Scatec ASA has just set the stage for a monumental shift in Egypt’s energy landscape with a groundbreaking 25-year power purchase agreement (PPA) with Egypt Aluminium. The deal, backed by a sovereign guarantee, encompasses a colossal 1.1GW solar photovoltaic (PV) project and a 100MW/200MWh battery energy storage system (BESS). This isn’t just a project; it’s a statement, a testament to Scatec’s prowess and Egypt’s commitment to a greener future.
The $650 million project, with 80% financed through non-recourse debt and the rest via equity, is more than just numbers. It’s a strategic move by Egypt Aluminium, the country’s largest aluminium producer and a significant electricity consumer, to decarbonise its operations. With 60% of its production exported to Europe, the project is a proactive response to the EU’s Carbon Border Adjustment Mechanism, set to take effect in 2026. This isn’t just about compliance; it’s about future-proofing.
The project’s scale and scope are unprecedented in Egypt. It’s the first utility-scale PPA with an industrial off-taker, a pioneering step that could reshape the country’s energy market. Scatec, with its extensive experience in the region, is well-positioned to navigate the complexities of this project. The company will act as the primary engineering, procurement, and construction service provider, handling 90% of the total capital expenditure. Scatec’s CEO, Terje Pilskog, underscored the significance of the project, stating, “This is another testament to Scatec’s position as one of the leading renewables companies in Egypt. It is a groundbreaking project as it is the first utility-scale PPA in the country with an industrial off-taker.”
The project’s success hinges on several factors. Collaborating with relevant authorities to allocate land, finalising grid connections, and securing financing are the immediate next steps. Scatec aims to achieve financial close and begin construction by March 2026. The company’s plan to reduce its long-term economic stake by inviting additional equity partners is a strategic move that could attract more investors to Egypt’s renewable energy sector.
The ripple effects of this project could be profound. It could catalyse more industrial off-takers to invest in renewable energy, driving Egypt’s energy transition. It could also spur innovation in the region, with Scatec’s team already showcasing “great persistence and creativity in securing this agreement and bringing new solutions to the market,” as Pilskog noted. The project could also serve as a blueprint for other countries looking to decarbonise heavy industries.
However, challenges remain. The project’s success will depend on the efficiency of land allocation, grid integration, and financing. Moreover, the project’s impact on Egypt’s energy market and its potential to catalyse further renewable energy investments will be closely watched. The project’s ability to meet Egypt Aluminium’s decarbonisation goals and comply with the EU’s regulations will also be crucial.
The project’s scale and scope, coupled with Scatec’s expertise and Egypt Aluminium’s commitment, make it a game-changer. It’s a bold step towards a greener future, a future where renewable energy powers heavy industries, and a future where Egypt leads the way in the region’s energy transition. This project isn’t just about energy; it’s about Egypt’s future, and it’s about time.
