Saudi Arabia and Egypt Saturday signed a SR6 billion ($1.6 billion) agreement to link their electricity grids, a project that will allow power trading between the two countries.
Peak-time summer power consumption in Saudi Arabia falls between noon and mid afternoon when air conditioners are most intensively used, while in Egypt peak time is after sunset.
Linking the two will allow Saudi Arabia to export power to Egypt.
The Kingdom’s majority state-owned utility, Saudi Electricity Co (SEC), and Egypt’s state power company Egyptian Electric Holding Co will share the cost of the 3,000-megawatts 20 km undersea transmission cable.
Power lines will be extended by around 1,320 km, 820 km in Saudi Arabia and 480 km in Egypt.
Egypt’s Electricity Minister Ahmed Moustafa Emam said the linkage is expected to take 24-30 months to complete.
“Egypt will pay for around 40 percent of the cost while Saudi Arabia will pay for the remaining 60 percent,” Emam told Reuters after the signing ceremony in Riyadh.
“The Project will allow both countries to share power of up to 3,000 megawatts, and will achieve a return on investment of 13 percent for each country.”
He declined to give details on prices, saying tariff and commercial agreements have not yet been finalized.
Emam said it would cost Egypt around 30 billion Egyptian pounds to generate an additional 3,000 megawatts itself.
Saudi Minister of Water and Electricity Abdullah Bin Abdulrahman Al-Hussayen said the project, when completed, will effectively lead to linking the power grids of 14 Arab countries, including the six-member Gulf Cooperation Council.
“This is one of the most important projects of its kind between Arab countries,” he said during the signing ceremony.
Egypt and Saudi Arabia had been discussing the power linkage for several years.
Emam has underlined the importance of a power linkage project between Egypt and Saudi Arabia due to the potentials both countries have as Egypt and Saudi Arabia produced about 92 percent from the power energy produced in the rest of Arab countries.
The minister said that the technical and economic feasibility studies proved that the planned project will be successful.
Emam noted that the project’s estimated costs reach nearly $1 billion and $650 million, adding that the amount of the Egyptian side reaches $570 million.
He made clear that it is planned to start implementation of the project immediately in order to be finalized by 2016, where the operating tests will be launched by 2015.