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Property of Kareem El-Hini

“Egyptian Energy Market Dynamics” Sample Slides

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Sector Coverage

Natural

GasFuel

(Oil)Power Africa


Natural Gas Sector Overview

Natural

GasFuel

(Oil)Power Africa


Egyptian Gas Sector Trends

100

120

140

160

180

200

220

240

260

280

Egypt

MENA

World

14% 59% 61% 69% 73%

0%

20%

40%

60%

80%

100%

1990 2006 2011 2016 2021

Oil Share Natural Gas Share

Looking forward, Egypt’s expected growth in natural gas consumption over the coming decade is 4.2% CAGR, compared to World CAGR of 1.7%

8.4%

6.6%

2.7%

Natural gas replacing oil as main fuel source… …caused significant growth in gas consumption

The government is driving to substitute as much refined oil products with natural gas.Additionally, Egypt’s historical natural gas production and consumption growth rates arethe highest compared to the region and the World…


Local Production Does Not Satisfy Growing Energy Demand

Egypt’s Annual Production of Crude

Oil & Natural Gas

45.7

58%

33.0

42%

47.1

59%

73.2 26.1

Split of Production with Foreign Partner

Egypt’s Consumption Egypt’s Deficit

Total value of Egypt’s local oil and gas market, valued at International

Prices*, is roughly USD 40 bn

Natural GasCrude Oil

Units = Millions of tons of oil equivalent

Total Egypt Share78.7 MTOE

* Crude Oil = 100/BBL, Natural Gas = 10 USD/MMBTU

38% of consumption

21.5

65%

11.6

35% 25.6

55%

20.1

45%


Importation and Subsidy of Oil Products

Imports 2013(% of local

consumption)

Overview

Diesel Gasoline LPG Fuel Oil

In 2013, consumption of petroleum products in Egypt was covered X% by importation, amounting to roughly USD X bn but there is still more than a X% shortage in the market which will require additional importation

costing USD X bn. Total subsidy of fuel products, excluding natural gas, was EGP X bn

X Mtons(40%)

Represents 19% of energy consumption

but 48% of the subsidy bill. The transportation

sector accounts for 35% of consumption

X Mtons(21%)

Due to the rapidly increasing number

of licensed vehicles, Egypt transitioned

from net exporter to net importer of

gasoline

X Mtons(51%)

Being consumed mainly by

households (315 million cylinders per annum). Cylinders

are sold at EGP 8 but cost EGP 105

X Mtons(10%)

The shortage of fuel has lead to many

factories halting or reducing production

Subsidy 2013 (% of subsidy)

EGP X bn(48%)

EGP X bn(13%)

EGP X bn(14%)

EGP X bn(14%)


Fuel (Oil) Sector Overview

Natural

GasFuel

(Oil)Power Africa


Egyptian Fuel Marketing Sector Trends

0

50

100

150

200

250

300

DistillateFuels

Gasoline

4.7%

7.8%

Market is growing rapidly due to a major increase in licensed vehicles during the previous 5 years, at CAGR of9.3%, reaching 6.6 million licensed vehicles in 2012.

Egypt’s consumption of distillate fuels over the last 10 years grew at CAGR of 4.7% compared to World CAGR of2.5%. In the same period, Egypt consumption of gasoline grew at CAGR of 7.8% versus World CAGR of 2.3%.

Although the increase in fuel prices is expected to slowdown demand in the short term, in the long term this sector is expected to witness considerable growth due to low motor vehicles penetration rate in

Egypt, being 4.5% vs. world rate of 17%, in addition to high population growth (forecast at 1.5% p.a.) and expansion of urbanized areas in Egypt

4,240 4,687

5,137 5,814

6,279 6,607

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2007 2008 2009 2010 2011 2012

…has led to a large jump in fuel consumption (000’s BPD)Fast growth in licensed vehicles (000’s) …


