Orascom Construction, a subsidiary of Dutch-based OCI N.V., will build a coal-fired power station on the Red Sea coast in partnership with Emirati-based International Petroleum Investment Company (IPIC), the company announced on Wednesday.
Egypt suffers from an energy shortage leading to frequent blackouts especially during the Summer, with the government struggling to supply natural gas needed for power generation.
The government – which cut fuel subsidies in July, including those targeting heavy industries – allowed businesses to start importing coal as a substitute for gas needed to produce electricity.
The plant will cost $2.5 to $3 billion, a source close to the deal said. Nassef Sawiris, CEO of OCI N.V., discussed the project with Prime Minister Ibrahim Mahlab last week, the source said.
The planned power plant will have a capacity of 2,000 to 3,000 megawatts (MW) and is "pending technical studies and governmental and corporate approvals," the company said in the statement.
It will also utilize "advanced clean-coal technology that complies with EU standards for emission control." Many Egyptian environmental groups oppose the use of coal saying it has grave environmental and health repercussions.
Sawiris, Egypt's wealthiest man, promised large investments after his three-year sentence for tax evasion was overturned on Tuesday.
IPIC was established in 1984, and is wholly owned by the Emirati government. Egypt turned to the UAE for economic help following the ouster of Islamist President Mohamed Morsi in July 2013. The two countries signed a deal in September committing Egypt to purchase about 65 percent of its needs from its Gulf ally in the next year.
On Saturday Egypt signed $350 million of financing agreements with Saudi Arabia aimed at upgrading its power grid and securing oil products. The Oil rich kingdom sent Egypt $3 billion worth of refined oil products between April and September of this year, an Egyptian oil official told Reuters, while the total value of Saudi oil aid since July 2013 amounted to about $5 billion.