We held our inaugural Climate X forum yesterday, which saw 300 CEOs, business owners, investors, bankers and development finance folks gather together under the roof of the brand new Grand Egyptian Museum to discuss the opportunities in the climate industry as our global green transition conditions. Discussions covered everything from how to build a (potentially bn USD) climate-centered business to how to access climate finance and what is needed at the policy and regulatory levels to move the green economy forward.

We had on stage yesterday three guys who are building large-scale climate businesses right here in Egypt to discuss everything from hydrogen and renewables to EVs. The panel brought together some of the biggest industry players in the region, including:

• Amr Allam, CEO, Hassan Allam Holding
• Mohamed Ismail Mansour, co-founder and CEO, Infinity
• Sherif El Kholy, partner and head of MENA, Actis.

Amr and Mohamed’s companies are working together — and separately — on some of Egypt’s most interesting climate opportunities. Together, they’re developing a total of 10 GW of wind and 4 GW of electrolyzer capacity for green hydrogen production. Hassan Allam is separately working on a 1.1 GW wind project in Egypt, which is one of the largest onshore wind farms in the world, and the largest in the Middle East, as well as almost 70 MW solar PV projects.

Infinity is gearing up to become the largest African renewable energy company by 1Q 2023 after having signed agreements to acquire Lekela Power’s portfolio of operational wind power projects, which have a combined installed capacity of over 1 GW (in South Africa, Egypt and Senegal). They’ve also developed more than 440 EV charging points across 11 governorates in Egypt.

Sherif El Kholy is a longtime partner and head of Middle East and Africa Infrastructure as well as MENA private equity at Actis, a leading investor in sustainable infrastructure in global growth markets. Actis has owned and developed 15 GW of renewable power by investing in successful platforms including Lekela Power, in pioneering commercial and industrial businesses such as Yellow Door Energy, and climate adaptation-focused businesses including Emicool.

KEY TAKEAWAYS-

There is plenty of appetite from the private sector for climate-focused projects, El Kholy said, to the extent that limited partner appetite is now seeing private equity firms set up specific vehicles and funds to focus on the green energy transition, El Kholy said. LPs including sovereign wealth and pension funds are convinced of the financial returns — and they want to invest in climate opportunities because their mandates now demand it, he said. They want to do good while doing well.

The private sector wants a piece of the adaptation pie: Private investors are already getting in on mitigation — dominated largely by investment in green energy projects with a view to reducing carbon emissions. But there’s plenty of reason for the private sector to be interested in adaptation: Investments that will help businesses, consumers and nations adapt to a warming world. “I think going forward, there are going to be increasing shifts to deploy capital more creatively in the sector, with investments becoming more diversified as more capital becomes available,” El Kholy said. He emphasized the need to focus on energy-efficient technologies, rather than just on power generation, name-checking industries like district cooling, which has taken off across the GCC but is still undeveloped in Egypt.

Few countries anywhere in the world are setting out build as much renewable power in the coming years as Egypt, which we estimate will need 40 GW of green energy to power just the hydrogen plants for which the Madbouly government inked framework agreements at COP27.

The way the electricity market works today: Folks operating solar and wind facilities generate electricity and sell it to the state under a long-term offtake agreement. The assumption is that the state will continue to do this with energy for the hydrogen plants: Buying from the renewables players and selling the the plant operators at a markup. (In this case, through a special “green corridor”: You can think of it as something resembling a point-to-point grid separate from the national network that links producers with the hydrogen plants. That ensures eventual buyers of the green hydrogen that only green energy was used to make it.)

The way the private sector wished it worked: Energy producers wish they could effectively “rent” the state’s grid: Use it, for a fee, to sell green electricity directly to their end clients. In industry speak, that’s called “wheeling.”

Mansour and Allam say producers — like all businesses — want visibility. They want a wheeling tariff that makes sense, and they want the tariff for each project they do to be set for the lifetime of the offtake agreement. The state’s role needs to be that of a regulator rather than a market participant, El Kholy added, suggesting that public funding can go towards expanding and developing the national power grid and on distribution, rather than generation, which should be the private sector’s purview.

One key to making this happen: Look at having the state divest some of its transmission infrastructure to the private sector, possibly through a program involving the Sovereign Fund of Egypt (SFE), which already “speaks the language of the private sector,” Allam said.

GREEN HYDROGEN-

The green hydrogen sector remains young, but it’s a risk many are willing to take as industry players look at the rapidly forming market for the green fuel in Europe. Hydrogen Europe CEO Jorgo Chatzimarkakis, who was on stage just before this panel, called the 2020s the “decade of hydrogen.” The private sector agrees, despite it being an embryonic sector in which European regulations and incentives are still no clear.

Is hydrogen a viable business today? No. Allam notes that while the green hydrogen sector right now is not economically attractive, neither was solar or wind 10-15 years ago. “We believe in the next 10 years, green hydrogen will be one of the key sources of energy in the world,” Allam said. “Being a first mover in this would pay off for us.”

When could we see companies breaking ground on planned green hydrogen plants? Masdar, Hassan Allam, and Infinity could begin commissioning the pilot phase of its 480k-ton green hydrogen facility within five years, Mansour said. Several of the hydrogen facilities for which framework agreements were signed during COP27 are slated to go online in 2025 or 2026.

EXPORTS, EXPORTS, EXPORTS-

All three of our panelists agreed that with Egypt undertaking a world-scale green energy program, we need to push hard to localize manufacturing of components from solar panels to wind turbines, blades and electrolyzers for hydrogen. Don’t just buy components from big Chinese, German and other players — we need to have them come and manufacturing plants here to serve our booming renewables industry, setting us up to become a key export hub to Europe, Africa, the Levant and the GCC not just of green electricity and hydrogen, but also of components for the industry.

OTHER TAKEAWAYS-

When it comes to Egypt’s EV industry, we still have a long way to go, Mansour says. Only some 2.5k electric cars are currently on our roads, he noted. We could see the transition to EVs take form within the next 5-8 years, he predicts, as more and more brands roll out EVs here.

The landmark loss and damage fund coming out of COP27 could be key to advancing these industries forward, especially given the turbulent global macroeconomic backdrop and higher interest rates, El Kholy said. Subsidized finance will be key, and the loss and damage fund could be a major source of funding, he added.

Our thanks to CairoScene and StartupScene for images from the event