Saudi Arabia announced today new funding for its electricity interconnection plan with Egypt.
The Saudi Electricity Company said it secured a 14-year facility worth $567.5 million to finance the Saudi Arabia-Egypt electricity interconnection project. The deal was signed by the British bank Standard Chartered and Japan’s Sumitomo Mitsui Banking Corporation and is guaranteed by the Swedish government’s export credit agency, the official Saudi Press Agency reported.
A facility refers to a line of credit that can be drawn upon within a set time frame. In this instance, Standard Chartered and Sumitomo Mitsui will provide the Saudi Electricity Company with the requested funds. Sweden will pay the banks the money borrowed should the Saudi firm not be able to pay.
Export credit agencies provide financing for international trade.
What it means: Electricity interconnection occurs when one country connects its electricity system with another’s. Work began on the Saudi-Egypt interconnection project earlier this year, and Egypt expects it to be finished by 2026. The interconnection will provide Egypt with 3,000 megawatts of power at a cost of $1.8 billion.
One megawatt of electricity can power hundreds of homes.
Why it matters: Egypt does not have the severe electricity shortages that some other countries in the region have. The country has experienced widespread power cuts in recent years, however.
The Egyptian Cabinet today approved a plan to ration electricity. The purpose of this is to save on natural gas and thus export more gas in an effort to gain more foreign currency. Egypt’s currency shortage is due to less tourism from Russia and Ukraine amid the war there, as well as rising commodity prices, according to Reuters.
Egypt’s Electricity Ministry said yesterday the country is not facing an electricity shortage.
Saudi Arabia and Egypt have strong economic ties. In June, Saudi Arabia pledged to invest billions in Egypt per an agreement. Yesterday, the Saudi sovereign wealth fund acquired minority stakes in some Egyptian state-owned firms.
Know more: Saudi Arabia and Iraq also began interconnecting their electricity systems in June.