Disparity Between Local and International Prices

1998 2003 2008 2013

Brent Crude 8.2 8.2 61.0 67.3

Gasoline 80 26.5 16.7 32.4 26.1

Gasoline 92 29.4 18.5 34.3 27.6

Diesel 11.8 7.4 20.4 16.4

USD/EGP 3.40 5.4 5.4 6.7

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

USD

/ E

GP

USD

Cen

ts p

er L

iter

Brent Crude Gasoline 80 Gasoline 92 Diesel USD/EGP

Evolution of Brent crude price vs. local market prices of petroleum products (USD Cents per Liter)

While the price of Brent crude has increased by over 700% since 1998, local prices of petroleum products have increased in the range of 75% to

175%. Accordingly, the local pump price of diesel is just 17% of US pump price while local

gasoline price is 33% of US pump price

Local pump prices vs. US pump prices excluding taxes (2013)

1626

92

77

0

20

40

60

80

100

Diesel Gasoline

USD

Ce

nts

pe

r Li

ter

Local Pump Price US Pump Price


Power Sector Overview

Natural

GasFuel

(Oil)Power Africa


Egyptian Power Sector Challenges

Egypt is facing a serious challenge to increase power supply to keep up with booming power demand…

GW:Current

estimated deficit

4

% CAGR :Expected power demand growth over the coming

decade

5GW:

New generation capacity

planned by 2017 to satisfy

demand

13

Up to 2017 power generation, will require investments amounting to EGP XX bn, with EGP XX bn planned to originate from the private sector.

% Loss:Transmission and

distribution losses (roughly

5-7% in efficient systems)

11EGP bn:

Amount of subsidy borne

directly by Ministry of Electricity

23

Generation Challenges Distribution Challenges


Fast growing electricity demand (GWh) …

Between 2008 and 2013, electricity consumption increased from 109,090 GWh to 144,081 GWh at CAGR of 5.7%,Per capita consumption increased from 1,650 KWh to 1,910 KWh.

Booming demand has led to significant pressure on the country’s infrastructure.

Egyptian Power Sector Trends

… Served by underdeveloped infrastructure (MW)

The government has been trying to shift most of the new industrial and mega real estate projects to seek their own power supply given that the already strained national

network is being outpaced by growing demand.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2008 2009 2010 2011 2012 2013

Consumption Production

0

5,000

10,000

15,000

20,000

25,000

30,000

2008 2009 2010 2011 2012 2013

Peak Load Installed Capacity


Need to Diversify Sources of Generation

World Power Generation Mix

Egypt Power Generation Mix

91% 9%

Oil and Gas

Hydro /RenewableEnergy

27%

16%

13%41%

3%

Oil and Gas

Hydro

Nuclear

Coal

Other

Egyptian power generation is largely reliant on oil and gas, with a small contribution from hydroelectric sources, generating 91% of power from oil and gas compared to 27% for the rest of the world. This exposes the country to supply shocks and volatile oil and gas prices.


Market Changes Promoting IPP Sector

New Electricity Law Under

Development

A Transitional Market Plan has been drafted by the Egyptian Electricity Regulator. The plan entails significant deregulation and the creation of a competitive electricity market where electricity activities are fully unbundled.

Transmission Wheeling

Regulation

Independent power producers have the right to transmit electricity across the national grid, through a wheeling agreement with EETC.

Energy Intensive Users Eligibility for Bilateral Contracts

As a first step towards deregulation, the government has announced that energy intensive users will not be supplied with electricity from the national grid. Egypt’s Investment Development Authority followed suit by granting licenses to new factories which require the factories to source electricity needs independently.

Low Government Funds with High

Growing Demand

Government is planning to add 13 GW of generation capacity by 2017, with an investment cost of roughly EGP XX bn. The government has stated that most of the investment will come from the private sector.

Steps have already been taken towards market deregulation


Egyptian Renewable Power Sector

Proximity to EU Markets for Future

Connection

The Euro and Mediterranean Regions are working towards interconnection of their power markets for improved energy security and sustainability. The foundations of Egypt-Europe interconnection already exist, as Egypt is connected to Spain via Libya-Tunisia-Algeria-Morocco, and is connected to Turkey via Jordan-Syria.

