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Egypt’s policy geared for energy transition

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Solar development in Egypt. The country has aligned its policy and regulatory framework to make provision for an energy transition. Image credit: Commons Wikimedia

Egypt’s policy geared for energy transition

An energy transition in Africa will require policy and legislative frameworks that considers decarbonisation and at the same time addresses climate change and the commitments made under the Paris Agreement.

Egypt, for example, have already taken steps to address the urgent need to harness renewable power. Such efforts are expected to provide exciting opportunities for investors in the African energy sector.

According to Lamyaa Gadelhak, Baker McKenzie Cairo Partner & Co-Head of Banking and Projects, policy in Egypt is a good example of how to make the transition a reality.

“According to Egypt’s article 20 of the Investment Law No. 72 of 2017 (Investment Law)  companies that have been established to develop a strategic or national project and contributes to achieving development, or projects in partnership with the private sector and the State, the public sector or the public business sector, in the area of public utilities, infrastructure, new or renewable energy, roads, transportation or ports, may, by a cabinet decree, be granted a “single license” for the establishment, operation and management of the project, which will include a construction permit and an allocation of real estate property required for the project (License),”says Gadelhak.

Conditions to be strategic

Gadelhak adds that such a license will be effective without the need for any further procedures and may include other additional incentives for the project provided in the Investment Law.

“The aforementioned was further developed through Cabinet Decree No. 56 of 2022, which specified a series of requirements to be met for a project to be considered a strategic and/or national project.”

In addition to meeting a set of conditions, these projects must be a development in one of the fields specified in the cabinet decree, which include, but are not limited to, green hydrogen projects, green corridor projects, renewable energy projects aimed at supplying desalination projects and green hydrogen production projects with energy, and carbon capture, utilisation and storage (CCUS) projects.

The conditions, set out in the cabinet decree, will be subject to a yearly review in light of any changes to the State’s economic development plan.

Gadelhak explained that among the other incentives provided under the Investment Law, and which can be included in the License, Article 11 provides that companies set up before 28 October 2023 to operate in certain industry groups, could obtain a deduction from their taxable income.

“This incentive is limited to seven years from the date of commencement of the project and is not perpetual. Furthermore, the Investment Law provides that additional incentives around, for example, utilities connection costs, land allocation costs and technical training may be made available to a project by a cabinet decision.

The government of Egypt recognises the production, storage and export of green hydrogen and green ammonia among the areas falling within the state’s economic development strategy.

It has passed a decree that would allow green hydrogen and green ammonia projects to benefit from a wide range of state support under the country’s existing Investment Law, including tax incentives.

“This is a key development for Egypt’s hydrogen economy and we expect that it will stimulate private investment and the development of new green hydrogen and ammonia projects in the country,” says Gadelhak.

Egypt’s policy geared for energy transition

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Egypt’s policy geared for energy transition

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