By: Lamia Nabil
The Egyptian government has signed a $250m leasing agreement with the Islamic Development Bank (IDB) to purchase equipment for a power plant to generate electricity in South Helwan. The deal will be finalised after presidential approval
The Minister of Planning Ashraf ElAraby signed the agreement in mid-January with the IDB president Ahmed Mohamed Ali.
The project aims to meet the growing demand for energy in Egypt, with the capacity of the steam-powered plant in the South Helwan area will be 1,950 MW.
According to the agreement, the Government will lease the equipment from the IDB which will make the initial purchase for the project, and which will comprise three steam turbine generators to power 650 MW, and circuit breaker electrical capacity of 500 KV, for a period 15 years.
The rental period starts from the expiry date of testing the equipment or the end of the project’s preparation date. The IDB has stipulated that the government must thereafter rent this equipment to the Egypt Electricity Holding Company (EEHC).
Payment will be made in equal, semi-annual installments after a grace period of five years starting from the date of the first payment. The profit margin for the deal is equivalent to a six-month LIBOR rate (London Interbank Offered Rate) plus 115 basis points, the condition being that the profit margin cannot be less than 1% and cannot exceed 12% annually.
Furthermore, and the funding does not include any commissions. The IDB is committed after the transfer of the final payment to hand over ownership of the equipment to the Egyptian government for free.
According to the agreement, the IDB will bear all equipments costs and contracting value including equipment transport and insurance.
Spokesperson for the Ministry of Electricity and Energy Aktham Abu El-Ela said that this agreement will be directly between the EEHC, as it’s a government-owned company, and the IDB.
He added that the ministry is striving to meet the high demand-low supplies issues associated with such deals.
“Any financing in any form is extremely welcome,” said Mohamed El-Sobki, head of the Energy Research Centre (ERC). “And under more-or-less any conditions, especially nowadays, because we are real need of energy. It’s very good agreement for South Helwan.”
He added, however: “I would say it’s not a sustainable solution. The government must have plans to meet high market demands and financing methods have to be exceptional.”