May 2022

U.S. Business Mission to Egypt

U.S. Business Mission to Egypt

"GreenTech Business Mission to Egypt"
May 15 - 17, 2022 | Cairo, Egypt

AmCham Egypt In Partnership with The U.S. Chamber of Commerce held the GreenTech Business Mission to Egypt

As Egypt prepares to host COP27 on behalf of the African continent this November, AmCham Egypt, and the U.S. Chamber of Commerce, leveraged their strong track record of convening U.S. business leaders with key government stakeholders to organize and host a GreenTech Business Delegation to Egypt.

The Mission featured a series of Events and Limited Sectoral Roundtable Discussions with:

H.E. Dr. Mostafa Madbouli
Egypt's Prime Minister
And Members of the Egyptian Cabinet
Leading the Mission from the U.S. side:
Ambassador David Thorne
Senior Advisor
Office of the U.S. Special Presidential Envoy for Climate
Jake Levine
Chief Climate Officer
U.S. International Development Finance Corporation

The Delegation comprised of senior representation from leading U.S. Government Financing Agencies and other organizations, including; Export Import Bank of the United States (Ex-Im Bank), United States Agency for International Development (USAID), United States Trade and Development Agency (USTDA).

In addition to Senior U.S. Government Representatives from the Departments of State, Commerce and Energy. Participating as part of the delegation are senior representatives from U.S. companies and financial institutions across a wide array of sector focuses, including but not limited to energy, power, healthcare, agriculture, aviation, construction, digital, transportation, and water resources management.

The first U.S. GreenTech Mission to Egypt stressed cooperation, the government's eco-friendly strategy, projects and financing needs.

Achieving the 1.5 degrees Celsius climate target of the Paris Agreement by 2030 will be essential for averting irreversible disasters, and it will require significant investment in eco-friendly projects. "Egypt is one of the countries greatly affected by climate change," said Prime Minister Mostafa Madbouly during the first U.S. GreenTech Mission to Egypt, held May 14-17. "As an emerging economy with a growing population, we need to have stable and predictable energy sources."

Highlighting the government's plans, projects and evolving investor-friendly climate, the business mission was organized by the American Chamber of Commerce in Egypt (AmCham Egypt), the U.S Chamber of Commerce, and the Office of the U.S Special Presidential Envoy for Climate. Madbouly noted, "This event is a continuation of our Strategic Dialogue meeting in November in [the United States] when we formed the Egypt-U.S. Working Group on Climate.”

Government strategy

The prime minister said the government has several plans in progress to make Egypt a sustainable, eco-friendly economy. The first is the Sustainable Development Strategy 2030 to have renewable energy sources account for 42% of the country’s electricity supply by 2035, up from the current 20%. Also, the state recently finalized Egypt's first Comprehensive National Climate Change Strategy 2050.

The government's priority investments are green hydrogen, sustainable transportation via natural gas and electric vehicles, and an integrated solid waste management program. "Those projects represent our [climate] mitigation strategy," Madbouly said.

On the adaptation side, the government is implementing several projects to protect shorelines and surrounding land. In addition, there are several desalination projects, and Egypt is working toward resilient agriculture.

Long term, the government plans investments in green hydrogen and decarbonizing high polluting sectors, including oil and gas, steel, cement and agriculture, Madbouly said. The government also wants to localize some eco-friendly industries, including the production of electric vehicles.

Realizing that such eco-friendly projects would require innovative solutions, Madbouly said all laws relating to intellectual property rights (IPR) are under review. "We tasked a cross-ministerial committee to develop an IPR Strategy to [ultimately] improve our ranking on the IPR Index,” he said. "In addition to reforming our IPR ecosystem, we will also raise public awareness of the importance of IPR."

GreenTech cooperation

Cooperating with the United States is essential to stimulate more eco-friendly investment in Egypt and finance government and domestic private sector projects. "This mission constitutes a step in the right direction regarding efforts to transform climate pledges into reality on the ground," said Sameh Shoukry, Egypt's minister of foreign affairs and COP27 president-designate, during the U.S. GreenTech Mission.

He stressed Egypt's government sees that "current economic models are not sustainable" and the way forward is a "just green transition." Shoukry noted that expediting eco-friendly projects across all sectors is crucial: "The sooner we shift toward a greener economy, a more sustainable consumption and production pattern, the quicker we will be able to harness the opportunities presented by such a shift."

David Thorne, senior adviser to U.S Special Presidential Envoy for Climate John Kerry, praised the government's recent decision to increase the private sector’s contribution to GDP to 65% over the next three years. "Egypt has been taking important actions regarding boosting the role of the private sector, which is very important for the country's economy. Governments can't [combat climate change] without the full partnership of the private sector," he said.

Eco-friendly and sustainable projects will continue to boom as governments and companies meet their climate obligations and pledges. "Green investment is a huge business opportunity," said Thorne. "Those who get in early will enjoy huge investment benefits."

Fuel for the future

The push for clean energy developments and pressure from governments and international organizations have put the oil and gas sector under the spotlight. Not only is the industry being called upon to decarbonize extraction operations, but its end products emit environmentally harmful gasses when used. However, economies can't simply discard fossil fuels in the short term. "Oil and gas would be needed in a transitional way," said Minister of Petroleum and Mineral Resources Tarek El Molla during the mission.

