Egypt to issue new cement licenses

Egypt will offer new licenses for 12 cement production lines as it aims to boost cement output by 40 percent by 2015, the cabinet said on Monday leaving the details of how energy will be supplied to the firms undecided.

Egypt's construction industry has grown even as it stalled elsewhere. Cement demand rose 25 percent last year, driven largely by housing needs of a growing population and a cash-fuelled economy, but has since slowed.  

"Demand is increasing by 8 percent a year," Cabinet spokesman Magdy Rady said. "It is expected to reach 77 million tons in 2015 so we need to boost output."

He said licenses for 12 lines would be offered and said that some licenses could cover more than one line.

Egypt has said it planned on issuing eight to 12 licenses by mid-2010, but the decision had been pushed back several times as the government said it may not be able to supply energy to firms that obtain the licenses.

Trade and Industry Minister Rachid Mohamed Rachid said in April firms may opt to import their own energy supplies, in what could potentially raise the cost of investment in the new licenses higher than had been expected.

Monday's cabinet meeting did not settle outstanding questions on energy supplies to the new licenses, but approved a recommendation from the Trade and Industry Ministry proposing cement firms build their own power plants.

While the details of the license conditions were yet to be drafted, Rady said the energy question should not be a concern.

"We will not put out a license, without guaranteeing that the energy is there," Rady told Reuters. "Any energy scheme will be facilitated by the government."

Rady said firms may import their energy or build their own power plants, to ease pressure on Egypt's grid, but that all such scenarios would be factored into the cost of the licenses.

Egypt, the Arab world's most populous nation, has been seeking to tackle power outages that economists say could cramp investment and that have prompted public grumbling during a hot summer and the Muslim fasting month of Ramadan.  

The government has also resumed gradually phasing out energy subsidies to industry in July, after suspending the plan following the onset of the global economic downturn.

Energy subsidies cost the government 60 billion Egyptian pounds (US$10.5 billion) in fiscal year 2007/08, up from 57 billion pounds in 2006/07. Of this, 20 billion pounds went to energy-intensive companies, including cement.

Those who have expressed an interest in bidding for the new licenses include the Egyptian unit of Lafarge and Egypt's largest listed cement firm Suez Cement , which controls Helwan and Torah Cement.  Suez is a subsidiary of Italcementi.

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