Review of Manufacturing Capabilities and Potential in MENA

C h A P T E r 2

Review of Manufacturing Capabilities and Potential in MENA Countries

2.1 review of the Main CSP-related Industrial Sectors and Companies in the MEnA region

ThisstudytargetstheindustriesinMENAthathavetheprofiletobecomepotentialcontributorstotheCSPvaluechainintheshortormediumterm.Thisworkisbasedontheconsultants’experience,onbibliographyreviewsandoninterviewswhichwerecarriedoutduringfieldtripsinMorocco,Algeria,Tunisia,Egypt,andjordan.ThelistofcontactsinterviewedisprovidedinannexCofthisdocument.1

Inafirststep,thepotentialmanufacturersofCSPcomponentsandsecondranksupplierswereidentified.Themostrelevantindustrysectorswereanalyzedtounderstandwhichcompaniesarepositionedonvaluechainsegmentswhereentrybarriersdonotpreventnewcomers.Industrysectorsanalyzedinclude:

• glassindustry• steelmetallicstructure/steelpiping• electricalandelectronicequipmentindustry

Abriefsummaryofthestrengthsandweaknessesofeachofthesesectorsisalsopresentedintheannexes.

1Notethat,despiteongoingCSPprojectsconsideredinjordan,thehashemitekingdomdoesnotappearasaprimarytargetforinternationalcompaniesrelatedtoCSP.Thisisparticularlyduetothesmallsizeofthelocalmarketandtohighenergyprices.TherearealsoaverylimitednumberofmainstreamindustrialsectorsthatcouldstepintoCSPcomponentsmanufacturinginjordan.Asaconsequence,thepresentstudydisplayslimitedinformationonthiscountry,especiallydealingwithitsmanufacturingcapabilitiesandpotential.

MNA Local Manufacturing Report 4-14-11.indd 69 4/14/11 6:32 PM

70 MENA Assessment of the Local Manufacturing Potential for Concentrated Solar Power Projects

In a second step the potential players in terms of construction works andEPCcontractorswerecovered.Inparticularthefollowingsectorswerescreened:

• Constructioncompaniesorcontractors• Energyoperatorsandoperations&maintenancefirms• Engineeringfirmsandtechnicalconsultants

TheanalysisincludessubsidiariesofinternationalcorporationsthatarehaveastrongpresenceintheMENAmarkets,especiallyasregardsbuildingmaterials,construction,infrastructuredevelopment,andoperations.Itisaimedatunder-standingtheperceptionoftheseplayersaboutpotentialindustrialpartnershipswithlocalcorporations.

2.1.1 meNa glass and mirror Industry

ThemainoutputoftheMENAglassandmirrorindustryisfoodandbeverageglass,glassware,building,andautomotiveglass.TheglassproductthatisofdirectinteresttoCSPisfloatglassas,givenappropriatequality,itcanbetransformedintoflatmirrors(solartowerorlinearFresnel)andbentintoparabolicmirrors.FloatglasscurrentlyproducedinMENAcountriesisusedforbuilding,andau-tomotiveandhouseholdmirrors.NoflatorparabolicCSPmirrorproductionhasbeenidentifiedinthecountriescoveredbyourstudy

Floatglassproductioncapacitieswerescarceuntilrecentyearsbutarecur-rentlyincreasinginAlgeriaandEgypt.however,mostoftheregionaldemandisstillsuppliedthroughimports.Figure2.1givesanoverviewofthecompaniesthatareactiveintheMENAmarketandthefloatglasslinesthatarecurrentlyinserviceorunderconstruction(startingdateinbracketswhenavailable).OutofthefivecountriescoveredbytheCTF(“CTFMENAcountries”),onlyAlgeriaandEgypthavefloatglassproductioncapacities(Table2.1).

ThefourfloatglassproducersofCTFMENAcountriesaretheEgyptianGlassCompany,SphinxGlass,Saint-GobainandCevital.Notethattherearenofloatglassproducers inTunisia,Moroccoandjordan. In thesecountries,highenergypricecombinedwithlowlocaldemandforfloatglassarestrongdrawbacksforinstallingproductionunits.Asanexample,thelocaldemandinTunisiaisaround25percentoftheproductionofaprofitablefloatglassplant(forwhichtheminimumoutputcanbeestimatedatapproximately150,000tons/year).

ProductionoffloatglassinCTFMENAcountrieshasbeengenerallyverylow(around2tons/1,000persons,comparedtoover7tons/1,000personsinSaudiArabiaforexample).Despitethishistoricallylowproductionlevel,EgyptandAlgeriaarecurrentlyexperiencingaseriousrampupinfloatglassproductionwhichiscatalyzedbythefactthattheyarenaturalgasproducers.Egypt’sproduc-tioncapacityoffloatglasswasaround160,000tonsperyearin2003,whichisatleast40,000tonsshortofdomesticdemand.Egypthadweakexportperformanceacrossmostflatglassproducts,whichwaspartlyduetotheshortageofdomestic


Review of Manufacturing Capabilities and Potential in MENA Countries 71

productioncapacityinbasicfloatglass.yet,twotothreeplantsofaround200,000tons/yearwereunderconstructionin2010accordingtotheEgyptianChamberofBuildingMaterialsindustries.Thisaddstothetwocurrentfloatglassproduction

Figure 2.1 ■ Float Glass lines implemented in the MENa Region

Sphinx Glass – EG

MFG Algeria 1. (02/09)

1. (02/10) (11?)

1. EGC – Egypt2. Phoenicia – Israel3. Saudi Guard – Saudi4. Gulf Guard

1. (8) lines in Turkey2. (1) line in Bulgaria

1. EFG – RAK (03/09)

AUFG –Saudi1. (02/09)

SGGE – Egypt1. (04/10)

Source: Sphinx Glass.

Table 2.1 ■ float glass Production Capacities in CTf MEnA Countries

Name of company Country Current output Shareholders Production capacities

Egyptian Glass Company

Egypt Clear glass onlyQuality grades: Building, Silvering & Auto

JV: 55% Khalafi/45% Guardian

1 oven of 160 000 tons/year

Sphinx glass co. Egypt Glass with thickness varying between 2 mm and up to 19mm in varied sheet sizes up to jumbo size glass panes as large as 6000mm x 3660mm. products

Citadel Group + Dubai CapitalTechnology transfer agree-ment with PPG

1 oven of 200 000 tons/year (starting date: Q1 2011)

Saint-Gobain Egypt Float glass In partnership with MM-ID & Ali Moussa

1 oven of 160 000 tons/year to be commis-sioned in sept. 2010

Mediterranean Float glass/ CEVITAL

Algeria Float glass JV with the Chinese CLFG

3 lines of 600, 700 and 900 tons/day

Source: EY, based on interview



lineswithacapacityofaround150,000–200,000tonseach.Asaconsequence,whileallCTFMENAcountriesarenetimportersoffloatglass,recentinvestmentsinproductionlineswillmakeEgyptandAlgerianetexportersoffloatglass.AsshowninTable2.2,theproductionoftheEgyptianandAlgerianglassindustrywillhelpmeettheincreasinglocaldemandwhiledevelopingexports.FurtherdataonimportandexportfiguresandthelevelofspecializationoftheglasssectorintheCTFMENAcountriesisprovidedintheannexes.

