Thursday,23 November, 2017
Current issue | Issue 1305, (28 July - 3 August 2016)
Thursday,23 November, 2017
Issue 1305, (28 July - 3 August 2016)

Ahram Weekly

No agreement on international arbitration

Differences linger between the government and some investors who have applied for the first phase of supplying solar energy through the feed-in-tariff (FIT) scheme.

 

eco
eco
Al-Ahram Weekly

 

Enel Green Power and Électricité de France are reported to want to back out of their investment in Egypt’s New and Renewable Energy Agency (NREA)’s 1.8 gigawatt (GW) solar park, which includes 39 separate project plots. The two companies are among over 20 who have lost financing from international financial institutions such as the International Finance Corporation (IFC) because the law regulating foreign direct investment in Egypt only allows for domestic arbitration in case of disputes.

The international institutions want international arbitration, since if dispute settlement is domestic the government could litigate against the decision which would mean dealing with Egypt’s complex judicial system, said Hisham Tewifk, chairman of Cairo Solar, one the companies affected by the decision. He said it was difficult to find alternative financing because the institutions were providing long-term financing in hard currency and were taking currency convertibility risks. The hard currency resources of local banks were already strained, he said.

The FIT scheme was introduced by the government in 2015 to encourage investment in renewable energy. It allows any person or company, public or private, to generate electricity from renewable sources such as wind and solar and sell it to the national grid. A second phase of the FIT scheme is due to be launched in October, and it remains to be seen what the terms will be like regarding the price offered and the dispute settlement mechanism. The government was offering investors 14.3 cents per kilowatt hour (KW/H) in the first phase.

Tewfik said it was likely that it would offer a lower rate in the second phase, as is the case in Jordan, which offers around 6.8 cents per KW/H. However, he said that investors in Jordan bear lower cost with lower taxes, lower infrastructure costs, and no convertibility risks. “If the government believes that the rate it offered was too high, it could have lowered capacity,” Tewfik said.

In the meantime, investors have not given up trying to convince the government. If no agreement is reached, Tewfik said many investors will pull out, though they may still apply in the second phase if the terms are favourable.

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