Egypt’s Pioneering Solar and Battery Storage Project Secures Landmark $479.1 Million Loan

The global push for clean energy has found a significant new champion in Egypt, with the announcement of a landmark US$479.1 million loan for the nation’s first integrated solar and battery storage plant. This ambitious project, spearheaded by Obelisk Solar Power SAE, a special purpose vehicle (SPV) incorporated in Egypt and wholly owned by Norwegian renewable energy giant Scatec ASA, is set to redefine the country’s energy landscape. The financing, provided by a powerful triumvirate of development finance institutions – the African Development Bank (AfDB), the European Bank for Reconstruction and Development (EBRD), and British International Investment (BII) – underscores a collective commitment to accelerating the green transition in emerging markets.

Located in Egypt’s Nagaa Hammadi region, this cutting-edge facility will combine a 1 GW (gigawatt) solar photovoltaic (PV) power plant with a robust 200 MWh (megawatt-hour) Battery Energy Storage System (BESS). Its strategic importance lies in its ability to deliver dispatchable clean energy, meaning the power can be supplied on demand, regardless of solar irradiance. This enhanced capability will significantly improve grid stability, enable more efficient integration of renewable energy sources, and effectively manage the country’s growing peak electricity demand. Upon completion, the project is expected to generate approximately 3,000 GWh of clean energy annually and prevent up to 1.4 million tons of carbon emissions each year, making a substantial contribution to Egypt’s ambitious decarbonization goals.

A Collaborative Financial Architecture: Blended Finance at its Best

The funding for the Obelisk Solar Power project exemplifies the power of blended finance – a strategic approach that combines concessional finance (from public or philanthropic sources) with commercial capital to de-risk projects and attract private sector investment into sustainable development initiatives that might otherwise be deemed too risky or not sufficiently profitable. The total estimated capital expenditure for the project stands at US475.6 million covering approximately 80% of this cost. This robust financial structure highlights the confidence of international development partners in Egypt’s renewable energy potential and Scatec’s execution capabilities.

The African Development Bank Group’s Significant Contribution

The African Development Bank Group (AfDB), a premier financial institution on the continent committed to fostering sustainable economic development and social progress in its regional member countries, is providing a substantial financing package of US$184.1 million. This includes various components tailored to support the project’s viability and impact:

• Commercial Loans: A significant portion, US$125.5 million, is allocated as commercial loans, demonstrating the AfDB’s direct investment in financially sound green infrastructure.
• Concessional Funding from Special Funds: The AfDB leverages its specialized funds to provide critical concessional finance, which is essentially loans offered on more favorable terms than market rates (e.g., lower interest rates, longer grace periods). This includes:
  • Sustainable Energy Fund for Africa (SEFA): US$20 million from SEFA, a multi-donor trust fund managed by the AfDB, which aims to unlock private sector investments in renewable energy and energy efficiency projects across Africa.
  • Canada-African Development Bank Climate Fund: A further US$18.6 million from this partnership, showcasing the collaborative efforts between nations and multilateral development banks to address climate change.
  • Climate Investment Funds’ Clean Technology Fund: An additional US$20 million channeled through the AfDB from this global fund, designed to support developing countries in scaling up low-carbon technologies.

The AfDB’s Board of Directors officially approved this comprehensive funding package on June 11, 2025, underlining the institution’s strategic priority to “Light Up and Power Africa” – one of its High 5 strategic priorities aimed at ensuring access to affordable, reliable, sustainable, and modern energy for all Africans. This investment not only advances Egypt’s energy security but also serves as a critical demonstration project for hybrid renewable energy solutions across the continent.

European Bank for Reconstruction and Development (EBRD)

The European Bank for Reconstruction and Development (EBRD) is contributing a financing package of up to US$173.5 million. The EBRD, which operates across three continents from Central and Eastern Europe to Central Asia and the Southern and Eastern Mediterranean, is renowned for its commitment to developing market economies and fostering sustainable and inclusive growth. A key feature of its support for this project is:

• EFSD+ First Loss Cover Guarantee: US$101.9 million of the EBRD’s financing will benefit from a guarantee provided by the European Fund for Sustainable Development Plus (EFSD+). This “first loss cover” mechanism is a powerful de-risking tool. It means that the EFSD+ will absorb a predetermined initial portion of any potential losses on the loan for the first 18 years. This significantly reduces the risk for the EBRD and potentially other commercial lenders, making the project more attractive for investment. It is a testament to the European Union’s broader commitment to supporting green transition in its partner countries.
• EBRD Shareholder Special Fund Grant: An additional US$6.5 million grant will be provided by the EBRD Shareholder Special Fund, further improving the project’s financial viability and demonstrating direct support for its developmental impact.

