Egypt eyes wind after Arab Spring
Twelve people were murdered last week in the attack on French satirical magazine Charlie Hebdo. This horrific attack has once more stoked fears about attacks on the west by radical Islamists.
There is no lack of commentators telling us that the best reaction to this kind of attack is defiance. Maybe so, but it should also make businesses think twice about where to invest. Wind resources can never be the only concern for businesses eyeing overseas growth.
The example that currently comes to mind is Egypt.
This north African nation is seeking to add 7.2GW of wind capacity by 2020, including 2.5GW from private firms, and this should be an exciting investment opportunity for western businesses. But, since November, terrorist group Islamic State has been active in Egyptand there has been a rise in threats against western interests.
These threats were enough to force the British and Canadian embassies in Cairo to close their doors, and they will certainly make investors think twice about the country.
That is on top of the uncertainty that investors are already likely to feel about a country still seeing big changes following the ousting of president Hosni Mubarak in the Arab Spring of early 2011. This will make investors think hard about whether to invest in Egypt, and the Charlie Hebdo attack will understandably enter their thoughts.
And yet, there are reasons that wind investors should look seriously about the potential to develop projects in Egypt.
For one thing, western businesses would usually use local partners to help develop their operations in any new emerging market, which gives a degree of protection against the security concerns above.
There is also the protection offered by the size of the country. Cairo is a sprawling city with a population of 7.8m people, just 500m fewer than London. Investors will remain active in London despite ISIS threats, and so we shouldn't rule out Egypt on that basis.
No, terrorism should remain a minor concern for wind businesses.
In Egypt, we should be far more worried about the ongoing political change in the wake of the ousting of Hosni Mubarak four years ago. The potential for legal and policy shifts that damage the energy sector, including wind, is a far bigger threat to those who seek to carry out business in the country.
And yet, for now, government support for wind looks good. Energy demand in the country is growing, and it has a target of 20% energy from renewables by 2020. Installed wind capacity was only 550MW at the end of 2013. Evidently then, there is still room for major growth.
Egypt has also been awarding new projects. The New & Renewable Energy Authority last month revealed that it had awarded tenders to 49 companies to build wind farms in the country — 36 for projects of 20MW-50MW, and 13 under 20MW. And it plans to support local manufacturers to compete with overseas suppliers.
This bodes well. Yes, entering Egypt will require bravery and good local intelligence, but this is true of any emerging market. Terrorist threats should not be used as a sole reason to rule out the country.