Japanese and European banks lend $503 million for Egypt’s wind farm

In a big boost to Egypt’s renewable energy sector, Japan’s Nippon Export, and Investment Insurance (NEXI) has agreed to provide insurance for commercial bank loans extended to the Red Sea Wind Energy company, which is setting up a 500 MW wind farm in Egypt at a cost of $660 million.

This is the first co-financing between NEXI, and the European Bank for Reconstruction and Development (EBRD) based on a memorandum of understanding signed in 2020. Red Sea Wind Energy is owned by Engie (35%), Toyota Tsusho Corporation & Eurus Energy Holdings Corporation Consortium (40%), and Orascom Construction (25%).

The funding is provided by a consortium of banks including the EBRD, Japan Bank for International Cooperation (JBIC), Sumitomo Mitsui Banking Corporation (SMBC), Société Générale Tokyo Branch, and The Norinchukin Bank.

NEXI is providing cover for the $163 million loan extended by the commercial banks, as well as for the interest rate swap agreement provided by SMBC. The EBRD is providing a $50 million senior secured loan for the bank’s own account, and around $50 million for the account of the Green Climate Fund. JBIC is providing $240 million, bringing the total co-financing package amount to approximately $503 million.

Due to its contribution to environmental protection and climate change prevention, the project is provided with NEXI loan insurance for green innovation and increased commercial risk coverage of 97.5% is applied.

Red Sea Wind Energy will build, own and operate the onshore wind farm consisting of 84 wind turbine generators, located in the Ras Ghareb region facing the Red Sea, approximately 200 km southeast of Cairo.

The power generated will be sold to the Egyptian Electricity Transmission Company under a 25-year power purchase agreement (PPA). The Ministry of Finance of Egypt has issued a guarantee for the PPA.

Strategy on Renewables

The Egyptian government has set a target of increasing the share of renewables in the national energy mix to 42% by 2035, which consists of hydro power (3%), wind (14%), solar (22%), and solar thermal (3%). This project is expected to play a significant role in the country’s renewable energy strategy.

The project complies with the LEAD Initiative (in the environment and energy field) which NEXI actively promotes.

NEXI said that its financial support is expected to expand the business opportunities of Japanese companies in Africa and maintain and increase the global competitiveness of Japanese businesses in renewable energy development.

In its Infrastructure System Overseas Promotion Strategy 2025 (supplemented in June 2022), the Japanese Government, in support of the transition to carbon neutrality and decarbonisation, established the policy of providing support for quality energy and electricity infrastructure that harnesses sophisticated technologies to reduce the burden on the environment in a way that is compatible with the energy policy of the host countries.

The JBIC loan is in line with this policy and will financially support an overseas infrastructure project where Japanese companies have invested and will be involved in its operation and management for the long term, thereby contributing towards maintaining and improving the international competitiveness of Japanese industry.