For Egypt, the priority is to increase investment in liquefied natural gas (LNG) during the current transitional period, as natural gas is considered the cleanest-burning fossil fuel. The East Mediterranean Gas Forum should be an ideal platform to attract investors in everything from natural gas extraction to exporting to Europe and MENA. El Molla labeled the forum a "success story" in consolidating energy efforts in the region.

Another step the ministry is taking is digitizing oil and gas operations to facilitate preventative maintenance, detect and reduce emission leaks, and improve the sector's environmental footprint. El Molla stressed that his ministry is "engaging more private sector companies" in those efforts.

The pressure is on the government, given that a significant portion of the industry consists of state-owned companies. "We have initiated several programs regarding energy efficiency and how to run complete operations digitally using different modes," El Molla said. The ultimate goal is to change the "old bureaucratic" organization to one with clear key performance indicators and digital operations.

The next step for El Molla is to integrate the oil and gas industry into the eco-friendly global movement. He noted how COP26 organizers stopped oil and gas companies from participating. The minister wants to avoid that this year by ensuring the sector doesn't "spoil or harm" the event. "We started to suggest [decarbonization] alternatives that could be more acceptable [in COP27]," he said.

Alternative fuel

The Egyptian government is currently focused on creating a hydrogen-powered economy by attracting FDI into projects that convert hydrogen gas into a fuel that facilities can use. Additionally, the country is attracting investments to build and modify facilities to use hydrogen.

The Sovereign Fund of Egypt’s (TSFE) Utilities Sub Fund focuses on infrastructure investment, particularly in the hydrogen-fueled economy. It aims to ensure individual opportunities are attractive to private sector investors. "Sustainability is not only around resource sustainability," said the fund's CEO Ayman Soliman. "Resource sustainability is one sliver of the model. The other part of it is the economic system," which includes financial feasibility, robust business models, robust contracts of partnerships, and governance.

Soliman noted the sovereign fund’s green hydrogen focus is on building plants to create clean fuel or generate the eco-friendly electricity necessary to power factories and other facilities such as water desalination and water treatment plants.

The TSFE CEO said green hydrogen is the missing link in the energy supply chain, allowing Egypt to attract investments in upstream, midstream and downstream projects. He added those opportunities would only be magnified as the government wants to localize the technology and the industry built on it and its applications. "We are looking at [an] eight-year curve."

Sustainable electricity

A significant contributor of harmful emissions is the electricity generation sector. It could also be one of the most straightforward to decarbonize. Mohamed Shaker, minister of electricity and renewable energy, said the government's feed-in tariff, announced in 2015, has helped renewable energy projects boom. In 2022, renewable energy accounted for more than 20% of Egypt's electricity needs.

The next milestone is to expand solar, wind, hydro and hydrogen plants to power 42% of the grid’s capacity by 2035. "We have another [strategy] for 2040, which will focus on increasing energy efficiency and power supply diversification," Shaker noted.

Ultimately, those projects should prove enough to create a parallel national electricity grid that distributes only electricity from clean, renewable sources. Shaker called it the "green corridor," which should distribute 70 gigawatts of electricity.

Solar should account for 25% of the total electricity generated, wind 14% and hydro 2%. The private sector should be the primary investors in those projects. Shaker said the ministry is organizing tenders and auctions for developing large-scale renewable energy projects and promising the winners tax rebates, VAT exemptions, and loan guarantees. "We are leaning very hard on the private sector to invest in renewables," the minister said.

The electricity ministry also provides solar and wind atlas information to help investors choose the best spots for their renewable energy farms. It also lays the groundwork for green-hydrogen-fueled power stations to feed the national grid. "We will announce our green hydrogen strategy soon," Shaker noted. "Its main target is for the fuel to generate 20 gigawatts of electricity by 2027."

To boost investments, the ministry is adjusting the feed-in tariff to remain competitive globally and imposing only 2% customs and taxes on imported equipment used in such projects. "We have multiple models and arrangements to cooperate with the private sector," Shaker said, adding that the government plans to announce more incentives and projects during the COP27 conference.

Green money

Egypt was the first country in the MENA region to issue green bonds, sovereign bonds that finance only eco-friendly projects. That debut was in September 2020 with a five-year bond worth $500 million, returning 5.75% interest. In November 2021, the private sector followed suit with Commercial International Bank (CIB) issuing a $100 million green bond, which the IFC bought. "Egypt is a pioneer in green finance in the region," said Madbouly.

However, the government needs more funding for its National Climate Change Strategy 2050. That financing will go into "large-scale eco-projects in agriculture, irrigation, sustainable transport and energy," said Rania Al Mashat, minister of international cooperation.

Significant financers for those projects will be international development institutions. In 2020 and 2021, Egypt secured $4.7 billion for development projects from the World Bank, African Development Bank, European Investment Bank and China, said Mashat. This year, she said the government would seek financing from the European Bank for Reconstruction and Development and the U.N. Development Programme, among others.

Mashat said her priorities would be projects that are green, inclusive, and digital, which will need suitable U.S. investments and financing models to yield the best results. "We want to showcase ourselves as an example in Africa, that we ... have several projects that have ... materialized in terms of their financing," said Al Mashat.

The Ministry of International Cooperation has lined up 28 adaptation projects worth $2.85 billion and 48 mitigation projects worth $7.83 billion for the private sector to enter. "We're working with many of the partners here … to try to see how we can … create more implementation from all the pledges and the trillions that we heard about” at COP26, said Al Mashat. "Egypt is impartial; adaptation and resilience are important, but implementation is key."