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Tuesday, 30 August 2022

Could FDI help Egypt’s solar industry traverse the FX crisis?

Import restrictions are threatening Egypt’s solar industry, industry insiders tell us: A shortage in solar panel components in Egypt could put projects in the country at risk, according to Egypt’s Solar Energy Development Association (SEDA). Key components including solar cells, transformers, solar heaters are increasingly rare, SEDA board member Hatem Tawfik tells Enterprise Climate. “This comes as a result of import regulations [in the country] that impose letters of credit (L/Cs) for imports,” he adds. SEDA understands that manufacturing is a priority for L/Cs, but it also believes that electricity production should be included as a priority area, as this is a critical industry right now, Tawfik says. “This is especially the case because every USD 1 mn spent on solar saves Egypt some USD 10 mn per annum in natural gas.”

A number of 30-40 MW solar projects are already at risk, SEDA says: “On-grid solar energy projects currently under development in the country range from 30 to 40 MW, and they could save up to USD 400 mn annually if used to generate power through renewable energy,” he tells us. These projects are at risk of continuing their work unless urgent action is taken, Tawfik noted.

Background: Last March, the Central Bank of Egypt made it mandatory for importers to obtain L/Cs for their imports. The policy was aimed at reducing the rate at which Egypt was burning foreign exchange amid a serious emerging-market sell-off triggered by Russia’s invasion of Ukraine.

SHORT TERM FIX- Enterprise Egypt reported yesterday morning that Egyptian officials may be about to take steps to make it easier for some importers to source hard currency if they’re bringing in critical raw materials or production inputs. The hope is that they could make it easier for solar products to source the components they need. The news comes after central bank governor Tarek Amer resigned with more than a year to go on his second (and final) term in office. He was replaced by veteran banker Hassan Abdalla, who previously led Arab African International Bank (AAIB), a joint venture between the central banks of Egypt and Kuwait.

LONG TERM FIX- A domestic component industry, thanks to Beijing? Egypt’s government is in talks with unnamed Chinese players to build and finance a USD 2.3 bn complex to make solar-panel components, Bloomberg Asharq reports, citing four unnamed government sources.

Details: The complex — which could be located in Suez, Minya or Aswan — would house silicone, polysilicon, chip-cutting, solar cell, glass, and PVC plastics factories, as well as a station to power the facility. Egypt’s electricity, military production, planning and trade ministers are all reportedly part of the negotiations with Chinese firms to build the project and are also in talks with Chinese banks for a long-term, low-interest loan to finance it. Asharq’s sources did not disclose a timeframe for the talks.

This isn’t just an Egypt problem: The solar industry has been hobbled by supply chain kinks and the cost of solar power components globally has risen sharply this year, climbing some 15% between May and early August, according to Bloomberg, which cites data from the China Silicon Industry Association.

Thankfully, this hasn’t put a damper on solar regionally — particularly in energy exporting countries. Just last week, Qatar awarded two major utility-scale solar power projects worth QAR 2.3 bn (USD 632 mn), according to Qatar News Agency.


Egyptian solar energy company KarmSolar will sell a minority stake to investors via a capital increase as it looks to expand its presence in Egypt and across the region, according to a company press release (pdf). KarmSolar hopes to raise “a significant amount” in the investment round, KarmSolar CEO Ahmed Zahran told Enterprise on Monday, without disclosing the target sum or how much equity will be on offer. The capital injection will help grow the company’s existing power generation and distribution business and allow it to push into new markets in the region, Zahran said, without naming any specific countries. Funding will also be directed to its solar-powered desalination firm KarmWater, he added.

EV charging firm in the works: Part of the capital increase will go towards a new EV charging venture, KarmCharge, that the company hopes to launch early next year, Zahran said.

You can catch the full story in today’s EnterpriseAM.

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