FIT developers meet at EETC to discuss Round 2

The Egyptian Electric Utility Company (EETC) invited the Round 2 solar and wind Feed-In Tariff (FIT) developers to a meeting earlier today, which was also attended by the New and Renewable Energy Authority (NREA) and the Egyptian Electric Utility and Consumer Protection Regulatory Agency (EgyptERA) to discuss the latest developments of the programme. 40 solar developers (in addition to the 9 developers from Round 1) and 15 wind developers had so far expressed interest to proceed with the projects. The main takeaways of the meeting are the following:

For solar developers

  • EETC has already hired the Independent Engineer and has received two reports from them on the infrastructure works in Benban, which are currently being revised by EETC, and which would be circulated to the developers next week. This will confirm that almost 80% of the interconnection works have been completed. Following the circulation of the reports to the developers, EETC will issue its invoice for the third instalment under the Cost Sharing Agreement (CSA).
  • In order to reduce the cabling cost, EETC has requested NREA to expand the cables routes (in order to avoid the three-layer cabling method that was sanctioned earlier and that comes with a higher cost). For this reason, minor adjustments to the plots’ coordinates need to be made. This will affect the developers’ MOUs in that the minutes of hand-over of the land would need to be amended to reflect the new coordinates. This may require a site visit to adjust the flags and corners on site and to execute the amended hand-over minutes. The total surface area of the plots is maintained, as while the length is reduced, the width of the plots would be increased.
  • These attempts of EETC at cost reduction have apparently – and unfortunately – not prevented an increase in the cost of the infrastructure works being carried out, in particular the cost of interconnection, overhead lines and monitoring centre, which were put on hold by EETC due to the delays in the FIT programme. The new cost estimates (approximately between 15% and 20% increase on top of the 25% contingency cap of EETC) will be sent to the developers within two weeks’ time. The new costs will apply to both Round 1 and Round 2 developers, and EETC confirmed that this will naturally be subject to the reconciliation provided for under the CSA.
  • The new costs do not include the remuneration of EETC for the facility management work which the developers have now asked it to take part in. A new annex to the CSA would be created if EETC were to oversee such works, which would set out the details of this service. A meeting is being scheduled on Thursday, 23 February 2017, at 13:00, to discuss the details of the facility management proposal.
  • All infrastructure works in Benban are expected to be completed by the end of 2017.
  • The number of plots currently available in Benban, after moving Zafarana and West Nile developers thereto, is 4x50MW plots and 2x20MW plots, as confirmed by NREA. Any new developers interested in being allocated new plots must get in touch with NREA as soon as possible, according to the land availing process applicable.
  • Commitment letters from the lenders to finance the project, or an executed term sheet, are expected by EETC from the developers in April 2017. Only project finance is acceptable in Round 2, with no partial equity funding. Full equity funding with a commitment not to refinance could have been considered an option in Round 2, but is not favourable with EETC.
  • The Arabic version of the Principal Project Agreements is available and will be shared by EETC with the developers shortly. No approval from the State Council is currently needed.
  • The Ministry of Finance is ready to execute the Direct Agreements to guarantee the obligations of EETC; this has been confirmed by the State Council according to EETC counsel.

For wind developers

  • EETC is expecting the execution of the Cost Sharing Agreement by wind developers to take place soon.
  • Only 2 substations will be built at the early stage (nos. 2 and 4), since not all projects are going ahead. However, this does not require any change to the plots allocated, given that the determination of the substations to be built took into account the location of the allocated plots.

If you have any questions about the meeting, please do not hesitate to get in touch with us. You may reach out to Donia El-Mazghouny directly, and for more information on Shahid Law Firm’s expertise in renewable energy, please visit the Energy & Renewables practice page.

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