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Agence Française de Développement (AFD) and the Government of Egypt have signed on 10Th June 2020, a new Development Program Financing (DPF) agreement for the development of Egypt’s Electricity sector. The DPF comprises a credit facility of EUR 75 million—the first of two equivalent credit facility operations, with the second one to be possibly approved later this year—and additional grant funding of EUR 1 million for the deployment of effective and targeted technical assistance programs.

AFD DPF is part of a multi-donor support program jointly with the African Development Bank (AfDB) and the Japan International Cooperation Agency (JICA), for an estimated total financing of EUR 1 billion.

Specifically, this new DPF for the electricity sector aims to reinforce the design of effective policies carried out by the Ministry of Electricity and Renewable Energy (MoERE), which would curb dependence of the Egyptian economy on climate-harming fossil fuels and boost the market penetration of renewable energies with a strong focus on both economic and climate goals.

The DPF will allow to enhance the financial sustainability and to improve the governance along with the operational efficiency of Egypt’s electricity sector. It will also support clean energy for fostering green growth through development of renewables and energy efficiency actions.

This operation aims to support the Electricity Sector Development through a new set of targeted actions for the implementation of the Integrated Sustainable Energy to 2035. It is ultimately designed so as to contribute to the broad goal of consolidating the Sectoral Policy Dialogue with the Egyptian authorities with a view to mainstreaming climate change into the electricity sector reform.

Since 2014, the Government of Egypt has undertaken an ambitious reform for the modernization of the Energy sector, which fits within the implementation of Egypt National Contribution against climate change submitted during the COP21 Forum. This has led to the 2035 Integrated Sustainable Energy Strategy adopted by the Government of Egypt, which entails:

  • progressive phasing out of the energy subsidy regime
  • diversification of the electricity mix, with an increasingly growing share of Renewables (42% by 2035)
  • improved sectoral governance, with a gradual liberalization of the electricity market
  • and enforcement and promotion of energy efficiency as a cross-cutting objective.   

AFD Group, which includes the subsidiary Proparco for the development of the private sector, has been significantly involved in the Energy sector in Egypt over the last decade, through financings for a total amount of EUR 795 million dedicated to low-carbon Investment projects (renewable energy project and sustainable structural power assets) and policy-led programs notably with a first Development Policy Loan to the energy sector in 2017/2018. 

AFD Country Director for Egypt, Dr Fabio Grazi, has declared that “the new DPF to the electricity sector represents a key step in the commitment of AFD to support the transition towards a sustainable and efficient energy system in Egypt”.