On the 21st of December 2014, Egypt issued a new law on incentivizing power generation from renewable sources in Egypt (the “Law”).

According to the Law, projects for generation of power from renewable sofor investors to construct, own, and operate renewable energy power plants. EETC would offtake all the power generated by these plants at the price to be agreed with the investor (without adhering to a feed-in tariff).

1- Tenders by the EETC ed power to EETC and distribution companies through offtake agreements at a set price (the feed-in tariff)

2- Investors may construct, own and operate renewable energy power plants and sell the generaturces may be created, among others, as follows:

3- Investors may also independently construct renewable energy power plants and directly enter into agreements with consumers to sell power generated from renewable sources. We expect, however, that the prices under this arrangement will be subject to approval from the Egyptian Electric Utility and Consumer Protection Regulatory Agency (ERA).

According to article 5 of the Law, the ERA issues licenses to producers and sellers of power generated from renewable sources. Investors who build renewable energy power plants with a capacity of over 500 kW must incorporate a Project Company in the form of a joint stock company under law 8 of 1997 (the Investment Law) to implement the project and hold such licenses.

Power producers who generate power for their own consumption only, and renewable energy power plants with a capacity of 500 kW or less, are exempted from this licensing requirement.

According to article two of the Law, government land for renewable energy projects may be allocated under a usufruct arrangement with the annual usufruct fee priced at the value of two percent of the electricity produced. The government will not bear difference between the feed-in tariffs and the prevailing power prices, but will rather apply “Renewable Portfolio Standards” by mandating certain categories of consumers (as determined annually by the Cabinet of Ministers) to purchase certain quotas of renewable power at the feed-in applicable tariffs.

Finally, regarding the cost of connection to the national electricity grid, article six of the Law states that EETC or the relevant distribution company, as the case may be, shall bear the costs of connecting renewable energy plants to the national grid. If EETC or the relevant distribution company is unable to connect such plants to the grid, it shall purchase the power produced from such plants in accordance with the rules to be issued by the ERA in this regard.

First round of Feed-in Tariff qualifications announced.

Implementation of the recently introduced regime for feed-in tariffs in Egypt referred to under 2 above is already underway. Investors wishing to implement projects under the feed-in program must be qualified by the ERA first. Qualified bidders for the first round were announced last week. Twenty-eight companies were qualified for wind energy projects, and sixty-nine were qualified for solar energy projects with a capacity above 50 MW. (A list of qualified companies can be found here.)

No date for the second round for qualifications has been set yet. We do not expect this to take place soon, as we understand the government received in the first round significantly more requests for qualifications than originally expected.