Large-scale modern glass manufacturing facilities require either developeddomesticmarketswithlargecustomerbasesfortheirproductsoraccesstoexportmarkets.Foradevelopingeconomy,suchasEgyptandAlgeria,theglasssectorisdevelopingtomatchgrowingdemandfromindustrialsectorsthataresignificantusersofglass,suchas:foodprocessing,automotive,pharmaceuticals,electriclight-ing,andconstruction.Thesectorisalsoexport-orientedtosupplycustomersinregionalandinternationalmarkets.Intermsofemployment,approximately2,000peoplearecurrentlyemployedbythefloatglassproductionindustryinEgyptandAlgeria.Inthesemarkets,despitefavorableconditions(localavailabilityofnaturalgas,materialsquality),theemergenceofsignificantfloatglassproductionprojectshasbeenalengthyprocess,partlyduetothefactthattheseprojectsareverycapital-intensive(uS$180–200million)ofinvestmentforafloatglassplantof600tons/day,integratingahighlevelofautomation).

DemandforfloatglassinMorocco,Tunisia,andjordanisexpectedtoincreaseinthenextyears.Thisriseofdomesticdemandmightstillreachlevelsrequiredtojustifyalocalfloatglassproductioncapacity,unlessthereisaclearbusinesscaseforexports.

however,itmustbestressedthatmostoftheMENAcapacitieslistedaboveareproducingglasswithironcontentthatwouldnotyetbecompliantwithCSPrequirement.Greenglassislessexpensivethanwhiteglass,butgreenglassmir-rorsare5percentlessefficientthanwhiteglass.Costsavingswouldhenceneedtobeabout6percentforgreenglasstobecostefficient(becauseopticaleffectshaveaslightlyover-proportionaleffectonperformance),whichwouldbeabout€33/m².Sincethisrepresentsthecostfortheentiremirror,includingbending,silvering,andadditionalcoatings,itisunlikelythattheEPCwouldnottaketheoptionofusinggreenglassmirrors.

Table 2.2 ■ Annual float glass Production in CTf MEnA Countries, Tons/year

Country2003

production levelsCurrent demand

Current production

5-year forecast demand

5-year forecast production

Egypt 180,000 250,000 340,000 350,000 > 700,000

Morocco 0 60,000 0 80,000 0

Tunisia 0 40,000 0 60,000 0

Jordan 0 20,000 0 30,000 0

Algeria Na 70,000 200,000 100,000 400,000Source: EY, based on interviews



Presentation of the glass transformation industry

NotallCTFMENAcountrieshostfloat glassproduction capacities,howeverglasstransformationactivitiesexistinallcountries;between10and20mirrorlinesarecurrentlyinoperationinCTFMENAcountries.Theoutputofmostoftheseproductionlinesismirrorswithanaveragethicknessof~3mmandwithbuildingquality.ThemainsuppliersofthesemirrorproducersareSphinxGlass,EGC,SGG,andChineseproducersaccordingtoSphinxGlass.

The mirror production capacities identified in CTF MENA countries arepresentedinTable2.3.

Someofthesecompanies,forexample,SIALAorDrGreiche,areproducinghighqualitymirrors.InthecaseofTunisian-basedSIALA,glassusedfortransfor-mationisimportedmainlyfromAlgeria,andtoalesserextentfromEgyptandEurope.Transport fromAlgeria toTunisia isobviouslymucheasier thanfromEgyptorEuropeasthereisnoneedforheavypackaging(requiredformaritimetransportation).

EveniflocalMENAglassplayershaveskillsintransformingglassandproducinghightechmirrorssomedoubtsremainabouttheircapabilityofproducingandcoatingCSPmirrorswiththespecificationstoendureharshSaharanconditionslikesandstorms.AttheSolarPacesConference2010inFrance,itwasstressedthatblowingsandandsanddamagetomirrorsisgoingtobeamajorconcernofoperationsintheMENAregion.DLRhastestedmonolithicmirrorswithpaintonthebackinalabsimulatingSaharanconditions.Itwasfoundthatinanenvi-ronmentliketheSahara,amonolithicmirrorwouldonlylastthreeyears.

Manufacturingmirrorsthatcouldresistthesekindsofconditions,likelami-natedmirrorswherethecoatingiscompletelyencapsulatedbetweentwopanesofglass,ismorecomplexthanmanufacturingconventionalCSPmirrors.FewCSPmirrorshavepatentsforthelaminatedmirrorprocessandproduct;thisaddsto

Table 2.3 ■ Companies with Mirror Production lines in CTf MEnA Countries and Production Capacities

Name of company Country Production capacities

Dr. Greiche (1,500 employees) Egypt 5 kt/year

Khattab Mirrors Egypt 4 kt/year

United Mirrors Egypt 3.5 kt/year

Universal Mirrors Egypt 2.5 kt/year

Hawala Mirrors Egypt 2.5 kt/year

Loaloa Mirrors Egypt 2.5 kt/year

El Gammal Mirrors Egypt 2.5 kt/year

El Sadaawi Mirrors Egypt 2.5 kt/year

Nabil Salah Mirrors Egypt 2.5 kt/year

SIALA Tunisia 6 kt/year

STEMIR, SOVEP, SAVEMI Tunisia Not availableSource: EY, Sphinx Glass



theuncertaintyforlocal industriesstartingproductionofCSPmirrorsforthelocalstringentmarket.

Furthermore,mirrorbendingwithCSPspecificationswouldbeachallengeforlocalindustries;itremainsadifficultprocesstolearnandwouldneedajointventure, requiringextensivetechnicalassistanceandknowledgetransfer tobeimplemented.

As an example, Guardian Industries managed to convert their automotiveglassbendingassetsintoCSPbendingassets.Buttheyhadsignificantexperienceinbendingglassandevenwiththatexperience,developmenttoreachcurrentqualitylevelsrequiredoverthreeyears.AccordingtotheGuardianIndustriesaninvestmentof$50millionwouldbeenoughtocommissionthenecessarybendingequipment.Runningthatequipment,however,wouldbedifficultwithouttheappropriateknowledgeandlicenses.