The EBRD’s involvement aligns with its Green Economy Transition (GET) approach, under which it aims to be a majority green bank by 2025, ensuring all its activities are aligned with the Paris Agreement. The Obelisk project perfectly encapsulates this strategy by enabling a significant shift towards renewable energy and away from fossil fuels in Egypt.

British International Investment (BII)

British International Investment (BII), the UK’s development finance institution and impact investor, is providing a financing package that includes a US100millionconcessionalloanandaUS15 million returnable grant. BII focuses on creating productive, sustainable, and inclusive economies in Africa, Asia, and the Caribbean. Their participation in this project is particularly strategic:

• Concessional Loan & Returnable Grant: The combination of a concessional loan and a returnable grant (a grant that may need to be repaid under certain conditions, but generally improves project economics) is designed to lower the overall cost of the Battery Energy Storage System (BESS) component of the project. This makes the BESS part more financially viable and affordable, which is crucial for a nascent technology at this scale in the region.
• Attracting Private Sector Participation: By de-risking and improving the economics of the BESS, BII’s financing plays a catalytic role in attracting further private sector participation and establishing a replicable model for future investments in integrated renewable energy solutions. BII’s financing for this project is subject to drawn-down conditions, indicating a structured release of funds tied to project milestones.

BII’s involvement underscores its commitment to innovative and sustainable energy solutions that directly contribute to climate action and economic development in emerging markets.

Project Development and Operational Certainty

The integrated power plant is being developed by Scatec ASA, a leading Norwegian renewable energy solutions provider with a global footprint and a proven track record in developing, building, owning, and operating solar, wind, and hydro power plants. The project is structured to be built in two distinct phases:

• Phase 1: Encompassing 561 MW of solar PV capacity coupled with 100 MW/200 MWh of battery storage. This phase aims to commence operations in the first half of 2026, quickly bringing significant clean energy online.
• Phase 2: Adding another 564 MW of solar PV, targeting operations in the second half of 2026.

This phased approach allows for efficient project management, learning from the first phase, and optimized resource allocation.

Crucially, the energy generated by the Obelisk Solar Power project will be sold under a 25-year Power Purchase Agreement (PPA) with the Egyptian Electricity Transmission Company (EETC), the state-owned entity responsible for power transmission across Egypt. This long-term, US dollar-denominated PPA provides essential revenue certainty for the project, making it highly attractive to investors. Furthermore, the PPA is backed by a sovereign guarantee from the Egyptian government. A sovereign guarantee essentially acts as a financial backstop, ensuring that the contractual obligations of the EETC will be met, even in unforeseen circumstances. This significantly mitigates off-taker risk for the lenders and the project developer, a critical factor for large-scale infrastructure investments in developing economies.

Transformative Impact on Egypt’s Energy Sector and Climate Goals

Upon its full completion, the Obelisk Solar Power project will represent a monumental milestone for Egypt: it will be the country’s first integrated solar photovoltaic and battery storage project of this magnitude. This is a game-changer for several reasons:

• Enhanced Grid Stability and Peak Demand Management: The inclusion of a 200 MWh Battery Energy Storage System (BESS) is particularly transformative. While solar PV plants generate electricity only when the sun shines, the BESS will store excess energy produced during peak solar hours and dispatch it during periods of high demand or when solar generation is low (e.g., at night or during cloudy weather). This “dispatchable” clean energy capability is vital for integrating large amounts of intermittent renewable energy into the national grid without compromising stability. It reduces reliance on traditional fossil fuel-fired “peaker plants” that are typically brought online to meet sudden surges in demand.
• Significant Carbon Emission Reduction: The project’s estimated annual generation of 3,000 GWh of clean energy directly displaces electricity that would otherwise be generated from fossil fuels. This will lead to a substantial reduction of up to 1.4 million metric tons of carbon dioxide emissions annually, making a crucial contribution to mitigating climate change and improving air quality.
• Diversification of Energy Mix and Renewable Energy Targets: Egypt has set an ambitious target to achieve 42% of renewables in its power mix by 2030. This project, with its 1 GW solar capacity, represents a significant leap towards this goal. It supports the diversification of Egypt’s energy sources, moving away from a heavy reliance on natural gas and oil, thereby enhancing energy security and reducing exposure to volatile international fossil fuel markets.
• Catalyst for Decarbonization: Beyond the direct impact, the Obelisk project serves as a powerful catalyst for Egypt’s broader decarbonization efforts. It demonstrates the technical and financial viability of large-scale integrated renewable solutions, paving the way for future investments and policy frameworks that support a greener economy.

