{"id":606258,"date":"2023-09-13T00:00:00","date_gmt":"2023-09-13T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/the-govt-is-pacing-out-its-water-desalination-plant-plans-on-fx-challenges-land-allocations\/"},"modified":"2023-09-13T00:00:00","modified_gmt":"2023-09-13T00:00:00","slug":"the-govt-is-pacing-out-its-water-desalination-plant-plans-on-fx-challenges-land-allocations","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/the-govt-is-pacing-out-its-water-desalination-plant-plans-on-fx-challenges-land-allocations\/","title":{"rendered":"The gov\u2019t is pacing out its water desalination plant plans on FX challenges + land allocations"},"content":{"rendered":"

Desalination plants tender pushed to 4Q 2023 from 3Q: <\/strong> The government is pushing back the tender for as many as four desalination plants on the north coast \u2014 as part of the government\u2019s water desalination program \u2014 to December 2023, Director of the Finance Ministry's public-private partnerships (PPP) unit, Atter Hannoura, told Enterprise. The tender for the first batch of three or four plants, which a Sovereign Fund of Egypt (SFE) spokesperson told us in May<\/a> was set to kick off in 3Q 2023, is now waiting on the land allocation process to be completed.<\/p>\n

REFRESHER- This has been in the works for almost four years: <\/strong>The government\u2019s water desalination infrastructure drive comes in response to concerns about water scarcity, particularly in light of developments related to the Grand Ethiopian Renaissance Dam (GERD)<\/a> and the necessity for water in various development projects. In 2020, Egypt announced a plan to invest more than EGP 134.2 bn<\/a> in desalination plants that would give us 8.85 mn cubic meters per day (cbm\/d) of freshwater.<\/p>\n

Who are the private sector players in the running? <\/strong>Some 10-14 qualified consortiums from an earlier tender round this year will be invited to submit financial and technical proposals for these plants, said Hannoura. The government intends to tender a total of 21 desalination plants. The SFE has prequalified 17 consortiums<\/a> out of 25 to bid in its upcoming tenders for renewables-powered desalination projects. The firms were chosen with the technical help of the PPP unit.<\/p>\n

Investments + capacity: <\/strong>Each plant is expected to require investments worth USD 270 mn and have a production capacity of 300k cbm\/d, said Hannoura. The first batch of plants will require a total investment of c. USD 1.5 bn, he told us.<\/p>\n

What\u2019s the hold up? Revising costs + land allocation: <\/strong> \u201cExchange rate fluctuations may necessitate adjustments in the investments required for the projects,\u201d said Hannoura. The Finance Ministry is still determining the size of the required investment against the backdrop of global inflation and a weaker EGP, a government source told us, confirming what we were told<\/a> back in March. Allocating lands to the projects is another time consuming process that entails local municipalities ceding control of the land to the SFE, which in turn allocates them to private sector players.<\/p>\n

The FX is needed for importing key components: <\/strong>Most of the components needed for the construction of the desalination plants and the solar and\/or wind plants that will power them are to be imported, which poses a challenge to the projects considering our ongoing FX crunch. Manufacturers have been struggling to import key components for more than a year after the war in Ukraine helped trigger a nationwide FX crunch that has made it difficult to secure the hard currency needed to cover shipments.<\/p>\n

Private sector players will need to source the necessary FX: <\/strong> Private sector players will be responsible for securing the necessary funding from various sources in accordance with the implementation schedule, said Hannoura.<\/p>\n

DFIs are lending a helping hand: <\/strong>The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) are advising the SFE<\/a> on technical and legal aspects of the public-private partnerships as well as ESG assessments for the projects \u201cin order to bring to the market a solid investment product,\u201d the release reads. The SFE will be investing in the plants alongside successful private-sector players.<\/p>\n

The long term plan: <\/strong>The strategic plan for desalination is divided into six five-year plans until 2050. These plans aim to achieve a total capacity of 8.85 mn cbm\/d across 11 coastal governorates nationwide, Deputy Housing Minister Sayed Ismail told us. The first five-year plan, which is currently underway, includes the establishment of 21 desalination plants with a capacity of 3.5 mn cbm\/d, expandable to 6.6 mn cbm\/day, Ismail added.<\/p>\n

Starting from Matrouh: <\/strong>The initial phase of desalination plants will concentrate on the Matrouh region and the northwestern coast due to their readiness and the potential for solar energy projects to power the plants, a government source told us. Priority will be given to consortiums working on technology localization for desalination plants, the source added.<\/p>\n

Powering the desalination plants with renewables: <\/strong> The government is tendering five solar<\/a> power plants<\/a> on the north coast to power some of our desalination plants and these renewable plants are expected to require a combined USD 270 mn worth of investment and will be built under a 25-year build-own-operate contract. They will have a combined capacity of 250 MW and will help desalinate over 400k cbm\/d.More than six consortiums have expressed interest in the tender for five solar power plants up for grabs on the north coast. The consortiums have until 27 September<\/a> to submit their offers to the Egyptian Electricity Holding Company.<\/p>\n

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