Competitive advantages

ThekeyassetofEgyptandAlgeria’sglassindustryisthecombinationof:

• Accesstorawmaterials• Naturalgasavailablelocally• Strategicmarketlocation,• Access to technology and new products that meet the requirements of

domesticandinternationalcustomers.

TheavailabilityofrawmaterialsisnotadecisivecompetitiveadvantageforEgypt’sandAlgeria’sglassindustry.AlltheinputmaterialsavailableinEgyptandAlgeriaareinternationalcommoditiesthatarereadilyavailabletoCTFMENAcountries’ competitors. In the past, Egypt andAlgeria have lacked access totechnologyandnewproducts,butwiththedevelopmentofjointventures(jvs),know-howandtechnologyarebeingprogressivelytransferred.

jointventuresareakeystrategictool,promotingmarketdevelopment,businessgrowth,andrisksharing.ThereareseveralexamplesinCTFMENAcountriesofglassmanufacturers(PPG,CLFG,Guardian,etc.)sharingtheriskoflargeinvest-mentsinfloatglassproductionlines,eitherwithothermanufacturers(Cevitalfor example) or with financial partners (Citadel for example).The develop-mentofthesepartnershipsdemonstratesthecurrentattractivenessofMENAcountriesforfloatglassproduction.however,lowcostproducerscontinuetooperateintheregion,whereacombinationoflimitedregulatoryrequirements(ornocontrolovertheirimplementation),shortageofreasonablypricedqualityproducts,andanemphasisonkeepingcoststoaminimummaintainsdemandforlow-costproducts.

Energyandrawmaterialcostsareeachassignificantaslaborintheoveralldeliveredcost.Glass isheavyandcomparativelycheap,makingdistributioncosts significant.These typically represent around15percent of total costs(Figure2.2).



Inmostcases,transportcostslimitthetransportoffloatglassforlongdistancesoverland.Typically,200kmisseenastheaveragerange,and600kmastheeco-nomiclimitformostproducts(whichisnotalongdistanceincomparisonwiththesizesofAlgeriaandEgypt),althoughthisvariesbetweenmarkets.Potentiallyitispossibletoachieveaverycost-effectivetransportoffloatglass,evenoverlongdistances,providedthattransportationbyseaispossibleandnolongroadtransportisinvolvedatbothends.Thistendstofavorfloatglassproductionlineswithlocalportaccessunlessalocalmarketisavailablefortheline’soutput.

Industry outlook

ThedevelopmentoftheMENAglassproductionandtransformationindustryfacesseveralbarriers:

• Limited R&D activity: links between research centers and industry areweakandneedtobestrengthenedthroughcollaborativeresearchand/orclusteringapproaches.

• Shortageoftrainedpersonnel:thereisalackofsuitablytrainedengineersandtechnicianstooperatetheexistingproductionlines.Forhigherqualityproducts,engineeringandtechnologicalknow-howneedtobetransferred(throughknowledgetransferagreements,partnerships,etc.).

• TheMENAfloatglassandmirrorindustrydoesnotintegratethefullvaluechain.Forinstance,floatglasslineequipmentiscomingfromothercountries(EuropeorAsiamostly).Inanumberofcountries,activitiescoveronlythedownstreamitems;thisistypicallythecaseofcountriesthatimportfloatglassinordertotransformitlocallyintomirrors,taintedglass,etc.(jordan,MoroccoandTunisia).

however,AlgeriaandEgyptpresentfavorableconditions:

Figure 2.2 ■ conventional Float Glass Nominal cost

Transport12%

Depreciation9%

Overheads9%

Prime labour12%

Energy28%

Raw materials20%

Other10%

Source: Pilkington, 2009.



• Naturalgasavailablelocally• virtuallyallinputmaterialsrequiredtoproduceglassareavailabledomesti-

cally.highqualitysandandalsohighqualitylimestoneareavailable.Floatglass with very low iron content and high solar energy transmittance isavailable,whichisparamountfortheproductionofultra-clearfloatglasswhichisneededforCSPapplications.

• Strategic location on the crossroads of three regional markets: Europe,MiddleEastandAfrica.

• FinancialstrengthofplayersintheMENAmarketplaceduetojointventuresandbackingby localprivateequity(CitadelGroupforexample).usingclosestrategicpartnershipswiththemaininternationalplayersallowsforexampletoproduceunderlicensehighperformanceglass.

• Thewellunderstoodopportunitytodeveloptheirglassindustry(especiallyfloatglass),whichisprovingtobesuccessful.

GlassindustryplayersinMENAcouldbeinterestedinCSPifthesizeofthedemandissufficient.Accordingtothestakeholdersinterviewed,floatglassplantimplementationisprofitableonlyifitscapacityisatleast150,000tonsperyear.ThesizeoftheregionalCSPmarkethastoreachathresholdvolumetojustifytheinstallationofCSPmirrormanufacturingplants,althoughthesizeoftheexportpotentialisalsocritical.Asanindication,itisestimatedthattheminimumoutputforCSPmirrorplantswouldcorrespondapproximatelytoayear’ssupplyoftheequivalentof400MWofsolarcapacityforflatmirrorsand250MWforparabolicmirrors.SuchannualvolumeswillnotbegeneratedbyanyoftheMENAcountriesintheshorttomediumterm.Theseaspectsarecurrentlyunderanalysisbyindustryplayers toestablishtheir investmentpriorities. Inanycase, localmanufacturingfacilitiesinthissectorwillnotbelimitedtosupplyinganationalmarketbutwillaimatservingawiderregional(MENA)andpossiblyworldwideCSPmarket.

ThetechnologicalgapbetweenconventionalfloatglassproducedbyMENAplayersandqualityrequirementsforCSPmirrorsremainssignificant;optionstofostertechnologytransferandtotrainthelocalworkforcewillneedtobeinves-tigated,possiblyintheframeworkofdonor-fundedtechnicalassistance.

DespitethelackoffloatglassproductionintheotherCTFMENAcountries(jordan,TunisiaandMorocco),localindustriescouldpositionthemselvesonglasstransformationactivitiesinordertomanufacturehighqualitymirrors.Forexample,SIALA(Tunisia)andDrGreiche(Egypt)wouldbereadytoconsideradjustingtheir newproduction capacities to enableCSPmirrorproductionprovided amarketwithasufficientsize.however,theywouldneedtechnicalassistancetoidentifyspecificallywhatadjustmentwouldbeneeded(coatingtechniquesforexample)andtheassociatedcosts.

Inaddition,newentrantsseekingtopositionthemselvesonCSP-relatedop-portunitiesintheglasssectorswillfacethefollowingentrybarriers:

• Despite lowprices,access togasneededbyfloatglassplants facessomelimitations. Insomecases,naturalgasproduced inEgypt isdedicated inprioritytoexportsratherthantoEgyptianindustries.



