“Girt there with blasts and meteors Tempest dwells. By Nile's aereal urn, with rapid spells. Urging those waters to their mighty end.” --Percy Bysshe Shelley, To the Nile
In 2016, when Cai Yongping, an engineer and project manager at China Electric Power Equipment and Technology Co., Ltd. (“CET”) first joined the EETC500 kV power transmission project bound for Egypt, all he knew about the Nile was its name, from his junior high school geography textbook.
Today, Cai and his colleagues shuttle back and forth along the Nile, the world’s longest river, all in view of the same scenes Shelley once described. The power lines now stretching across the Nile are Cai’s legacy.
2016 marked the 60th anniversary of the establishment of formal diplomatic relations between the People’s Republic of China and Egypt. On 19th January 2016, Chinese President Xi Jinping published an article titled “Let China-Arab Friendship Surge Forward like the Nile” in Al-Ahram. In the article, President Xi emphasized that, “The BRI is aimed at achieving true common prosperity instead of the mere satisfaction of self-interests.”
The following day, President Xi and Egyptian President Abdel Fattah al-Sisi were present as the State Grid Corporation of China, and Ministry of Electricity and Renewable Energy of Egypt, signed the contract for the EETC500 kV power transmission project. It was agreed that CET, a subsidiary of State Grid Corporation of China, would be the EPC of the project. It was the first all-inclusive signing, execution and financing contract between the two countries in the field of power transmission and heralded a new era in their bilateral cooperation.
CET thus became the first Chinese power company to enter the Egyptian market. The EETC500 kV power transmission project will cover the northern, central and southern parts of the Nile River Delta region, and will stretch along a total length of 1,285km.
Before CET’s arrival, Egypt’s power infrastructure was relatively weak. For those living on the banks of the Nile, power outages and blown fuses were part and parcel of everyday life. In today’s digital world, a power cut means being cut off from the world.
Under the scorching Egyptian sun, Cai supervised his colleagues in the project division in order to ensure the project was delivered to schedule. At peak times, construction work was carried out on six power lines simultaneously. The blueprints for individual power lines needed to be designed in tandem with the others, planning permission conflicts arose, and logistics posed a challenge. Despite these difficulties, the project team coordinated their efforts and tailored their solutions to evolving circumstances, even going so far as to develop a new EPC logistics management system. During the construction process, the project team conducted an analysis that allowed them to develop a program management model that suited the Egypt project. The team fully harnessed this model to ensure standardised design, centralised procurement, smart logistics management, and standardised, unified construction management objectives. As part of the project, two 175-metre-high pylons were erected on either bank of the Nile, making the EETC500 Kv project the first to cross the river. The height, weight and distance between the pylons all set new records for Egypt’s power grid.
For Cai, who had previously worked on power line crossings over the Pearl River and Yellow River in China, the greatest challenge of the Nile River project was not the technical aspect but the time constraints. In order to protect the Nile shipping trade, the Egyptian government stipulated that the power line cables be raised higher above the water. This in turn meant that higher pylons would need to be constructed, and would increase the workload by 30%. However, no adjustment was made to the delivery date, creating a thorough headache for the project team. Furthermore, the dozen power lines for the project would pass over some of Egypt’s most densely-populated areas. In Egypt, where private ownership of land is permitted, difficulties in acquiring the land necessary meant that the power lines often had to be diverted from the planned route, leading to sharp spikes in time cost for CET.
CET also faced many unexpected problems on its arrival in Egypt. For instance, what should have been the busiest phase of the project coincided with Ramadan. In line with Islam, Egyptian workers would not work in daylight hours. In order to ensure that the project was delivered to schedule, Cai transferred 200 workers from China to work in the day. The Egyptian workers would then take the night shift. In the summer, the management adjusted the work schedule to avoid the midday heat, beginning the shift at 4pm.
Eventually, the project was delivered not only to schedule, but even set a record for the shortest construction period of a project of its kind. Egypt’s days of imposed blackouts are set to become a thing of the past. Mohamed Shaker, Minister of Electricity and Renewable Energy of Egypt, praised the high standards and quality adhered to during the project: “The project has harnessed the latest electrical transmission technology and concepts from China, helping to revamp Egypt’s outdated power grid and transforming the quality of life of Egypt’s citizens.”
As an important part of the BRI, infrastructural development and connectivity lays the foundation for further BRI development. Investment in and construction of major infrastructure projects will remove the roadblocks to deeper cooperation between Belt and Road countries and pave the way for economic cooperation.
The Egypt project, which has a contractual value of USD758 million, has created financing structure challenges for CET.
Yang Guo, chief accountant at CET, notes that financial decisions at CET must serve the development and construction of BRI projects, and must ensure business development and execution. In Yang’s judgment, a proper financing structure should first and foremost meet the developing needs of a project, ensuring both efficiency and effectiveness.
“As a project progreses, we need to consider whether the financing structure and model are a good fit for the project, the feasibility of the financing, and arrangements for the duration. We also need to be aware of the risks or challenges posed by hidden costs – for example, exchange rate risk, which determines the choice of currency for settlement. All of these issues require prudent and rational judgment.”, said Yang.
In the initial stages, CET’s Egypt project was jointly financed by three Chinese banks and the China Export & Credit Insurance Corporation. CET also worked with HSBC and other international financial institutions. HSBC extended a comprehensive credit line to CET based on an analysis of its production and operations, business expansion, strategic focus and current financial position and business needs. HSBC further provided a Chinese-speaking local customer manager to assist CET and ensure that from the inception of the project there would be no language barrier.
With the support of a host of Chinese and international financial institutions, CET has harnessed a variety of financing solutions and met the requirements of various modes of collaboration accepted in the power grid infrastructure industry, including buyer’s credit for the Egypt project and seller’s credit for the GDHA500kV power transmission project in neighbouring Ethiopia.
Wenjie Zhang, EVP, Managing Director and Co-Head of Global Banking of HSBC Bank (China) Company Limited (“HSBC China”) commented that BRI-related projects often entail the raising of substantial sums. Diversifying financing channels is a crucial element in BRI-related financing, and Chinese companies should deploy a financing structure that fits the particular phase of construction or operation of a project.
As CET’s EETC500 Kv project progresses and Egypt’s revival plan is implemented, the country’s power transmission infrastructure is taking shape. There has been a clear drop in demand in the electricity market, and while banks in Europe are offering zero interest or even negative interest rates, Egypt’s diversified, low-cost financing model is growing by the day. Cai Yongping explains that Egypt has no large-scale or emergency projects in need of financing for the time being. There is increasing demand for low-cost, high-quality, short-term projects, and bidding wars are intense in the open-market economy. CET will need to adjust its market strategy accordingly in order to accommodate changes in user demand, with more focus on discovering technologies commensurate with the scale of the national grid and on projects that harness CET’s advantages as a seasoned player. CET will gradually transform its strategy towards grid upgrade, efficiency enhancement and cross-border interconnection of power grids.
Today, Cai and his colleagues on the CET project team are opening up a new market on the world’s longest river.
There is an Egyptian saying that goes: “Once you drink from the Nile, you will come back again.” Back in China on holiday on a short respite from work, Cai Yongping will soon return to the banks of the Nile; it will be another Chinese New Year spent away from his family.