Egypt plans to build new capital city

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Friday - 3 July 2015

During the spring, it announced that it plans to build a new capital city in the desert east of Cairo. Then, last month, it signed a huge power-plant deal with Siemens AG, the German-based multinational company.

Of the two projects, building a new capital is the more audacious. It may have been fuelled by the inability to attract new private-sector investment to Cairo, an ancient city that now houses an estimated 18 million people. But the population is expected to double within 40 years, and the city infrastructure is already badly overloaded and crumbling — some of it is beyond repair.

Building anew would be, at best, a patchwork solution, so the decision was made to build a new city in the desert and move the government there.

The objective is to build a city of 5 million. The government estimates that the first phase of construction will cost the Canadian equivalent of about $55.8 billion and take seven years.

There are few details, so far, about what that first phase will include. But Reuters news agency quoted a local real estate tycoon as saying that the entire project could total $372 billion.

The power-plant deal, with Orascom Construction, involves construction of three combined-cycle plants, each with a capacity of 4,800 megawatts.

There will also be a dozen wind farms, bringing the total for the new generation facilities to about $11.1 billion.

Siemens described the contract as the largest single order in the company's history — especially important since the firm hasn't sold a single fossil fuel-fired turbine since the German government made a policy decision to phase out nuclear and fossil-fuel facilities.

The company also said the wind farms would create as many as 1,000 jobs since the rotor blades for the 600 wind turbines will be locally produced.

The fact that the two gas-fired plants will be combined-cycle facilities is important.  Basically, a combined cycle means that gas is burned to create steam to drive a turbine. Then, waste heat from the exhaust fumes is captured and used to produce more steam.

Using the two energy streams means plant efficiency can be increased by as much as 50 per cent.

Part of the rationale for building a new capital city is to try to bolster Egypt's sputtering economy by attracting private capital. In that respect, it seems to be successful already, since it will be developed by Capital City Partners Limited, a private fund led by Mohamed Alabbar, a businessman from the United Arab Emirates. The Emirates have contributed, as have Kuwait and Saudi Arabia.

Glossy handouts show a variety of shops, cafes, schools, religious buildings and public parks. There are to be 40,000 hotel rooms. The city will include 21 residential districts.

It is expected to create more than 1.5 million jobs, including public-service jobs, once the project is complete.

The international community was somewhat guarded in assessing the new city's prospects. One analyst pointed to the Canary Wharf development in London. That project had a few false starts, had a lot of local opposition, and endured a slump in real estate values before its fortunes turned around. Now it's a prosperous new city-within-a-city that has drastically altered London's skyline.

The Abuja Centenary City in Nigeria languished on the drawing board for a long time before a deal was finally signed last winter for a new hotel complex that is expected to kick-start the development.

In Egypt, moving government employees and offices into the as-yet unnamed new capital is expected to provide a similar kick. The fact that private capital is backing the project, said one analyst, will at least partially insulate the project from delays and other vulnerabilities related to Egypt's high budget deficit and high public debt.