Minister of Electricity Mohamed Shaker’s recent remarks against power companies have incensed investors. He said that investors knew from the beginning that the power purchase agreement (PPA) includes a condition for local arbitration in Cairo in case of any disputes. Investors signed the cost sharing agreement (CSA) which included that same condition, the minister added to reinforce his point.
A number of investors responded, saying that they had accepted local arbitration in the CSA as it is a 12-month agreement and includes the infrastructure cost at a maximum of EGP 30m. On the other hand, the PPA is a 25-year contract, and each project included would cost more than $100m.
Cairo Solar did not object to the local arbitration condition in the CSA, considering the temporary nature of the agreement, major shareholder and CEO of the company Hisham Tawfik said. “It was not a point of contention, as it included contracting and infrastructure work in project sites in Benban, Aswan,” he added.
The PPA, on the other hand, is a 25-year binding contract, Tawfik contended. “Governments will change and new leaders will come,” he said. “The rights of investors and financing banks must be considered and guaranteed.”
Founder and partner of Solar Shams Faisal Eissa said he did not object to local arbitration for the CSA with the Egyptian Electricity Transmission Company for the same reason as Tawfik. “The PPA is a long-term agreement and requires much bigger investments,” he argued.
The CSA is one of five agreements that investors who qualify to implement new and renewable energy projects on the feed-in tariff system must sign. The agreement provides for sharing the cost of linking the solar plants that will be built to the national grid, as well as the infrastructure on the project site in Benban, Aswan.
Head of the projects department at Desert Technology Mohamed El-Deley said that the CSA does not require funding from banks, whereas the PPA will remain binding over 25 years, which requires guarantees for investors and financing banks.
He pointed out that both the second and third drafts of the PPA that the German Consulting Firm Fichtner sent to international financing institutions included a condition for local arbitration in Cairo—but with the possibility of moving it to Geneva, Switzerland should both parties agree to that. However, that was removed from the current draft.
