The government is allowing the private sector to own, not only operate, power plants, reports Sherine Nasr Local and international investors have been invited by the government to submit credentials in preparation for bidding to build the first privately owned thermal power plant under the "build, operate and own" (BOO) system. The project aims to build two combined cycle steam and gas turbines operated by oil and natural gas, with a capacity of 750 megawatt each, in the governorate of Beheira, northwest of Cairo, with the possibility of adding a third plant in the same area. According to Aktham Abul-Ela, media advisor to Minister of Electricity Hassan Younis, the deadline for making the bids is 31 March. A press release, issued by the Ministry of Electricity this week, said the selected company would sell electricity at a price approved by the Egyptian Electricity Transmission Company (EETC) that will be buying the output of the new plant for the next 20 years. The EETC, for its part, will sell the electricity according to prices approved by the Egyptian cabinet. According to Younis, having the private sector directly involved in securing an ever-growing energy demand for industrial, commercial and agricultural development is a fresh approach. The ministry has been encouraged by the success of inviting the private sector to build the first private 250 megawatt wind energy field under the BOO system early last year. Some 34 reputable international companies stepped forward, with the best 10 selected to submit offers. "To engage the private sector in the process is to lift the unaffordable burden of building and maintaining these power stations off the government's shoulders," said Abul-Ela. The conditions under which the new thermal plant will be built include full ownership of the plant after 20 years. The investor will have the right to use the land under concessional terms and will receive natural gas over the same period at $3 per million British thermal units (Btu). "These are quite favourable conditions that will undoubtedly lure more investors to come up with good offers," said a businessman and energy consultant to multinational companies who asked for anonymity. According to the source, the ministry's initiative to involve the private sector is a step in the right direction. "The state can not continue to pay the full cost for building new power generators, particularly as we know that electricity is subsidised in Egypt," he said. According to Amin Mubarak, professor of mechanical engineering at Cairo University and former head of the Industry and Energy Committee at the People's Assembly, the total cost for building thermal units of the same size under consideration can mount to LE4 billion. "By allowing the private sector to bid, the government is following an international model that has successfully long been in practice in other countries," said Mubarak, adding that while this is not the first time that the private sector has been invited to bid for power generation projects, it is the first time investors are allowed to own the power plants after the concession period ends. According to Mubarak, there are three major projects with a capacity of 2,000 megawatt in Sidi Kreir, Al-Sokhna and in Port Said that have been operating under the "Build, Operate, Own and Transfer" (BOOT) system for 10 years now. Those power plants will be transferred to the government once the concession period is over. According to Abul-Ela, Egypt's current installed capacity is estimated at 25,000 megawatts with a 7.5 per cent increase in demand every year. Egypt plans to expand its capacity to 32,000 megawatts in the near future. "There are plans to add to the capacity on an annual basis," said Abul-Ela, adding that the company that wins will be selected on the basis of its internationally recognised expertise in addition to its financial offer. "Because the plant will be handed over to the company by the end of 20 years, it is important that we get electricity at the best price possible," he said. Abul-Ela added that getting the best price is possible particularly since, "natural gas will be delivered at the very favourable price of $3 per million Btu while in other countries this may jump to $5 per million Btu." Mubarak added that, unlike the BOO system, plants operated under the BOOT system may be poorly maintained as the contract comes to its end, which causes losses to the government.
