Siemens signs 8 billion euro power deal with Egypt

Siemens CEO Joe Kaeser (front, right), signing a contract with Egyptian Minister for Electricity and Energy Shaker El-Markabi (front, left) while German Minister for Economic Affairs Sigmar Gabriel (back, left) and Egyptian President Abdel Fattah al-
Siemens CEO Joe Kaeser (front, right), signing a contract with Egyptian Minister for Electricity and Energy Shaker El-Markabi (front, left) while German Minister for Economic Affairs Sigmar Gabriel (back, left) and Egyptian President Abdel Fattah al-Sisi (back, right) talk before the German-Egyptian Economic Commission in the Federal Ministry for Economic Affairs in Berlin, Germany, on June 3, 2015. -- PHOTO: EPA

BERLIN (Reuters) - German industrial group Siemens signed an 8 billion-euro-deal (S$12 billion) with Egypt on Wednesday to supply gas and wind power plants designed to boost the North African country's power generation by 50 per cent.

The deal, signed during an official visit of Egyptian President Abdel Fattah al-Sisi to Germany, is Siemens' single biggest order ever and gives a much-needed boost to its gas and power division, which is struggling in its home market.

The orders expand on memorandums of understanding announced in Egypt in March with Siemens and other suppliers including General Electric (GE) as Egypt strives to improve its creaking national grid.

That could put the German company, which started doing business in Egypt in 1859, ahead of arch-rival GE.

GE said earlier this year it had a 30 per cent market share. Siemens claimed a share of 25 per cent before the deal.

Egypt is going through its worst energy crisis in decades, with power cuts common even in Cairo as its ageing state-run infrastructure struggles to handle rapidly growing demand for electricity in a country of 87 million people.

Siemens said the installations, when completed, would add 16.4 gigawatts to Egypt's national grid.

The order includes 24 of Siemens' H-Class gas turbines, adding to just 48 that Siemens has sold in total so far. They will power three new gas plants, which Siemens said would be the largest in the world once completed.

Siemens has also built an H-Class turbine-powered plant in Irsching, Bavaria, but it is to be shut down next year as it is pushed out of business by competition from renewable energy.

Siemens' chief executive Joe Kaeser said last month he had resigned himself to never selling another gas turbine in Siemens' home country.

The Egypt order also includes 12 wind farms in the Gulf of Suez and West Nile areas, comprising around 600 wind turbines and an installed capacity of 2 GW.

Siemens will build a rotor blade manufacturing facility that will provide training and employment for up to 1,000 people and is scheduled to go into operation in the second half of 2017.

The deal will be financed by Siemens Financial Services, supported by export credit agencies in Germany and Denmark, Siemens said.

An initial 4.4 GW is scheduled to go online before summer 2017 and the full 14.4 GW 38 months after the financing has closed and advance payments have been received.