EGYPT – A GREENER FUTURE WITH HYDROGEN

Egypt has recently announced a partnership with the European Bank for Reconstruction and Development (EBRD) for the development of a hydrogen strategy as part of the government’s ambitious energy transition plans. It was reported that Egypt would allocate $40 billion to fund the implementation of the strategy, with the aim of achieving a production capacity of 1.4GW by 2030. This could be used to meet local demand and for exports to Europe, which envisages 40GW of imports from neighbouring countries (including North African countries) by 2030.

The EBRD will assist Egypt with the development of a framework for establishing a green hydrogen industry, including:

  • mapping international supply and demand;
  • analysing existing and potential hydrogen production;
  • advising on the development of supply chains including storage, transportation and export opportunities; and
  • advising on reforms required to the regulatory and fiscal regimes.

The partnership was announced against the backdrop of the government’s 2035 Integrated Sustainable Energy Strategy, as part of which the country will seek to drastically increase the share of renewables in its energy mix.

EGYPT’S POTENTIAL AS A HYDROGEN HUB

Renewable Generation Capacity – Egypt has significant resources to generate input electricity for green hydrogen. It has an abundance of land, consistently high wind speeds and high levels of solar radiation. This promises to reduce the most significant input cost for green hydrogen production.

Connecting Infrastructure – Egypt’s proximity to Europe and the Middle East is also an advantage. It has in place connecting infrastructure which could be utilised for the transportation and/or storage of hydrogen or other products which utilise hydrogen as feedstock (such as ammonia). Key transport routes with the Mediterranean and the Middle East include the Suez Canal, the SUMED pipeline and the Arab Gas Pipeline.

Economic environment – Egypt is also party to a variety of investment treaties and a member of free trade organisations including the WTO and GATT. It has strengthened investor protections with the introduction in 2017 of a new Investment Law. The IMF is predicting sustained growth in FDI inflows into Egypt until 2025.

Sources of funding – In addition to the traditional sources of finance, other potential sources are emerging. For example, Egypt’s largest private bank (the Commercial International Bank) has raised $100 million by issuing green bonds and intends to use 80% of the proceeds to finance its green loan portfolio. Support could also become available from EU institutions as part of the implementation of the EU Hydrogen Strategy or from individual member states under bilateral agreements with Egypt.

CURRENT HYDROGEN PROJECTS

Several hydrogen projects are currently under development in Egypt, including:

  • H2 Industries’ 1GW Waste-to-Hydrogen hub located at the Mediterranean entrance to the Suez Canal, which has secured preliminary approval.
  • A 100MW green hydrogen facility to service a green ammonia plant operated by Scatec in partnership with OCI NV, Fertiglobe, The Sovereign Fund of Egypt and Orascom Construction. The electrolyser is being supplied by Plug Power. The facility is likely to be the first electrolyser in Egypt, placing it at the forefront of the country’s future green hydrogen evolution;
  • Green hydrogen projects to be developed by Masdar and Hassan Allam Utilities, targeting a production capacity of 4GW by 2030.
  • A green hydrogen facility to be developed by AMEA Power which will produce green hydrogen for use as a feedstock for ammonia production at a nearby plant. The facility will produce up to 390,000 tonnes of green ammonia per year, to be exported by ships via the port of Ain Sokhna.
  • A USD 3 billion green hydrogen project to be developed by EDF Renewables, again to produce green fuel for export via Ain Sokhna.

The General Authority of Suez Canal Economic Zone also signed an MoU with Maersk relating to low-emission transport of green fuels.
Additional projects could emerge from ongoing feasibility studies being carried out by Siemens, Eni, Dredging Environmental and Marine Engineering NV (DEME) and CWP Global.

KEY ISSUES FOR THE HYDROGEN STRATEGY

In the near-term, thanks to the relatively low cost of renewable generation, there is significant potential for small-scale green hydrogen production with secure offtake arrangements.

