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New risks to Egyptian IPPs from Covid-19

African Energy Power Reports

The coronavirus pandemic – and the global response to it – has already damaged the Egyptian economy. The speedy disbursement of $2.77bn to Egypt by the IMF on 11 May was a necessary response to the intense stresses the country is now suffering.

However, to understand the likely long-term impact, investors and lenders – including those in the electric power sector – need to ask whether the aftermath will include structural changes to key markets, for instance a permanent reduction in global oil and gas consumption, or in the number of people taking overseas holidays. While it is not yet possible to provide definitive answers, it is clear that important shifts have occurred in both these areas revealing a range of risks to both operating and planned IPPs.

African Energy’s detailed research and analysis – laid out in our Egypt Power Report 2020, published in February – shows the country already enjoys an extraordinarily large power generation reserve margin. A short-term reduction in GDP growth or even a period of recession followed by a vigorous recovery is likely to delay the need to build new capacity. However, this scenario may only have a marginal impact on long term demand growth. By contrast, if the present crisis results in structural changes, a more drastic response, including the re-writing of the government’s power sector masterplan, may be called for.
Read the full analysis on the African Energy website

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