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Thursday, 18 May 2023

Egypt details tax incentives aimed to boosting green hydrogen industry

Egypt greenlights green hydrogen incentives: The Egyptian Cabinet approved yesterday a package of incentives aimed at stimulating the country’s nascent green hydrogen industry and increasing FX inflows, according to a statement. Under the draft decision, companies implementing green hydrogen projects within five years and deriving a certain percentage of their financing from foreign lenders will receive VAT and income tax breaks.

What’s on offer: Companies will receive tax breaks of between 33-55% on income earned from the plants, and will pay no VAT on raw materials, plant and machinery purchased for the projects. The facilities will be exempt from real estate tax, stamp tax, and a number of administrative fees. Companies will also be permitted to import and export without having their names in either of the registers.

To be eligible: Companies will need to have their projects up and running within five years and obtain at least 70% of their financing from foreign lenders. They will also be expected to source at least 20% of their inputs from local suppliers as part of the country’s push to increase localization and reduce reliance on imports.

Desalination projects and power stations are also eligible — if they link up with green hydrogen plants: The incentives also target water desalination projects that allocate a percentage of their production to green hydrogen projects, and green power plants that allocate no less than 95% of their production to green hydrogen.

New Red Sea wind farm also fast-tracked: Egyptian ministers yesterday approved a golden license to fast track work on the 500 MW Gulf of Suez wind farm being built by Egypt’s Orascom Construction, France’s Engie, and Japan’s Toyota Tsusho and Eurus Energy, according to a statement.

REFRESHER- The USD 680 mn project — which is slated to become Africa’s largest wind facility when it begins operating at full capacity in 3Q 2025 — reached financial close last month. It is being financed by a syndicate of Japanese and French banks alongside DFIs the European Bank for Reconstruction and Development (EBRD) and the Japan Bank for International Cooperation (JIBC).

A wind plant for Scatec and Maersk’s green projects: Egypt’s Cabinet also approved requests by Norwegian renewables producer Scatec and Danish shipping giant Maersk to allocate a piece of land in the Gulf of Suez for a 320-MW wind farm that will power their green projects: a green hydrogen plant and a USD 15 bn clean fuel project.

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