Project Description
Provision of a sovereign loan of up to EUR 165 million to the Arab Republic of Egypt, to be on-lent to the state-owned Egyptian Electricity Transmission Company (“EETC”), to finance the upgrade and reinforcement of the electricity transmission grid in Egypt.
The proceeds of the loan will be used to finance (i) the upgrade of a 500 kV substation in the Cairo governorate in Egypt that is crucial for the stability of the network and is directly linked to the closing of a gas-powered power plant (Shoubra El Kheima) under the Energy Pillar of Egypt’s Nexus Water, Food & Energy (NWFE) initiative, and (ii) the construction of a 200 km high-voltage overhead transmission line (OHL) that will relay c. 2.1 GW of renewable energy from the Gulf of Suez region, where several wind projects are currently under development or construction.
Project Objectives
The Project will be the first grid investment under a USD 2 billion investment programme to be implemented by EETC under the NWFE initiative. The Project will help unlock Egypt’s renewable energy potential by tackling one of the main obstacles impeding the roll-out of more renewables. Expansion and upgrade of the ageing transmission and distribution network is crucial in allowing Egypt to achieve its long-term strategy of having 42% of the electricity generated on peak load come from renewables by 2030.
The quantifiable benefits of the Project include the connection of new loads and the reduction of grid losses. The unquantifiable benefits include relief of overloading on neighbouring substations, improvement of voltage profile, and increase of system security.
Transition Impact
ETI score: 60
The Project is on the Green Energy Transition (GET) Direct Track. 60% of the proceeds of the loan will be used to finance part of the 200 km overhead transmission line to relay c. 2.1 GW of renewable energy from the Gulf of Suez region, where several wind projects are currently under construction; this portion of the proceeds will qualify as GET finance. 40% of the proceeds of the loan will also be used to finance the upgrade of the Cairo high- and medium-voltage substations in other areas across the country, but this amount of GET finance will only be determined during due diligence.
The Project is also the first grid investment under the NWFE initiative, a policy dialogue initiative developed by the Bank and announced at COP27 in Sharm El Sheikh. The initiative as a whole is expected to lead to GHG emission reductions of around 17 million tCO2 per annum.
Client Information
EGYPT SOVEREIGN
The Project implementation entity is EETC, which is the state-owned owner and operator of Egypt’s medium- and high-voltage network transmission system. It is a 100% subsidiary of the Egyptian Electricity Holding Company (“EEHC”), the state-owned utility which in turn is 100% owned by the Ministry of Electricity and Renewable Energy (“MoERE”).
EBRD Finance Summary
EUR 165,000,000.00
Total EBRD financing of up to EUR 165 million to finance the upgrade of the 500 kV substation (40% of EBRD financing) and the construction of the 200 km OHL (60% of EBRD financing).
Total Project Cost
EUR 200,000,000.00
The Project will require total financing of EUR 200 million split between an EBRD loan of EUR 165 million and EU grants (subject to EU approvals) of EUR 35 million. Up to EUR 120 million of the blended facilities (60% of total financing) will be used to finance the 200 km OHL, and the remaining EUR 80 million (40% of total financing) will finance the upgrade of the high-voltage substation.
Additionality
Financing Structure: EBRD offers financing that is not available in the market from commercial sources on reasonable terms and conditions, e.g. a longer grace period. Such financing is necessary to structure the project. EBRD offers a tenor, which is longer than available to the client in the market on reasonable terms and conditions.
Risk Mitigation: EBRD helps the client to mitigate carbon transition risks and take climate action, such as to move along a low carbon transition pathway. EBRD helps the client to mitigate environmental, social and governance (ESG) risks through identification of risks related to the depletion of natural capital assets, raw materials and water availability, etc., and to manage risks.
Standard-setting: helping projects and clients achieve higher standards: Client seeks/makes use of EBRD expertise on higher environmental standards, above ‘business as usual’ (e.g. adoption of emissions standards, climate-related ISO standards etc.). Client seeks/makes use of EBRD expertise on best international procurement standards.
Environmental and Social Summary
While the sovereign loan is presented under one package, separate board approvals will be sought for the two tranches of the loan as they will finance separate projects in different locations and are therefore associated with different environmental & social risks due to the location and categorisation, and will therefore undergo separate due diligence. Tranche 1 will finance the upgrade of the Cairo 500 kV substation, is categorised B, and will not require an ESIA. Tranche 2 will finance the construction of the 200 km OHL which is categorised A under the 2019 ESP and will require an ESIA.
The upgrade and extension of the existing substation in Cairo (Tranche 1) is associated with environmental and social impacts that are readily identifiable and which can be managed and mitigated through the provision of targeted mitigation measures. Independent E&S due diligence (ESDD) is being undertaken for Tranche 1 focusing on occupational and community health and safety, contractor management, stakeholder engagement and environmental and labour management. The ESDD will consider the capacity of EETC to implement the Project in line with the Bank’s E&S requirements and an ESAP will be developed to address any gaps identified. A Stakeholder Engagement Plan and Non-Technical Summary will be developed for Tranche 1 and disclosed in both English and Arabic.
Tranche 2 is categorised A as the high voltage OHL is expected to pass through two important bird areas and a protected area in the Gulf of Suez (GoS). The GoS is also located on a major migratory bird flyway which has been a key consideration of the Bank’s wind power projects in the area. The Project will require a comprehensive ESIA including disclosure thereof for 120 days. A key consideration in the ESIA will be collision risks to migrating birds and adequate baseline information to assess and mitigate this risk. The ESIA will be informed by both existing migratory soaring birds surveys data available from the wind power projects in the GoS area and additional surveys to inform the final Project design and mitigate collision risks to the extent possible. Other E&S considerations include land acquisition, impacts on terrestrial habitats and potential social issues noting, however, that the line is generally distant to residential areas. Independent consultants are currently undertaking the ESIA including the required avifauna surveys in line with international standards. A disclosure package comprising of the ESIA, ESMP NTS, SEP, and ESAP will be disclosed on the Bank’s website in both English and Arabic for 120 days prior to Board approval.
Technical Cooperation and Grant Financing
The following technical cooperation (TC) assignments are envisaged as part of this Project:
1) Advance Procurement Support to EETC, financed by the EBRD Shareholder Special Fund (SSF);
2) E&S Scoping Assignment to identify key risks, impacts and opportunities related to the Project, financed by the SSF;
3) Bird migration study to identify key environmental risks and impacts related to the Project, financed by the SSF;
4) Environmental and Social Impact Assessment, funding source to be confirmed; and
5) Environmental and Social Due Diligence for the substation, finance by the SSF.
Company Contact Information
Dr Tamer Khattab
t.khattab.eetc@moere.gov.eg
+201092662455
+20226841153
PSD last updated
12 Oct 2023
Understanding Transition
Further information regarding the EBRD’s approach to measuring transition impact is available here.
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Environmental and Social Policy (ESP)
The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”. The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.
More information on the EBRD’s practices in this regard is set out in the ESP.
Integrity and Compliance
The EBRD’s Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.
OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank’s countries of operation. The information provided must be made in good faith.
Access to Information Policy (AIP)
The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.
Specific requests for information can be made using the EBRD Enquiries form.
Independent Project Accountability Mechanism (IPAM)
If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).
IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.
Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.