• CTFMENAcountrieswillcompeteforoutside investments inthisfieldandwillseektomaintaintheirfirst-moveradvantage.

• Competitionisemergingatregionalleveleithertotakenewpositions(e.g.,EuA,SaudiArabia)or tomaintain thecompetitivenessof existingCSPmirrorproductionfacilities(e.g.,Saint-GobainSolarinPortugal,GuardianIndustriesinIsrael).

2.1.2 meNa electronic and electrical Industry

Theelectricalequipmentindustrycoversawiderangeofcomponents(cables,electricmotors,transformers,etc.).Thissectionfocusesonthecableindustryaswellastheotherelectronicandelectricalcomponentindustry.

Presentation of the cable industry

OneofthemainindustrialdevelopmentsintheCTFMENAcountriesregardingelectricalequipmenthasbeencableproduction for theEuropeanautomotiveandaeronauticssectors.AstrongindustrialcapacityhasemergedinTunisiaandMorocco,consistingofbothsmallexport-orientedplayersandafewmajorcablegroupssuchasNexans,LeoniorCorningCableSystems.TheEgyptianproductioncapacityisalsodeveloping.Today,theMENAregionaccountsfor6.5percentoftheworld’stotalcableproductionandTunisiaalonesupplieshalftheEuropeandemandforautomotivecables,benefittingfromlocalregulationsthatencourageexport-orientedinvestmentsbyforeigncompanies.TradebalancesandinformationonthelevelofspecializationoftheMENAcountries’economiesinthissectoraregivenintheannexes.

Althoughafewcross-borderinterestshavebeendevelopedintheregion(e.g.theEgyptiangroupEl-SewedyinvestsinSudanandSaudiArabia),thecablein-dustryinMENAremainsfragmented;nolargegroupshaveyetemergedwitharegionalpresencecomparablewithEuropeanleaderssuchasNexans,Prysmian,orDraka.Anotherweakness that the industry isnot integratedupstreamandmostrawmaterialsneedtobeimported.

Thecableindustryisbothhighlycapitalintensiveandhighlydependentonthepriceofrawmaterialswhereaslaborandenergydonotaccountforasignifi-cantshareofthetotalendproductcost.Asaconsequence,therearelittlecostreductionmarginstobeobtainedbymanufacturingcableslocally(asopposedtolaborintensiveassemblyactivities).however,hightransportationcostcontrib-utestotherationaleoflocalproduction.qualitystandardsachievedbyMENAcompaniesarecompetitivewithEuropeanstandards.

Presentation of the other electric and electronic components industry

Manyinternationalfirmshavechosentooutsourceintheregion,inparticularinTunisiawherelargeinternationalcompaniesemployover45,000peopleorin Morocco where manufacturing of electronic components is carried out by



approximately10firms(e.g.,STMicroelectronics)employingover7,000people(seeexamplesinboxbelow).

InAlgeria,thesectorshowshighannualgrowth(from6to10percent),andexporttoEuropeisexpectedstartingin2012.Currently,16localcompaniesareactiveinthesector.TheregionaroundSétif(BordjBouArreridj)hasbecomeanimportantindustrialpoleintheelectronicsector.SeveralinternationalfirmshavealsoestablishedtheirproductionplantsinAlgeria.

Engineering,designandR&Dactivitiesarestilllimitedbutareprogressivelyemerging.Localcompanieshaveunderstoodtheneedtodevelopsmallproductseries,withhigheraddedvalueandtechnologycontent,inordertocompetewithimportsfromlowcostcountries(mainlyChinaandSouthEastAsia).Someinter-nationalEuropeancompanieshavechosentokeeptheproductionoftheirmosttechnologicalproducts(suchasspecializedcablesforthesolarindustry)inEurope.

Thisisalsoreflectedbythestatusofintellectualpropertyrightsinthissector.ThenumberoffiledpatentsinMENAinthefieldofelectronicsisconsiderablyhigherthaninallotherindustrialsectorsthathavebeenanalyzed.InformationonthenumberofpatentsheldbytheCTFcountriesisprovidedintheannexes.

Figure2.3showsaspecializationpatternfortheelectronicsindustryforseveralofMENAandnon-MENAcountries.Thespecializationpatterncombinesinforma-tionfrompatentanalysis(cf.annexes)andforeigntradeanalysis(cf.annexes).The‘RevealedCompetitiveAdvantage’(RCA)isplottedagainstthe‘RelativePatentShare’(RPA).Theexportvolumeisdisplayedbythesizeofthedatapointsoftheindividualcountries.PositivevaluesforbothindicatorsindicatethatacountryisnotablyactiveintermsofexportandR&Dinthissector,comparedtootherin-dustrialsectorsoftheeconomy.Negativevaluesindicatethattherespectivesectorperformsbelowaverage,consideringtradebalanceandintellectualproperty.Fortheelectronicsindustry,however,positiveRPAvaluesoccurandarelativelyhighexportvolumeisreachedbyMoroccoandTunisia,comparedtootherMENAcountries.

Industry outlook

TheelectronicandelectricalcomponentsindustryisdevelopedanddynamicinmostoftheCTFMENAcountries,drivenbybothincreasinglocaldemandand

International electric players producing in the CTf MEnA region:Bosch, Casco, Cegelec, Doncaster Cables, Dräxlmaier, Delphi, Fritz Driescher, Haier,, Heinrich Kopp, Kaschke, Kbe Elektrotechnik, Kromberg & Schubert, Latécoère, Lear Corporation, Leoni, Optelec, Philips, Radiall, Socomec, Somfy, Sumitomo, Sylvania, Valeo, Vossloh Schwabe, Yazaki, Yura Corporation, Zodiac, Etc.

International electronic players producing in the CTf MEnA region:Anjou Électronique, Asteel, Fitelec, Fuba Printed Circuits, Groupe Actia, Groupe, Cofidur, Isophon Vertrieb, Johnson Controls, Kaschke, Lacroix Électronique, Mentor, Philips, Phoenix, Safran, Siemens, St Microelectronics, Thomson, Multimedia, Weco Wester Ebbinghaus, Yamaichi Electronics, Zolner, Etc.



largeexports toEurope.According tomostpeoplecontacted, local industriescould probably supply CSP plants with electric and electronic componentsintheshortterm,especiallycables,trackingsystems,balanceoftheplantandmonitoringsystems.MostofthesecomponentsarenotspecifictoCSPorcouldberathereasilyadaptedtoCSP.ElectronicandelectricalindustryenteringtheCSPvaluechainwouldsignificantlycontributetoanincreaseofthelocalshareasthesecomponentsrepresentover10percentofthetotalvalueofaCSPplant.

