Construction companies double the prices of civil works for renewable energy investors.

Mohamed Farag

Reevaluating the Feasibility of Feed-in Tariff Projects After the "Currency Float"... Concerns Over Losses

Contracting companies have decided to withdraw their offers submitted to renewable energy companies for executing the civil works of feed-in tariff projects. They have also notified these companies of a doubling in the estimated implementation costs following the currency float.

The head of a solar energy company stated that contractors have sent new pricing for installation, concrete work, transportation, diesel, and construction, increasing by 100% compared to previous offers.

He told Al-Borsa that the floating of the Egyptian pound has led to increased project costs. Additionally, companies will face significant challenges when importing project equipment due to fluctuations in the customs exchange rate of the US dollar.

Solar panel manufacturers, including China's Suntech, have also withdrawn their offers to feed-in tariff companies in order to adjust their pricing after the rise in the US dollar exchange rate.

Hesham Tawfik, Chairman of CairoSolar, stated that implementation contractors will not undertake projects for less than 84 cents per watt. This presents a significant risk under the current circumstances and could lead to losses for renewable energy investors.

In response, renewable energy companies have begun reevaluating the feasibility studies of feed-in tariff projects, especially since previous financial assessments were based on an exchange rate of 8.88 EGP per USD. Profitability calculations were made accordingly, but with the currency float and the dollar now reaching approximately 16 EGP in banks, companies may face substantial losses.

A source at the Ministry of Electricity stated that the second phase of the feed-in tariff program takes currency exchange fluctuations into account, and the floatation of the Egyptian pound will reduce project risks by unifying the dollar exchange rate.

He added that 70% of feed-in tariff revenues will be calculated at the exchange rate of the Egyptian pound against the US dollar on the due date, while the remaining 30% will be fixed at 8.88 EGP per USD. This remaining portion includes 15% for taxes and 15% for operation and maintenance, ensuring the continuity of the projects.