Massive Potential for Renewable

Energy

Unmatched intensity of solar radiation ranges from 2,000-2,600 KWh/m2,

with operating hours reaching 2,400 hours compared to 1,900 maximum in

Spain and Greece.

The Gulf of Suez area has one of the highest, consistent wind speeds in the

world at 10 m/s and maximum operating hours of 4,000 per year,

comparable to the best coastal locations in Northern Europe.

Ernst & Young ranked Egypt 29th worldwide in its renewable energy index. Egypt Wind Atlas (Average Wind Speed)

Egypt Annual Average of Solar Radiation

Aggressive Renewable

Energy Expansion

Plan

The government has created a plan to reach 20% of generated electricitythrough renewable sources, with 12% generated from wind power (7,200MW). Additionally, the Egyptian Cabinet approved, in July 2012, a plan toinstall about 3,500 MW by 2027 of solar capacity with private investmentshare to be 67% of total investment.

The contribution of renewable energy to Egypt’s mix is likely to exceed national targets for the following reasons: need to diversify the energy mix to reduce exposure to supply and price shocks, strong support

from development banks, and the short lead time for PV projects (9-12 months)


Egyptian Solar Energy Plan

• In July 2012, the Egyptian Cabinet approved a plan to install about 3,500 MW by 2027 ofsolar capacity (2,800 MW Concentrated Solar Power + 700 MW Photovoltaic) with privateinvestment share to be 67% of total investment.

• This represents roughly 12% of Egypt’s total existing generation capacity of 29,000 MW.

• The table below represents NREA’s plan to achieve the target figure.

120 300

480 720

1,010 1,320

1,650

1,980

2,310

2,640

3,070

3,500

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

'16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27

Cumulative Added Solar Capacity (MW)


Africa Overview

Natural

GasFuel

(Oil)Power Africa


Africa Overview

Over the past decade, six of the world’s ten fastest growing economies were in Africa.

The region median age is 20, compared with 30 in Asia and 40 in Europe.

60% of population lacks access to electricity (600 million people)

FDI has grown in the last 10 years from USD 20 bn to USD 75 bn

Population doubled in 25 years and is expected to grow from 1 billion in 2013 to 1.3 billion in 2030, at CAGR of 1.3%, compared to world CAGR of 0.6%

Sub-Sahara GDP is forecasted to grow from USD 2.2 tn in 2013 to USD 3.2 tn in 2016 at a CAGR of 7.5%well above the World’s and MENA’s CAGR that are both forecasted to grow at CAGR of 5.7%.

Africa Energy Market Overview

Rapid expansion in the population of Africa, which is expected to persist going forward as well as strong GDP growth and several major recent discoveries of oil and gas reserves, ensure that Africa has all the right parameters for a major boom in its energy markets in the near and long term…

5 Year Population Growth Forecast (%)

GDP Growth Forecast (%)

0%

5%

10%

15%

2005 2010 2015 2020 2025 2030

Africa

Rest ofWorld

0%

1%

2%

3%

4%

5%

6%

7%

2012 2013 2014 2015 2016 2017 2018

World

MENA

Sub -SaharanAfrica


Africa Energy Forecast

As African countries begin to produce large quantities of natural gas over the coming years, and in order to support expected economic expansions and to increase low rates of electrification, consumption of natural gas and installed power capacity are expected to rapidly increase…

Natural gas consumption CAGR (previous 5 years %)

Installed Capacity CAGR (previous 5 years %)

0%

1%

2%

3%

4%

5%

2009 2014 2019 2024 2029 2034

World

Africa

0%

1%

2%

3%

4%

5%

2009 2014 2019 2024 2029 2034

World

Africa

Natural gas consumption in Africa is expected to increase from 100 BCM in 2013 to 200 BCM in 2034, at CAGR of 3.4%compared to world CAGR of 1.8%

Installed generation capacity in Africa is expected to increase from 145 GW in 2013 to 240 GW in 2034, at CAGR of 2.4%compared to world CAGR of 1.7%

Africa is the ideal region to duplicate the business model

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