Although local players have mainly acted as subcontractors in the past,theyareprogressivelyinvestinginR&Dandstartingtodevelopnewproducts,andtheaddedvalueofthisindustry’soutputisincreasing.AddedvalueoftheTunisianelectricandelectronicindustryisincreasingby18percentayear.2TheremaininggapbetweenthecomponentscurrentlyproducedandtheelectricandelectroniccomponentsneededforaCSPplantcouldbeeasilybridgedbycurrenteffortstodevelopR&Dactivities.Seizingthisopportunitywillrequirestrengtheningthelinksbetweenresearchandindustry(forexample,bysup-portingthecreationofotherindustrialpoles)andstrengtheningthebusinesscaseforthelocalmanufacturingofproductsthatwillcompetewithEuropeanandAsianproduction.

2Source:InvestinTunisia,2009(http://www.investintunisia.tn/document/488.pdf).

Figure 2.3 ■ Specialization pattern for Electronic Equipment in MENa countries, Relative patent Share (Rpa) vs. Relative competitive advantage (Rca). Sizes of the circles indicate Export volumes

0

20

–20

–40

40

100

–100

RCA

(200

4–20

08 a

vera

ge)

RPA (2000–2007)

80

–80

60

–60

–100 –80 –60

IndiaEgypt

Iran

Israel

Tunisia

Lebanon

Morocco

Jordan

United ArabEmirates

Saudi Arabia

–40 –20 0 20 40 60 80 100

Source: Authors.



2.1.3 meNa Steel Industry

Presentation of the steel production industry

ThemainliquidsteelproductioncapacitiesoftheregionarelocatedinEgypt(9.6MTPyin2010),Algeria(2.4MTPyin2010),andMorocco(1.25MTPyin2010).OnlylimitedcapacitiesareinstalledinTunisia(285kTPyin2007)andinjordan(75kTPyin2007).Intheentireregion,localproductioncapaci-tiesaremuchlowerthancrudesteellocaldemand(asanindication,in2008Africa and theMiddleEastproduced2.6percent of theworldproductionwhileusing5.8percent).AllMENAcountriesrelyonimports,mainlyfromTurkeyandSpain.

Largeinvestmentshavebeencommittedduringthepastfewyearsinordertoreducethesupply-demandgap.Asaresult,CTFMENAcountriesarenowoneofthefastestgrowingregionsintermsofsteelproduction.Somesteelproducers(forexampleArcelorMittalwithSONASIDinMorocco)haveinvestedinseveralformerpubliccompaniesinCTFMENAcountriestoupgradetheactualplantsandinvestinnewfacilities.Barrierstonewentrantsinthesectoraremainly:

• Capital-intensityoftheindustry,• Skilled-laborintensityoftheindustry.Althoughseveralcompaniesbenefit

fromhigh-techproductionlines,thereisalackofsufficientlytraineden-gineerstooperatethem;

• uncertaintyonpriceduetomonopolistic situations.Asanexample, theEgyptianmarketisdominatedbyEzz-Dekhelawhichholdsa61percentshareofthemarket.

Presentation of the steel structure manufacturing industry

ThemainoutputoftheMENAstructuremanufacturingindustryisconventionalsteelproducts suchas reinforcementbars,wire rods,andbillets.The industryemploysapproximately25to30,000people,andregroupsawidevarietyofcom-panies,mostlysmallandmediumenterprises.AsignificantnumberofcompaniesmanufacturehighqualitymetallicstructuresincludingNationalSteelFabrication(NSF),AlZamilandElSewedyinEgypt;Charcomem,EspaceMetal,Menasteel,

Table 2.4 ■ Steel Demand and Production in CTf MEnA Countries

Country2008 demand*

ktons/year2007 production levels

ktons/year2009 production

ktons/year

Egypt 8,253 6,224 5,508

Morocco 2,441 512 479

Tunisia 1,301 160 —

Jordan 1,776 150 —

Algeria 5,546 1,278 458Source: IISI*Apparent Steel Use, ktons/year=crude steel equivalent



PolymetalandDLMinMorocco;MSGIinTunisiaandseveralothersinjordanandAlgeria.Mostofthesecompanieshaveautomatedproduction,qualitycertifica-tion,andhigh-techtoolsandcouldreportedlysupplyCSPplantswithsupportstructures.StillR&Dactivitiesandthestatusofintellectualpropertyrightsinthissectoraregenerallylowintheregion(cf.patentdatainannexes).

however,asforcrudesteel,allCTFMENAcountriesarenetimportersofsteelproducts.Theincreaseofthelocalproductioncapacitydoesnotyetcoverthe growing demand from the construction sector, which requires significantimports.Furtherinformationontradebalancesandthelevelofspecializationofthesteeltransformationindustryontheexportofsteelstructuresisprovidedintheannexes.

Industry outlook

InsomeMENAcountries,thesteelindustrybenefitsfromthelocalavailabilityofnaturalgasandlowlaborcosts,howeverinreturnitfaceshighlevelsofrawmaterials imports,aswellasmonopolisticsituations.This leadstouncertaintyonpricesandpresentsbarriersfornewentrants.however,theavailabilityandpriceofsteelwouldnotputatriskthepotentialofsteelstructuremanufactur-ingcompanies toenter theCSPmarket. Indeed, thevolumesof steelneededforCSPplantsarenotsignificantcomparedtovolumesneededforbuildingandotherapplications.

Some local industries alreadyoperatehigh techproduction lines andhavetheskilledworkersavailablethatareneededtobuildCSPmetallicstructures.AgoodexampleistheinvolvementofNSFinthesteelstructuresupplytoOrascomIndustriesforthekuraymatproject.Generally,CTFMENAcountriesarecur-rentlyexpandingtheirindustrialsectorandareenteringanewphaseofindustrialdevelopment.Demandforflatsteelisexpectedtoboostindustryperformance.however, local playerswill face competitionwith foreign companies (mainlyTurkishandSpanish).

2.1.4 other Industrial Sectors

Piping and insulation

Pipes and insulation systemsneeded for aCSPplant arenot specificand themaincompaniesprovidingtheinternationalmarketaregenerallynotspecializedinCSPpipemanufacturing.

IntheMENAregion,inadditiontoBabcockWanson(aninternationalboilerspecialistwhichhassetuponeofitsthreeproductionsitesinMorocco)severallocalproducersseemtohavetheknow-howtosupplyaCSPplant:

• ElNasrSteelwhichisoneofthelargestmanufacturersandexportersofsteelpipesintheMiddleEast.

• unitedCompanyforManufactureMetalPipeswhichhasafactoryinCairo.• AlkarnacwhichisanothermanufacturerofmetalspipeinEgypt



• ThejordanPipesManufacturingCo.whichproduceswater,gasandcentralheatingpipes.