In order to achieve rapid growth in the medium and long-term, the hydrogen strategy will need to provide a roadmap for several key areas, including:

  • the eventual location and shape of the hydrogen network, initially driven by the location of supply and demand clusters;
  • the market framework and its interaction with any government incentive mechanisms; and
  • the regulatory framework, initially focussed on removing barriers to entry posed by existing planning and permitting regimes and eventually providing for the appointment of a new regulatory body and the gradual formulation of a holistic regulatory framework.

For more information, please contact Sharif Abousaada or your usual Herbert Smith Freehills contact:

Sharif Abousaada
Sharif Abousaada
Of Counsel
+33 1 53 57 70 95
Matt Berlansky
Matt Berlansky
Trainee Solicitor
+33 1 53 57 13 64

Chambers Global 2022 rankings confirm our market-leading status in Africa

The firm’s Africa practice has once again achieved top tier rankings in the 2022 edition of Chambers Global, maintaining top tier rankings in the following Africa-wide categories:

  • Band 1 for Africa-wide Projects & Energy (for the 14th consecutive year)
  • Band 1 for Africa-wide Projects & Energy: Mining & Minerals (for the 11th consecutive year)

We are also ranked:

  • Band 2 for Africa-wide Dispute Resolution
  • Band 2 for Africa-wide Corporate/M&A and Private Equity
  • Band 2 for Africa-wide Oil & Gas
  • Band 2 for Africa-wide Power
  • Band 2 for Africa-wide TMT
  • Band 3 for Africa-wide Capital Markets

5 partners across our Paris, Johannesburg and London offices are individually ranked for Africa-wide Projects & Energy, more than any other ranked firms.

The firm, or partners at the firm, are also singled out in relation to Algeria, Nigeria, Sierra Leone, Gabon, Guinea and Libya.

Commentators praise the team’s ability to “detect problems and provide solutions,” adding that the group “brings excellent expertise to the table on ESG.

Our Johannesburg office performed very well and is ranked in the following bands for South Africa:

  • Band 2 for Projects & Energy
  • Band 3 for Energy and Natural Resources – Mining
  • Band 3 for Competition/Anti-trust
  • Band 4 for Dispute Resolution
  • Band 4 for Corporate/M&A

In addition to the individual lawyer rankings in each of these areas, the Johannesburg office also has an individual lawyer ranked for Corporate Investigations.

We have 22 individual Africa-related lawyer entries in total: 8 for Africa-wide, 11 for South Africa and 3 country specific (Nigeria, Gabon and Sierra Leone).

Global Co-Head of our Africa practice Martin Kavanagh commented: “This year’s Chambers results once again affirm the strength of our Africa practice, particularly in projects, energy and mining. Congratulations to all those that received individual rankings. We are pleased at the recognition that the practice continues to receive by way of both these rankings and recent awards, including the Africa-wide Projects & Energy Law Firm of the Year at the Chambers Africa Awards 2022. We owe our thanks to our clients who continue to trust us with their most important and strategic matters in Africa.”

Global Chair of the Africa group Peter Leon added: “We very pleased to see that our Johannesburg office has continued to receive recognition in the key legal directories, with several improved individual rankings. We also received impressive client quotes for which we owe a great deal of thanks to our clients.”

For more information please contact Rebecca Donovan or Joanne Crichton.

Rebecca Donovan
Rebecca Donovan

Joanne Crichton
Joanne Crichton

South Africa’s ESG Bill Tracker 2022

In light of the multiple recent and forthcoming regulatory developments impacting ESG in South Africa (SA), HSF has prepared brief summaries of the key regulatory ESG highlights from 2021 as well as those to look out for in 2022.

The summaries are divided into the following four sections:

  • Key ESG related developments adopted in 2021;
  • Key ESG Bills in 2022;
  • Proposed amendments to key ESG related regulations; and
  • Other ESG guidelines/drafts to keep an eye out for.