Egypt’s Strategic Vision: NWFE Country Platform and International Collaboration

The Egyptian government views this project as a cornerstone of its national development and climate strategy. Dr. Rania A. Al-Mashat, Egypt’s Minister of Planning, Economic Development and International Cooperation, highlighted the project as a “landmark in Egypt’s clean energy transition.” She emphasized its role “not only as the first integrated solar and battery storage facility but also as a model for innovative financing through effective multilateral partnerships.”

The project is a concrete manifestation of Egypt’s commitment to its Nexus of Water, Food and Energy (NWFE) Country Platform. Launched in July 2022, the NWFE Program aims to accelerate Egypt’s national climate agenda by integrating climate action with development efforts across these critical sectors. The NWFE program provides a framework for mobilizing climate finance and private investments to support Egypt’s green transition, translating national climate change strategies into tangible, implementable projects. This solar and battery storage facility falls squarely within the energy pillar of the NWFE platform, serving as a flagship initiative that demonstrates Egypt’s resolve to achieve its climate ambitions.

The strong statements from the financing institutions further underscore the project’s broad significance and the collaborative spirit driving it:

• Wale Shonibare, AfDB’s Director of Energy Financial Solutions, Policy, and Regulations, noted that the project “exemplifies the scale of renewable energy potential across Africa and demonstrates how strong partnerships and innovative solutions can advance the energy transition and foster sustainable economic development.” He sees its “high demonstration and replication potential for similar initiatives across the continent.”
• Iain Macaulay, Director and Head of Project Finance (Africa & Pakistan) at BII, praised the integration of battery storage with solar PV as a “game-changer for Egypt’s energy sector,” providing “reliable and dispatchable renewable energy and reducing reliance on fossil fuels.” He believes it sets a “precedent for future dispatchable hybrid renewable energy projects in the region.”
• Boyd Carpenter, EBRD Managing Director for Sustainable Infrastructure, highlighted how the project “takes Egypt’s green energy transition to another level by harnessing the power of the sun not just during the day but also at night, thanks to the combination of solar and battery storage.” He explicitly linked it to the goals of Egypt’s NWFE platform.
• Stefano Sannino, Director-General of the Directorate-General for the Middle East, North Africa and Gulf of the European Commission, drew attention to the launch of the EU-Egypt Investment Guarantee for Development Mechanism, a strategic platform designed to “fast-track a significant pipeline of investment projects to deliver large-scale financing solutions in Egypt.” He stated that this particular project is a “concrete example of a fruitful collaboration between the EU and the EBRD for supporting green transition in the country.”
• Terje Pilskog, CEO of Scatec, expressed pride in their ability to deliver such “large-scale hybrid projects,” emphasizing their role in supporting Egypt’s clean energy ambitions.

A Blueprint for Future Sustainable Development

The Obelisk Solar Power project transcends its immediate geographical and sectoral impact. It stands as a powerful blueprint for future sustainable development initiatives, particularly in emerging economies grappling with increasing energy demand, climate change imperatives, and the need for robust, flexible power grids.

The successful collaboration between a private developer (Scatec) and multiple leading development finance institutions (AfDB, EBRD, BII) leveraging innovative financial instruments like blended finance and guarantees, offers a replicable model for mobilizing capital at scale for complex green infrastructure. The project’s emphasis on solar photovoltaic (PV) technology combined with advanced Battery Energy Storage Systems (BESS) is particularly relevant, demonstrating how intermittent renewable sources can be made dispatchable and reliable, addressing a critical challenge in renewable energy integration.

As countries around the world strive to meet their climate commitments and build more resilient energy systems, the lessons learned and the successful implementation of projects like Obelisk Solar Power in Egypt will prove invaluable. This project is not merely about generating electricity; it is about building a sustainable future, enhancing energy security, and fostering economic growth through innovative green technologies and robust international partnerships.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

17th June, 2025