Composite materials

Compositematerialsarewidelyusedforwindturbinesandmastsaswellasintheaeronautic,au-tomotive,andleisureindustries,becauseoftheirresilientproper-ties,suchasmechanical,weight,andtemperatureresistance.Theycould be used to form supportstructuresforCSPplants.

Althoughthebiginternationalplayers (Toray,Teijin, OwensCorning)arenotpresent intheCTFMENAregion,afewlocallyestablished enterprises seem tohave the necessary know-howtoproducesuchCSPstructures:

• SolutionsCompositesistheleaderintheTunisianandNorthAfricanmarketandhasalargeproductionsite.Itscustomerscomefromseveralsectors:shipyards (they are a major sub-contractor of Zodiac), railway industry,andleisureindustry.

• Avionav,establishedinTunisia,isasubsidiaryofStormcraft(Italia)produc-ingsmallplanesandhelicopterswithcomposites,designedforexportation.

• Aircelle,establishedinMorocco,oneoftheleadingplayersinthenacelleandaerostructuremarket,isdevelopingitsexpertiseincompositematerials.Thecompanypursuesapolicyofinnovationbyimplementingnewcompositetechnologieswiththedesignandproductionoflargelightweightstructures.Itpossessesthetechnicalknow-howtowidentherangeofproducts.

2.2 Analysis of MEnA Capabilities and Potential for CSP Components

2.2.1 analysis of value- and Supply chains for cSP and Identification of Potential Players

InthissectionanassessmentofthecurrentoutputcapacitiesandcapabilitiesofthelocalMENAindustriesiscarriedoutfromwhichageneralpotentialforlo-calmanufacturingofCSPcomponentscanbederived.ExamplesoftheprojectdevelopmentofongoingCSPprojectsinMENAarethenanalyzedandpotentialplayersforafutureCSPindustryinMENAareidentifiedtoevaluatetheoverallpotentialofCSPmanufacturinginMENA.

Figure 2.4 ■ composite wing for Small airplanes produced by avionav



Potential of local industries to integrate the CSP value chain

Thequalityofthesteelandglassindustries’outputisvariable.Ontheonehandsomecompaniesareproducingverybasichandweldedsteelstructuresorgreenglasswithhighironcontent.Thiskindoffloatglassisusedforautomotiveorbuilding industries but would not be suitable for CSP mirrors. On the otherhand,severalcompanies,operatingautomatedproduction linesandbenefitingfrominternationalcertificationandknowledgetransferagreements,wouldbeinapositiontomeetthequalityrequirementsofCSPindustry.

Table 2.5 ■ MEnA Industries gaps and Competitive Advantages regarding CSP requirements

MENA industry/capacity

Investment poten-tial and financial strength

Current output quality R&D potential

Cost reduction/international competitors

Glass and mirror industry

++JV and interna-tional partnerships already developed

–/+ Conventional glass and mirrors (most of output is green glass)

–/+ Low local R&D but possible technol-ogy transfer

++ Availability of natural gas

Importance of criteria regarding CSP requirements

Important as it requires large and capital inten-sive production facilities

Need for low frac-tion iron dioxide, precision of bend-ing and quality of coating

Not much R&D needed if technol-ogy transfer takes place

Further R&D needed for “Sahara conditions” resis-tant mirrors

Important as energy is a large share of the total CSP mirror cost

Electronic and Electrical industry

++ Large local and international firms present in MENA

+ Supplying interna-tional clients

+ Already in place to comply with international new requirements

+ Impact of lower transport cost on total cost


Not much invest-ment needed to provide CSP compliant elec-tronic and electric components

Na Needed to meet potentially specific CSP requirements

Needed as not many other op-portunities to differentiate from competitors

Raw material and structure manufacturing

+ Large companies in value chain

––/++ Large discrepan-cies between stakeholders

+ Some companies used to develop new structures for particular needs

+ Low labor cost


Investments need-ed to develop new designs and pro-duction line

High resistance and stiffness as well as accuracy needed

R&D needed to design mount-ing structure at the begin-ning and then need for mass industrialization

Importance of labor cost in total cost (if not highly automated)



AsdiscussedintheprevioussectionandhighlightedinTable2.5,manylocalindustriesalreadybenefitfromstrongpartnershipswithinternationalstakeholders.Someofthesearelookingintodevelopingnewactivities,andCSPisconsideredasapotentialopportunity.however,theawarenessofCSPtechnologiesislowamong local industriesandmainly relieson thecuriosityof some individuals.Furthermore,somecompaniesarefocusingonothertechnologiessuchaswindandPvanddonotseeCSPasapriorityfordiversifyingtheirbusinesses.

Localavailabilityofnaturalgasandlowlaborcostsarecompetitiveadvantagesforsomeindustrieslikeglassproductionandtransformationandsteelstructuremanufacturing,andcouldreducecostsforaCSPsystem.Thelowertransportcostsoflocalsupplierscouldalsocontributetothebusinesscaseforlocalproductionofsomelowaddedvaluecomponentslikecables,pipesorrawmaterials(cement,concrete,etc.).however,transportcostsremainasmallshareofthetotalCSPplantcostsandwillnotbeamaindriverforcostreduction.

Otherlocalindustrieshavedevelopedduetoaskilledworkforceandregulatoryframeworksthatincentivizeforeigninvestments,asinTunisiawhichhasdevel-opedflourishingcable,electric,andelectronicindustries.Theseindustrieshavemanagedtoexpandthankstothedevelopmentofpartnershipsandinternationalclientswithspecificneedsandhighqualitystandards.

ThecurrentR&Dcapacitiesoflocalindustriesarelimited,anddependonthecompany’sbusinessmodel.Forinstance,acomplexstructuremanufacturerisusedtodealingwith“oneshot”orders,whichneedaphaseofdesignanddevelopment.Ontheotherhand,theglassindustryproducesmostlystandardtypesoffloatglass.Thisisalsothecaseforglassprocessingcompanies,likeDrGreiche,theR&Dofwhichreliesonlyonfivepeople(outofhundredsofemployees).Forthemomentveryfewcollaborativeresearchprojectswithpublicbodieshaveemerged,althoughtheestablishmentoftechnologyplatformsinmostCTFMENAcountriesshouldencouragemorecollaboration.Moststakeholdersinterviewedconsiderthattheavailabilityofaskilledworkforceisnotaproblem.Skilledworkerscanbeacquired,andgenerallyon-the-jobandcross-trainingisdonewithinthecompany.

