Belt and Road 2018: Egypt coal power

FinanceAsia examines what China’s Belt and Road initiative has actually brought to the world last year. This is the fourth of our 10-part series.

China’s trillion-dollar Belt and Road Initiative is hailed as the “project of the century” as the world’s second-largest economy looks to take the lead role in globalisation historically held by the West.

Much has been discussed about the political, economic and cultural impact that the initiative could have globally since it was introduced in 2013. However, there has been little attention paid to the infrastructure projects in the making.

FinanceAsia will publish a series about the 10 biggest Belt and Road infrastructure deals that have been signed in the 2018 calendar year, and examines which companies are spearheading and likely benefitting from these projects.

The series follows a similar feature in 2017 where we examined BRI projects that started that year. Click here to revisit the feature.

These projects will be published in descending order based on their estimated project value. We will only include infrastructure deals of more than $1 billion.

         4. Hamrawein Coal-fired Power Plant, Egypt

Companies involved: Dongfang Electric Corporation, Shanghai Electric Group, Hassan Allam Construction (Egypt)

Status: Contracts signed in September 2018

Estimated project value: $4.4 billion

One of the overriding objectives of China’s Belt and Road Initiative is to export some of the country’s excess industrial capacity. As a result, many Chinese companies do not consider the return on their investment as a priority when bidding for overseas infrastructure projects.

China’s involvement in the Hamrawein power project is a typical example of how the country’s contractors win overseas projects with aggressive bids.

In September, a China-led consortium involving Dongfang Electric Corporation, Shanghai Electric Group and Egypt’s Hassan Allam Construction outbid its American and Japanese-Egyptian counterparts for the tender to build a 6.6 GW coal-fired power plant on the eastern coast of Egypt.

The consortium agreed to build the project for $4.4 billion, a cut-throat price that was 24% lower than the $5.8 billion bid by an American consortium led by General Electric. Another consortium comprising Japan’s Mitsubishi Hitachi Power Systems and Egypt’s Orascom Construction and Elsewedy Electric made an even heftier bid of $7 billion.

The Hamrawein project marks a symbolic transformation of Egypt’s energy sector because it will be the country’s first coal-fired power plant, underscoring the government’s efforts to diversify the energy mix for an economy that generates most of its electricity from crude oil and natural gas.

As the largest non-OPEC oil producer in Africa and the third-largest dry natural gas producer on the continent, it is perhaps unsurprising that Egypt has not relied on coal as a power source. However, while many coal-dependent countries are moving away from the environmentally unfriendly energy source, Egypt has started to embrace it.

Cairo dropped its long-standing ban on coal imports in 2014, three years after the massive anti-government protest at the Tahrir Square sparked a wave of uprisings in the Middle East known as the Arab Spring. The country’s persistent energy shortage was among a list of grievances that caused the Tahrir Square protest.

Two years later, Cairo amended the law to allow coal-fired electricity with the aim of developing 9.8GW of coal-fired power by 2025. The bulk of the power is expected to come from the Hamrawein project.

The Hamrawein facility will be partly financed by Chinese banks including Industrial and Commercial Bank of China (ICBC), Export and Import Bank of China, and China Development Bank.

It is expected to create over 5,000 jobs at the development stage and another 1,000 after completion.

¬ Haymarket Media Limited. All rights reserved.
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