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Egypt regulatory update: Financial Regulatory Authority issues decrees regulating the development and use of FinTech within non-banking financial services and activities
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Energy & Natural Resources
Egypt is gearing itself to become a heavyweight producer of green hydrogen and its derivative products, and has set its strategy to providing 5-8% of the world’s hydrogen by 2040, ramping up its GDP by USD 10-18 billion in the process. The Government has embarked on executing agreements, to develop green hydrogen projects and meet this goal. Ideally located in close proximity to Europe, Egypt is naturally fit to integrate its production into the European network of hydrogen pipelines, and to become a serious contender in the global green hydrogen market.
Egypt first established its Suez Canal Economic Zone to promote economic trade and investment in 2015, which today serves as the focal point for Egypt’s green hydrogen strategy. The Suez Canal Economic Zone, established around a shipping lane which is host to 15% of the global maritime trade, is impeccably situated to serve as a logistics centre for the distribution and export of green hydrogen and its products.
On Tuesday 2nd January 2024, the Egyptian Parliament ratified the final bill designed to incentivize the development of new renewable energy projects centred on green hydrogen and its derivatives, which remains to be promulgated and entered into force. This legislation emerges amidst a backdrop of numerous other major economies advocating for the advancement and adoption of the environmentally sustainable green hydrogen. Regionally, both the UAE and Saudi Arabia have already pledged to substantial initiatives for green hydrogen production and its application. Egypt has galvanised efforts to align with this movement, and to contribute to the flourishing renewable energy market emerging in the Middle East.
To action its strategy, Egypt has embarked into entering a series of agreements, including signing with a number of international investors, to start production of nearly 5 GW Green hydrogen which continues to expand as interest in green hydrogen grows.
Egypt is capitalising on the opportunity to export its green hydrogen production to Europe — the rationale behind this comes down to simple mathematics. While the fossil price per barrel is estimated to reach USD 100-115 by 2030, the cost of producing hydrogen per kilogram from renewables will fall to USD 2.0-2.5 by 2030; a staggering price difference.
Green hydrogen is a renewable hydrogen obtained by the electrolysis of water, which is typically powered by environmentally friendly sources like wind and solar energy. It shows great potential as a clean energy carrier, that could naturally supplant traditional hydrocarbon-based energy, and pave the route to a more sustainable and eco-friendly energy market. The unveiled legislative strategy in Egypt included allocating substantial land and resources for the development of renewable energy projects, and drew significant external investments from EU partners.
The new Act is focused on incentivising green hydrogen projects that are undertaken in partnership with competent authorities and within 5 years from the date of its enforcement.
In order to fall under its auspices, companies seeking partnerships with competent authorities are required to incorporate as joint stock companies, with the founding shareholder being a juristic person, and with the company’s primary objective set to execute one or more green hydrogen production projects or its derivatives.
The Act exclusively lists 5 types of green hydrogen projects to fall within its ambit, being:
The ratified bill introduces significant tax incentives targeted at fostering the growth of the green hydrogen industry in Egypt.
Projects engaged in the production and expansion of green hydrogen will be entitled to following benefits:
In addition, the companies and projects focused on green hydrogen will entitled benefits including, inter alia:
To qualify for the outlined incentives and benefits, companies must adhere to criteria, such as:
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