, you can attract investors in every sector, including infrastructure” adding “Investments like these are the nucleus for economic growth, which is needed in Egypt”.

The projects will be part of the 2GW national goal through Egypt’s landmark solar Feed-in Tariff (FiT) programme, aiming to harvest the country’s rich solar potential and develop the largest solar photovoltaic generation park in the world.

The 2 GW goal will be achieved through the development of 40 individual solar projects of approximately 50 MW each and help Egypt meet its target to source 20% of its energy from renewable sources by 2020.

Egypt’s solar FiT programme, will include projects financed by several development institutions like the European Bank for Reconstruction and Development (EBRD) and Proparco and is expected to be one of the largest foreign direct investments in years.

Last June, the European Bank for Reconstruction and Development (EBRD) approved a $500m package for 13 large-scale PV projects, as part of a 16-projects plant of 750MW total capacity.

Harry Boyd- Carpenter, Head of Power and Energy at the EBRD “We have been working with the Egyptian authorities since 2014 to help them fulfil their ambitious goals in this area. We are delighted now to be in a position to commit very significant financing to projects, which we expect to start construction before the end of 2017”.

The trust of Development Institutions to Egypt is expected to catalyse a further debt and equity inflow of $2 billion, highlighting Egypt’s re-emergence as an attractive investment destination.

The news came along despite Egypt’s announcement last December to reduce the FiT rate for PV projects to US$0.084 and US$0.078/kWh.

At the time, several power project developers claimed that the new rates would put in question the viability of several projects, although the new FiT price level is in line to rates seen in other regional markets.

Facing growing energy demands and pressure on fuel supplies for conventional energy generation, Egypt is focusing on renewable energy as a viable and effective source to add to the gas-dominated energy mix. Egypt’s New and Renewable Energy Authority aims to generate 20 percent of its power from renewables by 2020.

Egypt will need to add about eight gigawatts, foreseen to be split between 5.5 gigawatts of wind power, and 2.5 gigawatts of solar power according to EFG Hermes, one of the leading investment banks in the Arab World.

As a result, EFG Hermes predicts a debt and equity investment opportunity of approximately $6 to $7 billion for Egypt’s feed-in-tariff renewable energy program to 2018.

In these challenging times, renewable energy is increasingly serving as an innovative solution for Middle East and North Africa countries, especially Egypt, to rebuild, reconstruct, and drive diversified economic growth.

Renewable energy’s low cost of production, reduced environmental impact, and ease of implementation in rugged and demanding situations make renewables the best power source for Egypt’s future. Whether developed by governments, the private sector, or NGOs, renewable energy can transform the key development pillars of power, health, infrastructure, education, and people.

“We are bullish in the short- to medium-term on Egypt’s renewable energy projects. But it’s a matter of properly executing the first feed-in-tariff wave. The Government’s implementation of the regulatory framework is one of the biggest challenges. Once the right implementation plan is in place, then it will be easy for international lenders to be fully comfortable with Egypt’s renewables sector,” said Bakr Abdel-Wahab, Managing Director of Infrastructure Private Equity at EFG Hermes.

“There is a lot of focus on investors and developers, but we have to remember that 60 to 75 per cent of the funding will be via debt from international and multi-lateral institutions. All the necessary structural changes need to be in place to assist aggressive debt financing,” added Bakr Abdel-Wahab.

Bakr Abdel-Wahab will address financing renewables at both the Egypt Energy Forum and the World Future Energy Summit 2016, hosted by Masdar and part of Abu Dhabi Sustainability Week.

Currently, Egypt is deploying several different development models for renewable energy projects. These include bilateral agreements between the government and private developers, feed-in-tariff where the government pays set tariffs for renewable energy, and Build-Own-Operate and Build-Operate-Transfer tenders for more competitive bidding by developers.

Egypt is working on a range of measures to make opportunities more accessible to equity investors and lenders alike, including ensuring currency stability for settling renewable energy tariffs and funding the capital expenditure requirements of power projects, EFG Hermes said.

Moreover, many of Egypt’s renewable energy projects under the feed-in-tariff regime are split into 50 megawatt contracts, which has created a fragmented renewable sector that lends itself to further aggregation and consolidation of opportunities by larger developers and investors.

“Egypt’s renewable energy sector is very promising and will become substantially more so as roadblocks including currency convertibility are cleared. To be able to raise equity for these projects, for example via a dedicated renewable energy fund, investment managers require immediate tangible opportunities for investment. Investors do not prefer to hold commitments without disbursements for excessing periods,” added Bakr Abdel-Wahab.

“We would also expect that larger developers will consolidate projects and develop strategic partnerships within the sector, resulting in the acceleration of renewable energy development,” concluded Bakr Abdel-Wahab.

By Matthew Amlôt