Prospects in Egypt’s energy construction market

Egypt

Sayed Farouk, chairman of The Arab Contractors, talks to The Energy Year about trends and prospects the company sees in the Egyptian and regional energy construction markets, as well as its plans for partnerships and expansion. The Arab Contractors is a construction company active in the Middle East and Africa.

This interview is featured in The Energy Year Egypt 2022

What opportunities and challenges do you see in the Egyptian renewables sector?
Egypt has great potential for renewables projects, especially for solar energy. Renewable energy sources are a must for all countries now, not something that governments can decide to pursue or not. Countries have to implement such projects, and Egypt is going this way, but more projects are needed. The Arab Contractors is going to co-operate with renewables players, especially in solar. We are open to co-operating with any company from any country. For now, we don’t have any contracts yet in this area.
At the same time, there are some challenges: it’s obviously different from other energy sources that we are used to. Vast areas are needed to implement solar projects. There is a need for technicians, know-how and technology, but nowadays these are available in Egypt.

Do you see the trend of large-scale infrastructure projects continuing in the future?
Yes, large-scale infrastructure projects are being developed all around the country and I can see this trend going forward. In the north of Egypt, we’ve seen the development of New Alamein. Moreover, the New Administrative Capital is being built near Cairo. It’s almost completed and in itself contains many mega-projects. Another new city being built is New Mansoura, overlooking the Mediterranean Sea.
With that many new cities being developed, there’s a considerable need for infrastructure and buildings. Moreover, our population increases every year by almost 1 million. It’s clear that we need more cities, more infrastructure and more electricity. Egypt is very different now from how it was just two years ago. Everything is changing. Because of this, there is plenty of room for new construction players in the industry.

What role does the energy construction industry play today in The Arab Contractors’ overall operations?
Here in Egypt, we have worked on the Abu Qir and West Cairo power plants, as well as the Suez thermal power plant. Outside of Egypt, we’re constructing the Julius Nyerere hydropower plant in Tanzania with the Egyptian company Elsewedy Electric. We competed in an international tender against five other companies for that project.
It’s a challenging project because it’s in the middle of nowhere, about 400 kilometres from Dar es Salaam. But it’s a very important national project for the development of Tanzania, as they have a lack of energy supply. The project schedule has been delayed due to the pandemic and to floods. We are planning to complete it by the end of 2022.
We are ready to work on any project in the energy landscape, but our core business remains infrastructure – bridges, roads, water plants, sewage plants, big buildings. Still, we are looking at the downstream sector and trying to secure a stake in it. As of 2021, energy-related projects make up about 5% of our overall revenues.

What are your plans for the energy construction sector?
When it comes to the oil and gas industry, the issue is that it’s historically been a closed club with very few members. It’s not easy to penetrate it. We are trying now, as the market needs more players and resources. This represents an opportunity for us. We are aiming to undertake energy-related projects in Africa, co-operating with Petrojet and Enppi [Engineering for the Petroleum & Process Industries], possibly creating a joint venture with them.
We’re already communicating with Petrojet. We’re trying to learn from these players, who are clearly more experienced in terms of energy, as it’s their core business. Nowadays, with the construction boom, they have started to tap into infrastructure projects as well; therefore, we’ve started to discuss co-operation with them.

How do you assess the electricity landscape in Egypt?
About seven years ago, there was a real problem with the supply, with electricity being cut three times a day. Now this has been solved and that is mainly due to our minister of electricity and renewable energy, Dr. Mohamed Shaker, who is a brilliant individual and addressed this issue very quickly. He’s not only a politician, but a scientist as well.

How did The Arab Contractors manage to maintain operations during the pandemic?
Like any company, we had some challenges co-ordinating with companies in other countries, especially in Europe and in the US. Some of these countries were in lockdown and it was difficult to import materials, especially from Europe. Moreover, it was difficult to keep our people in safe conditions, but locally we succeeded in continuing to work.
We took the best measures we could to protect our people, such as social distancing and reducing the number of employees in our offices. If our employees have any kind of illness, we give them the option to work from home. We are lucky as being a contractor, we have fewer office workers and more employees who work on construction sites, working mostly outdoors.
Online meetings have solved a lot of issues, but if professionals from abroad are needed here for testing or commissioning of equipment, it gets difficult. As well, sending people overseas has presented issues with quarantine requirements. Nonetheless, here in Egypt we didn’t have a lockdown and we are lucky that our number of Covid-19 patients has been very limited.

What’s your view on foreign and local investment appetite for Egyptian infrastructure projects?
Foreign investment has obviously been affected by the pandemic, but it’s going to return to normal soon – probably by next year. As vaccinations are being rolled out, this will lead to reduced Covid-19 measures, bringing life back to normal. Egypt is one of the biggest countries in terms of population. We have a gigantic market and many educated people as well. So investing in infrastructure projects in Egypt will be very attractive.
Regarding our company, both international and local financing is going very well.

What is your international expansion agenda looking like?
Working in other African and Arab countries has been part of our strategy for more than 60 years. When we work in these countries, we are part of the community, training the labour force, trying to serve and help the community. We try to source most of the workers, engineers and technicians from among the locals, and the materials from the country itself or from adjacent countries. We feel a part of the environment because we are Africans, and we are from a developing country, just like them.
We started working in Uganda 19 years ago and now we’re a very strong contractor there. We’re working on building roads, hospitals, houses, malls and batch plants. I met the Ugandan minister of works and transport a few months ago, and we agreed on undertaking a pre-financed project.
During the pandemic in Uganda, the border was closed and there were no flights. Nonetheless, our people managed to keep on working. I was very proud of this and visited the projects as soon as flights became available. The co-operation there with the local community has been incredible.
We have a company in Nigeria as well, of which 45% is owned by us and 55% by Nigerians. We operate in six states in Nigeria and have been there for more than 31 years.
All in all, Africa has changed a lot because of Chinese companies. They are big and represent tough competition, even offering financing and trading of materials for construction projects. Nonetheless, we’re keeping up with them.

How important is it for Egyptian construction companies to provide their services beyond the border?
It’s very important, as we have every kind of human and technological resource, as well as experience and equipment. We should have a stronger relationship with Africa as we are a very important part of it. Around 10 years ago, we were the only Egyptian company working in other African countries, but now there are many Egyptian players doing that.

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