Egypt’s deal with the German industrial company to supply gas and wind power plants to Egypt will increase its power generation capacity currently at 31 Gega watt(GW) by 50 per cent.
The 8 billion euro deal ($9 billion) was signed during president Abdel Fattah El-Sisi’s visit to Germany last week and comes as a followup for the memorandum of understanding finalised during Sharm Al Sheikh economic conference on March.
Together with local Egyptian partners Elsewedy Electric and Orascom Construction, Siemens will supply on a turnkey basis three natural gas-fired combined cycle power plants, each with a capacity of 4.8GW, for a total combined capacity of 14.4GW.
Each of the three plants will be powered by eight Siemens H-Class gas turbines, selected for their high output and record-breaking efficiency.Siemens has so far sold only 48 H-class gas turbines worldwide . The Egypt order includes 12 wind farms in the Gulf of Suez and West Nile areas, comprising about 600 wind turbines and an installed capacity of 2 GW. The installations, when completed, would add 16.4 gigawatts (GW) to Egypt’s national grid.
Egypt is going through its worst energy crisis in decades as the ageing state-run infrastructure is unable to face the rapid increase in consumption due to the high population growth rate. According to Reuters , Siemens Chief Executive Joe Kaeser said last month he had resigned himself to never selling another gas turbine in Germany which means that the deal will provide Siemens with a good market for this kind of turbines.
The deal would give the German company, which started doing business in Egypt in 1859, a competitive edge against its rival General Electric group(GE). GE said earlier this year it had a 30 percent market share while Siemens claimed a share of 25 percent before the deal.
Siemens has maintained a continuous presence in the country since opening its first office in Cairo in 1901. The company’s technology has been implemented in the Attaka, Nubaria, Talkha, Damietta, Sidi Krir, Cairo West, Ayoun Mousa, Midelec and El Kureimat power plants, according to a Siemens press release. The deal will be financed by Siemens Financial Services, supported by export credit agencies in Germany and Denmark, Siemens said.
Pharos, the local investment bank , pointed out in a note that the 14 GW thermal power plants will require around 600 billion cubic feet of natural gas supply. “This is roughly one-third of current nation wide production of gas and, most importantly, higher than the expected increase in natural gas production in 2017 from the gigantic West Nile Delta concession”
This implies , according to the note , that energy intensive industries will be competing for residual natural gas supply, if there is residual supply after the requirements of electricity generation stations are fulfilled. Alternatively, energy-intensive industries will be obliged to import LNG cargoes, which has been recently legalised by the government ahead of the Siemens deal.
