Could you give us a brief historical background and a more detailed analysis on the activities of your company?
The Power Generation Engineering and Services Company (PGESCo) was established in 1993 as a joint stock company among Bechtel Corporation in San Francisco, who own 40%, the Ministry of Electricity and Energy (40%) and the Arab African International Bank (20%). The board of directors is compromised of 5 members; 2 from Bechtel, 2 from the Ministry and 1 from the bank. The company was formed in the premises to support and involve itself in engineering and constructing of power plants, which encompass engineering, procurement, and project and construction management. Sidi Krir 1 and 2 was the first project we started with, this project consists of two 350 MW units, west of Alexandria. Following that, we worked on the Ayoun Moussa plant with similar capacity in Sinai. At that time the core team of the company was moved to the United States, our employees received training from the Bechtel Corporation and that was necessary in the sense that our objective was to have all the technology and know-how of Bechtel transferred to our company. When we first commenced we had approximately 1 expatriate to every 5 Egyptian employees working for us. Today the ratio is one to fifteen. We support Bechtel in many projects in Saudi Arabia, Syria, Emirates, as well as supporting them with the first BOOT power project, which today we are doing about 75% of it. Supporting Bechtel was the key ingredient for their success with that project. As far as our local projects are concerned Sidi Krir 1&2 is now operational, while the Ayoun Moussa power plant is still being tested, but will be delivered by the end of this year. And in the year 2001 we will be delivering the Sidi Krir 3 and 4 project. The total install capacity of these projects will amount to 2,000 mega watts.
So then was it PGESCo as a whole or Bechtel who installed the 2000 mega watts in the country?
Previously, Bechtel was involved in the Egyptian Electric sector. They installed 1,200MW at Shoubrah El Kheima, 1,300 MW at Damietta and 200 MW at Cairo South, adding about 20% of the total capacity in Egypt. The Ministry and Bechtel decided to form a company together aiming to create a local engineering services entity with the know how of Bechtel. The other 2000 mega watt projects are currently implemented by PGESCo with the support of Bechtel.
What are the roles and interests of each partner, and how do they benefit from this partnership?
The ministry for example has created this company, as a source of quick and reliable engineering services to support their project. We have already done that and supported them with the 500 kV crossing the Suez Canal going to Aqaba, and solving a problem they were facing with the power plant in Al Arish. From Bechtel's point of view, they have created an execution center to help support them with other projects in the region. Thus we have become the first Egyptian Company able to face and accomplish immense projects in power generation, resulting from a great access to depths of knowledge and our consistency in maintaining our tools.
According to some opinions, there is a lack of entrepreneur initiative in Egypt which would lead to more investment in human resources and better training of staff. Do you think this could be a good example extrapolated to other sectors?
Yes definitely, and in my opinion this is the only road to be taken to acquire western know how. The reason behind sending and training people abroad is not only to absorb the knowledge but also to be able to communicate and comprehend other cultures. You might get to lose some people in the process, yet overall it is a good combination of both management and investment in human resources.
What is the company's strategy behind the plans of regional expansion?
We are trying to gear up with the new projects coming at Cairo North, and Nubareya, as well as trying to work with EdF to support them in their power BOOT projects in Egypt. Several Arab countries, such as Yemen and other regions in Africa are approaching us as well. In Egypt the private sector is now encouraged to build their own power generation, thus allowing us to try and accommodate ourselves to both the internal and external markets. This is our strategy, to try and maintain our existing annual growth of 6% to 7%, as well as improving gradually and steadily.
In a country where pollution is a major concern, what is PGESCo' s environmental policy?
It lies in the design of our projects. We have designed our plants both according to Egyptian and International environmental regulations and standards. Water is treated before it is discharged into the sea to minimize pollution impacts. In total it is a costly operation, but it has been our intention from the start to design plants in such a way as to minimize and eliminate air and water pollution.
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What is PGESCo's relation and agreement with InterGen?
InterGen is a developer owned by Bechtel (50%) and Shell (50%). They hired Bechtel to do the engineering, procurement and construction of their power BOOT project at Sidi Krir and in turn Bechtel took us to support the implementation of the project. Also, we supported InterGen in the development phase by supplying them with information. InterGen has also invested approximately 30% equity of the Sidi Krir project and secured the remaining amount in the form of loans from banks. Later on and after the project was financially closed Edison acquired about 40% from that equity, thus acquiring 12% interest in the plant.
Is PGESCo interested in bidding on future projects?
Three new projects are being launched this year, two at Cairo North to be completed using the BOOT system and the remaining in Nubareya financed by the EEA, these being part of the Ministry plan. The annual growth and demand for electric power in Egypt is approximately 600 mega watts annually.
What are the financial instruments normally used by your company to finance these mega projects?
In the 80's funds were obtained by EEA through the US AID and the World Bank. Today, most of the project funds come from the Arab or Kuwaiti funds as well as the Egyptian Banks with favorable terms.
The strategy of PGESCo is still continuing with the agreement between BECHTEL, the Ministry of Electricity and Energy and the Bank?
Yes we are, as well as continuing with our objectives to build power plants and pursuing our targets.
What are PGESCo's comparative advantages both in and outside Egypt?
In Egypt PGESCo's main advantage is the ability to understand local procurement, market and business culture, and at the same time retaining the know how of a top notch organization such as Bechtel. When it comes to external matters our advantages are the fact that we can get the job efficiently done and at a much lower cost, thus offering competitive prices as compared to international companies.
How do you see the sector evolving in the near future?
The initiative of privatization and liberalization in the Electric sector is definitely moving in the right direction, but it will take some time for some issues to be resolved. Private companies are now allowed to build their own power plants in Egypt and sell the excess to the government, and in the process of being allowed to sell to consumers. In order to do so the privatization of the Electric companies is required, which may prove to be difficult, due to a lot of necessary changes such as the improvement of these company operations that has to be made. Some companies such as the Cairo, Alexandria and Canal Electric Companies have already been selected as targets for privatization, and the Egyptian National Assembly has already approved sales of up to 49% of these companies. The other side of the equation now is to encourage people to invest here by offering attractive deals. Therefore new elements can be gained due to the mergers. They become part of one company and have a say on which procedures need to be followed. As a result this would lead to complete privatization and competitive prices which would change our economical status from a controlled one to a liberalized one, and we are in favor of this, but it must be done gradually.
Do you forecast a bright future in Egypt, and how well positioned is PGESCo in preparation for the day when competition is increased?
When we first established the company this issue was not considered, but now that it has come up we support it and are more than ready to face the challenge.
Are you optimistic when it comes to Egypt's future, as you are in the future of your company and sector?
Definitely. All the sectors complement each other. You can not have one doing well and other not. The petroleum sector can be taken as an example; they have a confirmation on tripling the reserve of natural gas. The intention did not exist before, but now they are willing to sell natural gas outside Egypt. Furthermore the petroleum sector has already encouraged international companies to do offshore drilling for potential sharing of the profits. The construction of roads and airports is another example. Liberalization is coming through from diverse directions and the political system is stable in Egypt thus encouraging steady and gradual investments inside the country. As I said before in order to compete with other countries we have to ameliorate our processes of improvement and work with less manpower, cost and bureaucracy. |