Thegapsidentifiedinthisstudymightbeaddressedthroughvariousmeasures,includingprivateorpublicinternationalcooperation, investmentinR&D,andthe development of centers of excellence. One short term action that wouldincreaseinterestfromtheindustrialsectorwouldbetoprovidemorevisibilityoftheCSPprojectspipelineandmoreprecisionaboutthepotentialoftheCSPmarket.ThiscouldbepartlyaddressedbythedecisionofMENAcountriestobettercommunicateaboutCSPdevelopmentroadmaps,includingcallsfortender.Othermeasures,suchasincludingrequirementsforatargetleveloflocalcontentincallsfortenderswillbecritical.

Iftheincentivesandcapacitybuildingdetailedinthefollowingsectionsareput in place, CTF MENA stakeholders consider that cables/electronics couldpotentiallybesuppliedbylocalindustries.Thesteelstructurecouldbemanu-facturedlocallyasisalreadydoneforthekuraymatproject.Themirrorscouldbemanufacturedinthemid-term,howeverthebendingprocessrequiresnewproductionlinesandadditionalknow-how,whichcurrentlydoesnotexistinCTF



MENAindustries(e.g.,thecoatingprocessforbendedmirrors,whichneedsaspecial spraytechnique).ConventionalCSPmirrorsmightnotbesuitable forharshSaharanweatherconditions(sandstorms,veryhightemperatures,etc.);R&Dthatcanonlybecarriedoutthroughjointventureswithextensivebackgroundinmirrorsbendingandcoatingwillbeneeded.

2.2.2 Illustrative Industrial Development in the meNa region: aeronautics Industry in morocco

ThepotentialofindustriestodevelopCSPactivitiesisconfirmedbysomesuc-cessstoriesintheMENAregion;thedevelopmentoftheaeronauticalindustryinMoroccoisoneexample.

Historical background

TheaviationindustryinMoroccocanbedatedto1994withtheinaugurationofthe“Aéropôle”locatednexttotheCasablancaairport.ItwasthefirstMoroccanclusterinaeronauticsandwascreatedthroughastateinitiative.Thisareaof85ha—whichbecameoperationalin1996—isdedicatedtoinnovation,incubation,andoutsourcingofmaterialandcomponentsrelatedtoaeronautics.In1999,oneofthefirstactorswascreatedbyajointventurebetweenRoyalAirMarocandSnecmaServices(SAFRAN).SnecmaMoroccoEngineServices(SMES)special-izes inthemaintenanceandrepairofcivilairplaneengines. In2000,aschoollocated in the“Aéropôle” called“Académie Internationale MohammedvI del’AviationCivile”wascreatedtohelpprovidethesectorwithqualifiedworkers.Intheearly2000s,severalequipmentmanufacturersandtheirsupplierssetupbusiness inMorocco,which ledtothecreationofMatis(jvRam,SafranandBoeing),Sermp(LePistonFrançais),Sefcam,Asi,Assystem.Thesecompanies,

Figure 2.5 ■ Breakdown of activity Types for aeronautics industry in Morocco

Manufacturing and Maintenance83%

Metal workmanshipand treatment

5%Precision mechanics

3%Components and

electronic material2%

Assembling3%

Engineering/design4%

Others (wires,services...)

0%

Source: Sectoral study by the FIMME, 2005.



mostlyFrench subsidiaries,helpedMorocco turn its aeronautic industry frommaintenancetowardproduction.

In2005,aeronauticsisdesignatedinthenational“Pland’Emergence”amongtheeightstrategicsectorsfortheeconomicdevelopmentofMorocco.Atthebegin-ningofEmergence,17companiessettledinthe“Aéropôle.”AsectoralfederationcalledtheGIMAS(LeGroupementdesIndustriesMarocainesAéronautiquesetSpatiales)wascreatedin2004.

AlthoughtheindustrydevelopedinCasablanca,citiessuchasTangiers(inthe“TangerFreeZone”),RabatandMarrakechrecentlybegantoenterintothisfield.

General description

Mostof thecompaniesoperating in this sectorare foreigncapitalenterprises.Manyaresubsidiariesofforeigngroups,suchasEADS,SAFRANandDAhER,whoseonlyclient is theirparentcompany.Thesecompanies tendtobesmallandthereislittlecompetitionorcommercialrelationshipbetweenthem.Theyoperateintheoutsourcingofelementaryoperationsthatcanbeclassifiedunderseventypesofactivities.

Nevertheless,withmorethan90playerstoday,3theindustryismakingitswaytowardgreatertechnologicalcontentandmoreaddedvalue.Thisresultsintheincreaseofservicesandengineering/designactivitiesaswellasR&D.Theindustry’sclientsaremostlyairlinesbutalsoaircraftandenginemanufacturersaswellassubsystemsdesignersandmanufacturersmainlylocatedinFranceandMorocco.

In2009,theindustryreachedaturnoverof€750million(morethan70per-centofwhichcomesfromexports)withanaveragegrowthof25percentduringthelastfiveyearsandemployingabout7,500workers.Mostofthesearefactory

3AccordingtoGIMAS(GroupementdesIndustriesMarocainesAéronautiquesetSpatiales).

Figure 2.6 ■ Evolution and projection of Employment and Turnover in aeronautics industry in Morocco

4,000

6,000

2,000

0

8,000

14,000

Empl

oyee

s

Number of employees Turnover

12,000

10,000

400

600

200

0

800

1,400M

illio

n eu

ros

1,200

1,000

2004 2006 2008 2009 2015

Source: Sectoral study by the FIMME, 2005.



workersortechnicians.Theproportionofengineersisusuallylow(about5%)4withtheexceptionofcompanies,suchasTeuchos,thatarefocusedonengineer-inganddesign,andwhereupto60percentoftheworkforceareengineers(seeFigure2.5).4Currently,thesectorbenefitedfrom€350millionofinvestment.By2015,thesectorisexpectedtocreateupto15,000newjobsandreachanad-ditional€400millionturnover(seeFigure2.6).5

Key success factors and strategic issues

Inadditiontothegeneral trendof lowcostsandoutsourcingofnonstrategicactivities,Moroccobenefited from several key factors that contributed to thesuccessof itsaeronauticssector.These includethecountry’sgeographicalandculturalproximitytoEurope,itseconomicandpoliticalstability,anditseconomicpositioninAfricawiththesecondlargestairfleetafterSouthAfrica.FreetradeagreementswithEuropeandtheunitedStateswerealsoimportant.