Subscribe to Africa Notes to receive our monthly updates to the ESG Tracker SADC Region.

If you have any ESG-related questions, please get in touch with your usual contact at HSF who will be able to direct you to the right specialist within the HSF team.

Download our ESG Bill Tracker February 2022 >

HERBERT SMITH FREEHILLS IS NAMED AFRICA-WIDE PROJECTS & ENERGY LAW FIRM OF THE YEAR AT THE CHAMBERS AFRICA AWARDS 2022

Herbert Smith Freehills was named Africa-wide Projects & Energy Law Firm of the Year at the Chambers Africa Awards 2022. These awards recognise a law firm’s pre-eminence in key jurisdictions in the region and they also reflect achievements over the past 12 months, including outstanding work, impressive strategic growth and excellence in client service.

In granting this award, Chambers said that the firm is “a global powerhouse when it comes to projects, energy and natural resources” and “presents a formidable offering for clients and stakeholders in Africa.” It went on to say that interviewees praised HSF’s proactivity and solution-oriented advice, with several commending its “excellent ESG expertise.”

Nina Bowyer, partner and Africa co-head at Herbert Smith Freehills says: “We are delighted to receive this recognition, adding to our recent wins as Project Finance Team of the Year and Project Finance Deal of the Year at the IFLR Africa Awards 2021, and Alternative Service Provider of the Year at The African Legal Awards 2021.”

Martin Kavanagh, partner and Africa co-head at Herbert Smith Freehills, says: Receiving this award is testament to our commitment to excellence in the service we provide to our clients wherever they are doing business in the world, and to the efforts of our multi-practice team of Africa specialist lawyers located in Johannesburg and across our international network of offices. In 2021 alone, the firm worked on over 1000 matters throughout Africa involving 180 partners in 20 offices”.

If you have any questions, please phone or email Martin Kavanagh or Nina Bowyer.

Nina Bowyer
Nina Bowyer
Partner, Paris
+33 1 53 57 70 73
Martin Kavanagh
Martin Kavanagh
Partner, London
+44 20 7466 2062

Algeria – Launch of the Solar 1,000 MW call for tender

The Algerian Ministry of Energy Transition and Renewable Energies launched the “Solar 1,000 MW call for tender on 23 December 2021 (the “Call for Tender“). This Call for Tender aims to implement the first installment of the 15,000 MW of electricity generation capacity based on renewables that Algeria aims to achieve by 2035, as provided for in the multi-annual program for the development of renewable energy and energy efficiency adopted in February 2020.

National and foreign investors have until 30 April 2022 to submit their technical and financial offers.

The new Société Algérienne des Énergies Renouvelables Spa (“SHAEMS“) (50% owned by Sonatrach and 50% by Sonelgaz) has been entrusted by the Minister of Energy Transition and Renewable Energies with processing the Call for Tender. SHAEMS will also take a stake, either alone or in association with public and/or private companies, in each project company. Electricity generation is not included in the list of regulated sectors for which the 49/51 rule applies (i.e. obligation to associate a national with 51% or more of the capital). The amount of SHAEMS’ participation may therefore be lower than 51% of the project company’s capital without a minimum level of participation being fixed (subject to the review of the Call for Tender terms of reference).

The decree no.17-98 dated 26 February 2017 detailing the call for tenders procedure provides that the construction of the transportation facilities for the energy produced (i.e. the connection line to the grid) will remain the responsibility of the investor. The construction and operation costs must therefore be factored into the price offered by bidders.

Each candidate can bid for one or more lots of 50 to 300 MWp with a combined capacity not exceeding 300 MWp.

If awarded, a power purchase agreement will be concluded for a period of 25 years with a “designated buyer” (whose identity is not known at the time of writing).

The selected sites are the wilayas of: Béchar, Biskra, Djelfa, El-Bayadh, El-Oued, Ghardaia, Laghouat, M’sila and Ouargla for a total area of 8,000 ha.

