Egypt to build 21 desalination plants in phase 1 of scheme -sovereign fund

A view of work around an 84-metre well being dug to draw seawater that will be desalinated using solar power at the resort area of Marsa Shagra near Marsa Alam on Egypt's southern Red Sea coastline, Egypt, October 18, 2021. Picture taken October 18, 2021. REUTERS/Aidan Lewis
  • Desalination plants designed to help reduce water scarcity
  • Egypt also planning to use renewables for green hydrogen

CAIRO, Dec 1 (Reuters) - Egypt plans to award deals next year to build 21 water desalination plants in the first $3 billion phase of a programme that will draw on cheap renewable energy, the CEO of the country's sovereign fund said on Thursday.

Egypt, which recently hosted the COP27 U.N. climate talks and is trying to boost lagging investment in renewables, also aims to start production at a series of proposed green hydrogen projects in 2025-2026, Ayman Soliman told the Reuters NEXT conference.

Egypt depends almost entirely on the Nile for fresh water, and faces rising water scarcity for its population of 104 million. The desalination programme aims to generate 3.3 million cubic metres of water daily in the first phase, and eventually reach 8.8 million cubic metres daily at a cost of $8 billion.

There had been expressions of interest from more than 200 developers from at least 35 countries for the first phase, Soliman said.

The Sovereign Fund was set up in 2018 with a goal of attracting private investment in state-owned assets through partnerships and co-investments.

It is currently focused on getting private consortia to develop brownfield infrastructure, and private equity to develop state-owned enterprises ahead of public listings.

Privatisation plans in Egypt have been repeatedly pushed back, with the government blaming delays on economic shocks including the COVID-19 pandemic and the war in Ukraine as well as on legal obstacles. The plans have also met resistance from advocates of continued state control, analysts say.

'ECONOMIC CONSTITUTION'

Soliman said a state ownership policy that is meant to map out which parts of the economy are open to private investment would serve as the government's "economic constitution" going forward, and as a platform to crowd in private investment despite the rising cost of capital.

"We as a fund are very sharply focused on trying to find those champions to scale up, be it in agriculture be it in tourism, be it in infrastructure, or be it in banking financial services," he said.

At the climate talks in Sharm el-Sheikh, the government converted into framework agreements nine of 15 memoranda of understanding (MoU) for green hydrogen projects concentrated in the Suez Canal Economic Zone (SCZONE) that would produce millions of tonnes of hydrogen and ammonia.

At least another three or four MoUs were close to being converted, and more MoUs were planned, with cheap renewable costs and the scale of the potential fuel export market towards Europe making Egypt competitive, Soliman said.

Framework agreements give developers access to specific locations to allow them to plan production.

"This is not a competition. We are creating a pipeline or a blueprint for that process, aiming to start production in 2025-26 and all the developers are working backwards from there," Soliman said.

So-called green or clean hydrogen is produced using electrolysers powered by renewable energy to split water from oxygen. It is seen as a potential future power source that could reduce emissions, though to date it is largely limited to experimental projects. Analysts say challenges facing its growth include high costs and energy inputs, as well as safety concerns.

Egypt's projects would have desalinated water built in, and quantities required would be negligible compared to those produced under the national desalination scheme, according to the Sovereign Fund.

Additional reporting by Sarah El Safty; Editing by Jan Harvey, Nick Macfie and Nick Zieminski

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