Thursday,18 January, 2018
Current issue | Issue 1373, (14 - 20 December 2017)
Thursday,18 January, 2018
Issue 1373, (14 - 20 December 2017)

Ahram Weekly

Going nuclear

Egypt will begin producing nuclear energy by 2026, writes Ahmed Kotb

Going nuclear
Going nuclear

President Abdel-Fattah Al-Sisi and his Russian counterpart Vladimir Putin witnessed the signing ceremony of $30 billion deal between Russia’s state-owned nuclear corporation Rosatom and Egypt’s Ministry of Electricity and Renewable Energy (MERE). 

The deal, which took two years to negotiate, was concluded on Monday. Construction of the nuclear power plant at Al-Dabaa on the coast of Marsa Matrouh governorate, 295 kilometres from Cairo, will begin immediately.

The plant will comprise four nuclear reactors with a total capacity of 4,800 megawatts (MW). The first reactor, with a capacity of 1,200 MW, is expected to begin commercial operations in 2026, says MERE. The remaining three reactors should be online by 2028. 

The nuclear deal includes a $25 billion loan from Russia to cover 85 per cent of the construction and service costs for the four reactors’ 60-year life expectancy, Rosatom Chairman Aleksey Likhachyov told Russia Today. Egypt will raise the remaining 15 per cent from private investors.

Rosatom will also help Egypt develop its nuclear infrastructure and train employees. Workers will receive training in Russia where hundreds of Egyptian students are expected to travel over the next few years.

Minister of Electricity Mohamed Shaker issued a press statement on Monday announcing that all legislative and legal procedures had been finalised and the design, construction, consultancy services for operation and maintenance, nuclear fuel supply and protocols for the management of nuclear waste had been agreed. 

Local companies will account for 20 to 25 per cent of production inputs for the first and second reactors, providing 15,000 new job opportunities for Egyptians, says MERE. 

A grace period of 13 years before loan repayments begin has been negotiated, a period Shaker says is “enough to finish construction of the plant and for it to begin generating revenue”. The loan will be advanced in tranches between 2016 and 2028.

A report published this week by the Egyptian Initiative for Personal Rights (EIPR) points that the three-per-cent interest on the loan will kick in as soon as the first instalment is received, though the original loan will only begin to be repaid after 2028 when all tranches have been received and the four reactors are complete.

When interest payments are factored in Egypt will have to repay $48 billion by 2050, which the report says “is a heavy burden on Egypt’s external debt”. 

According to the Central Bank of Egypt, Egypt’s current external debts stand at $79 billion.

Hussein Al-Shafei, head of the Egyptian-Russian Foundation for Culture and Science, believes the additional debt is easily sustainable.

“Egypt will generate more than $264 billion in net profit from the nuclear power plant once it becomes operational in 2026,” Al-Shafei told Ten Television Network.

“The loan and its interest represent a small portion of the more than $300 billion in revenues expected to accrue during the lifetime of nuclear reactors.”

The third-generation reactors planned for Al-Dabaa offer the highest levels of safety and operate with normal pressurised water, says MERE. The leaks at Fukushima and Chernobyl occurred in reactors that operate using boiling water.

Egypt first considered a nuclear power plant at Al-Dabaa in 1984 only for plans to be derailed by the Chernobyl disaster of 1986. The government subsequently placed the project on hold.

Rosatom was selected following a process of international bidding.

“Only the Russian bid included fuel enrichment,” Alaa Ezz, secretary-general of the Egyptian-Russian Business Council (ERBC), told Al-Ahram Weekly. “Now Egypt will have a complete supply chain which will ensure the stable running of the project.”

Egypt has been working on diversifying its energy sources. “We are planning to turn Egypt into a centre for energy generation, the goal being not just self-sufficiency but to generate power for export,” Shaker said in a press statement on Monday.

An intergovernmental agreement between Egypt and Russia to begin cooperation on nuclear energy was initialled in November 2015 and expected to be finalised in 2016. Progress was delayed following the crash of a Russian passenger plane over Sinai in October 2015.

Following the incident Russia suspended flights to Egypt, a major blow to the tourism industry. On Monday Putin said Moscow is ready to resume direct civilian flights following major upgrades in airport security. Russian Transport Minister Maxim Sokolov said on Monday he expected flights to begin again in February 2018.

Al-Sisi and Putin also discussed ways to strengthen economic ties and develop the Russian Industrial Zone (RIZ) into the biggest industrial centre in the region. “Total investment in the project is expected to reach $7 billion,” said Putin.

A memorandum of understanding to establish the Russian Industrial Zone in the Suez Canal area near the coastal city of Port Said was signed in February 2016 but the project hit problems because the designated area, southeast of Port Said, is better suited to light and medium projects rather than Russia’s typically heavy industry.

Ezz told the Weekly Russian companies are now conducting feasibility studies for the building of light and medium industrial plants in southeast Port Said while heavy industries will be located on the other side of the canal.

Ezz points out that Russia will benefit from the market of more than two billion consumers made available through free trade agreements. “There are 28 Russian companies ready to invest and manufacture in the zone,” he said, adding that more companies will follow suit.

RIZ will offer tax incentives to Russian companies and their partners. A major selling point is the access offered to fast-growing African markets. Egypt has free trade agreements with more than 70 countries in Africa, the Middle East and Europe and products manufactured in Egypt with a minimum local content of 40 per cent are exempted from import duties.

When the Tripartite Free Trade Area agreement between the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the East African Community (EAC) comes into effect Egypt will become the gateway to 2.6 billion consumers. The African initiative was signed in Egypt in 2015.

According to the Ministry of Trade and Industry, bilateral trade between Egypt and Russia reached $4.16 billion in 2016. Putin said on Monday that trade between Russia and Egypt has increased by 48 per cent compared to the same period last year.

Egypt imports petroleum products, wheat, cars and wood from Russia and exports agricultural products (mainly fruits and vegetables), garments, textiles and electronics.  

According to Egypt’s State Information Service, 416 Russian companies currently operate in Egypt with a total investment of $60 million. 

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