The terms of reference of the Call for Tender (which should include criteria detailing how the bids will be evaluated) are not yet available as certain elements are still under discussion. Bidders will be required to pay 1,000 USD to access the terms of reference.

The technical and financial bids will be accompanied by bid bonds of an amount of 500,000 USD for international investors and in local currency for domestic investors of 70 MDZD (approximately 500,000 USD) (or pro rata in the case of joint bids by domestic and international investors). The bid bond will be replaced by the successful bidder with a development bond worth 10% of the total capital expenditure at financial close which shall remain in force until the plant is commissioned. These bonds must be issued by banks domiciled in Algeria.

The successful implementation of the Call for Tender will serve as a strong indicator as to whether Algeria will succeed in its energy transition plans, following the example of its neighbor Tunisia, whose first 5 projects under the concession regime for a total capacity of 500 MW have just been approved by decree.[1]

The Algerian energy sector is currently based exclusively on hydrocarbons, which account for almost 99% of the country’s electricity production.[2] However, these resources are facing a depletion of reserves and a stagnation of production, while Algeria is facing a rapid increase in national energy consumption, which is severely impacting export revenue.

Against this backdrop and the favourable rates of solar insolation (2,000 to 3,900 hours per year[3] and a daily irradiation (PSH) of 3 to 6 kWh/m² [4]), unlocking Algeria’s renewable energy opportunities will be key in addressing energy transition goals and the diversification of Algeria’s energy mix.


  1. Ministry of Industry, Mines and Energy, “Régime des concessions”, https://www.energiemines.gov.tn/fr/themes/energies-renouvelables/projets-et-programmes/regime-des-concessions/
  2. Ministry of Energy of the People’s Democratic Republic of Alergia, “Bilan Énergétique National” 2019, p.9.
  3. K. Smaili, N. Kasbadji Merzouk, M. Merzouk, “Atlas Climatiques de l’Irradiation Solaire Journalière en Algérie”, Unité de Recherche Appliquée en Énergies Renouvelables, 5ème Séminaire International sur les Énergies Nouvelles et Renouvelables, 24-25 October 2018, p.1.
  4. MR. Yaiche, A. Bouhanik, “Atlas Solaire Algérien”, Centre de Développement des Énergies Renouvelables, 2002.

Author

Thomas Herman
Thomas Herman
Associate, Paris
+33 1 53 57 72 41

HERBERT SMITH FREEHILLS RECEIVES PROJECT FINANCE AND IFLR WOMEN DEALMAKERS HALL OF FAME AWARDS AT THE IFLR AFRICA LEGAL AWARDS 2021

Herbert Smith Freehills has been named Project Finance Team of the Year at the IFLR Africa Awards 2021.

 

The firm also received recognition for its work on the Beitbridge border post modernisation project, which was named Project Finance Deal of the Year.

The Beitbridge project involves the expansion, upgrading and rehabilitation of the Zimbabwean side of the Beitbridge border post, under a 17-and-a-half-year concession granted by the Zimbabwean government to La Frontiere Group. The project also includes the procurement of technical equipment and software, undertaking the services during the concession period, as well as the non-core works.

Continue reading

GREEN ENERGY IN AFRICA: ACCELERATING ENERGY TRANSITIONS ACROSS THE CONTINENT

Author: Rebecca Major

The following article was first published by Jeune Afrique in The Africa Report (N° 116, July-August-September 2021)

International investors need to reduce their carbon footprint globally and are being pushed by market forces, legislators, courts and shareholders to do so.

Africa needs an “energy progression” as well as an “energy transition”. In many parts of the African continent, it is not a question of changing the way electricity or transport networks are used, but a question of making reliable electricity supplies and transport networks available for the first time. Africa’s natural resources also need to be used to provide revenue for African citizens.

We think that the African continent can use the global “green business revolution” to its advantage.

African governments and legislators can harness this green revolution to facilitate access to electricity for African populations and encourage exports that suit the needs of international investors. The challenge will be to find a happy balance in order to protect the African economic environment with a healthy level of exports, and the social and economic domestic environment with an energy progression.

There will be enormous investments in Europe in these areas in the next few years, by private companies, national governments and the European Union. African governments and African businesses need to position themselves now to capture some of these investments and encourage sustainable investment in the African energy sector going forward.

Some international companies are seeing Africa as a good testing ground for innovative technologies and business models. For example, we are seeing investments and potential investments from Europe (and elsewhere) into off-grid solar, battery storage, improved hydroelectric technology and various uses of blue and green hydrogen. Africa could become an attractive place for using technologies such as hydrogen and renewable sources to make existing and new natural resources projects greener and therefore more marketable in the future. We have been talking to our clients about greener mines, greener gas and LNG production, greener ammonia production and greener refining and beneficiation processes generally in Africa.

We hope to see African policy and legislation continue to evolve to take account of this game-changing revolution and look forward to continuing to advise international investors and governments on these exciting challenges.

We are keen to speak with you about how we can help you achieve your goals in the green energy sector in Africa. For more information, please contact the lawyer below or your usual Herbert Smith Freehills contact:

Rebecca Major
Rebecca Major
Partner, Head of Energy & Natural Resources, Paris
+33 1 53 57 78 31

AFRICA EUROPE FORUM

Herbert Smith Freehills was a proud supporter of the Africa Europe Forum which was held virtually on 17 – 18 May 2021.

Thomas Kessler, a partner in the firm’s Frankfurt office, joined a panel discussion on the “Role of Renewable Energy in Sub-Saharan Africa’s Power Supply” together with Mario Ledic, Director Governmental Affairs, ANDRITZ HYDRO GmbH, Ravensburg; Dr. Daniel Schroth, Acting Director Renewable Energies, African Development Bank, Abidjan; Peter Schrum, Chairman, Sunfarming GmbH, Alensys AG, Erkner; Barton Shasha, Business Development Manager Afrika, ib Vogt GmbH, Berlin; and moderator Karsten Fuelster, Managing Director, Polaris Consulting & Invest GmbH, Frankfurt.

Continue reading

The Future of Africa’s Energy Transition

We were delighted to host our live webinar on Africa Day on the topic of the Future of Africa’s Energy Transition. Journalist and BBC presenter, Lerato Mbele moderated the discussion between Ashwin West, Investment Director at African Infrastructure Investment Managers (AIIM), Wandile Mamba, Investment Manager – Infrastructure and Climate Project Finance at the CDC Group, along with members of our Africa energy and infrastructure team, Martin KavanaghBrigette BaillieRebecca Major and Paul Morton. The panel debated whether Africa’s energy “transition” could be better described as a “progression”. While the continent has shown its ability to fast track development in other sectors, the panel discussed the opportunities and challenges that the energy sector faces.

Continue reading

WHERE NEXT FOR SOUTH AFRICA’S UPSTREAM SECTOR AND WOULD-BE INVESTORS?

It has now been over two years since Total made its significant gas condensate discovery in the Brulpadda block, offshore Mossel Bay. The announcement led to much anticipation for the rapid development of an upstream petroleum industry in South Africa.

Recognising the need for a dedicated legislative framework for the oil and gas sector (which is currently governed by the long-standing, mining-focused Mineral and Petroleum Resources Development Act, 2002), in December 2019 the Government published a draft Upstream Petroleum Resources Development Bill (the Upstream Bill). Although the benefit of having dedicated, stand-alone legislation is undeniable, the draft Bill failed to deliver on a number of fronts (see our previous briefing on the Upstream Bill here). Since then, no updates to the Bill have been published (comments from the public were invited before 21 February 2020) and the text has not been submitted to Parliament.

Continue reading