TheAéropôleandtheEmergenceplanwereimportantstate-sponsoredinitia-tivesforthedevelopmentofthissector.Theyresultedinsignificanttaxreliefwithtotalexemptionduringthefirstfiveyears,withsubsequentdeductionsof17.5percentaswellasfinancialaidsforlandcost,construction,andequipment.TheAéropôleislocatedinanareaofCasablancathatisattheheartofanimportantlaborpool,offeringaworkforceatlowercostsandmoreflexibleworklegisla-tion,aswellasspecializedengineersfromtopschoolsinMorocco(EMI,RAMAcademy)orinFrance(Supaéro,ENAC).Moreover,theAérôpolewasdesignedtoallowquickandeasysetupofoperationalunits:companiescanrentparcelsatalowpriceforbuildingtheirownfactoriesorrent“readytoproduce”modularindustrialspacesequippedwithutilities(electricity,water,compressedairandcomputernetwork)allowingthemtoinstalltheirmachinesin24hours.Therearealso“readyforservices”buildingsofferingmodularandcabledofficesforservicecompanies.TheAéropôlealsooffersgeneralservicessuchascleaning,security,trainingrooms,meetingrooms,andcopycenters.ThestrategiclocationnexttoCasablanca’sairportalsoallowsquickdeliverybyplane.

Finally, the presence of major foreign groups’ subsidiaries such as EADS,BoeingandSAFRANandthesuccessofthefirstactorsandjointventuresactedasavirtuouscirclebyattractingothercompanies.

SomeofthefactorsthatcontributedtothesuccessoftheAeronauticsindustryinMoroccotooktimetodevelop.Thefirstandmostimportantgaptoaddressatthestartwasthetrainingofprofessionals.Thetrainingoftechniciansandwork-ersisusuallyprovidedbyexternalcompanies,butwhentheprocessiscomplex,theycanbetraineddirectlybytheparentcompanyortheclient.In2000,the

4EstimationmadebyESCAEMBAstudentsintheirresearchpaperconductedin2007underthetitle“Dynamiquedesrelationsverticalesetclustering:quellestrategiepourunesous-traitanceaeronautiquemarocainecompetitive?”5ForecastsfromtheMoroccandailyNewspaper‘Lematin’:http://www.lematin.ma/Actualite/Supplement/Article.asp?origine=sej&idr=639&id=116183.



“AcadémieInternationaleMohammedvIdel’AviationCivile”wascreatedbytheONDA(astateinstitutionforthemanagementofMorocco’sairports), joinedin2009bythe“InstitutdesMétiersdel’Aéronautique”createdbytheGIMAS(sectoralfederation).Nevertheless,companiesstillplayalargeroleinthetrainingoftheirownworkers.Forexample,Nexanscreateditsthirdindustrialsitededi-catedtoaeronauticswiresinMoroccobysigningatechnologytransfercontractwithNexansMaroc,thatallowedthesubsidiary’s.experienceinthemanufactureofcarwirestobeconvertedtotheaeronauticsindustry.

Thelackofrelationshipandcommunicationbetweenthedifferentcompaniesactinginthisindustrycreatedanotherbarriertogrowth.Inthepast,mostcompanieswereaddressingtheirparentcompanies’needsinsteadofservingasasupplysourceforotherlocalcompanies,whichimpededverticalintegrationintheindustry.ThiswaspartiallyaddressedthroughthecreationoftheGIMASin2004whichisinchargeofcreatingafederationforthesecompanies.InstitutionalcommunicationwasimprovedwiththeparticipationofMoroccosince2007intheFrenchairshow“LeBourget”andthecreationoftheMoroccanairshow“AeroExpo”in2008.Theindustry isalsopromotedbytheCRI(“CentresRégionauxd’Investissement”)andtheCFCIM(“ChambreFrançaisedeCommerceetd’IndustrieduMaroc”).Therearestillsomechallengestotackle,however,includingthedevelopmentofR&D,thefurtherdevelopmentofsupportservices(supply,logisticsandqualitysupport),thestructuringofcommercialactions,andthedevelopmentoflocalsupplysourcesformaterialsandcomponents.Othersupportingactivitiessuchasbankfinancing,administration,publictransportation,andreliableelectricitysupplycouldhelpthisfurther.

Learning from the aeronautics experience for the development of CSP manufacturing in Morocco

TomakethelinkwiththedevelopmentofaCSPindustryinMorocco,Table2.6andTable2.7showananalysisofthekeyfactorsandchallengesforAeronauticsthatarerelevantforCSP:

2.2.3 Illustrative Business cases of current cSP Projects

ISCCS power plant in Kuraymat (Egypt)

Project Overview

TheIntegratedSolarCombinedCyclePowerPlant(ISCC)kuraymatisahybridpowerplantwithatotalcapacityof150MWthatusesbothsolarenergyandnaturalgastogenerateelectricity.Itislocatedabout90kilometerssouthofCairo,EgyptontheeasternsideoftheNileRiver.In1999theWorldBankdecidedtosponsorfourISCCprojects(inEgypt,Morocco,IndiaandMexico)byagrantofuS$50millioneach.In2001FichtnerSolarstartedwiththefirstlayoutsoftheplantinkuraymat,andconstructionhasbeenunderwaysincejanuary2008.Theplantwasdividedintotwolots:theSolarIsland,forwhichOrascomisthe



Table 2.6 ■ Comparative Analysis of key Success factors

Importance of the factors for the successful industrial

development

Challenges Aeronautics CSP Comments

Geographical and cultural proximity to Europe

Market for CSP components is mainly in MENA region, Africa and USA whereas market for aeronautics components man-ufactured in Morocco is mainly European.

Economic and political stability

This is a factor of major importance for any investment decision.

Proximity to regional MENA/Africa markets

CSP market is MENA whereas aeronautics market is Europe.

Free trade agreement with Europe and the US

See comments above

The state’s support (political support, tax reliefs, grants, etc.)

The state’s support has been determi-nant in the case of aeronautics’ industrial development. Considering the high level of investments needed for develop-ment of CSP, state’s support might be as determinant.

Cheap labor costs and flexible work legislation

CSP is less labor intensive than aeronau-tics and should rely on more skilled staff.

Strategic location (next to an airport or in a logistics zone)

CSP will need good logistics infrastructure (ports, roads…) in order to reach MENA and world market. Nevertheless, it should be less critical than aeronautics that re-quires quick delivery from subsidiaries to parent companies.

Network development CSP makes the junction between several industries that are not used to cooperate. Then, the creation and development of a network between these companies and the integration of their technical skills is critical. Moreover, CSP needs to leverage its network in order to get known.

Trained workforce For both industries, there were/are no competencies before the first training from foreign companies/experts.

➔ ➔ ➔ ➔

Neutral Decisive

Source: EY.



EPCcontractor(togetherwithFichtnerSolarandFlagsolassubcontractors)andtheCombinedCycleIsland,forwhichIberdrolawaschosenasEPCcontractor.TheBOOT(Build-Own-Operate-Transfer)projectislikelytoreachintegrated

Table 2.7 ■ Comparative Analysis of key Challenges

Importance of the remaining challenges

Challenges Aeronautics CSP Comments

Lack of bank financ-ing/fund raising

CSP development might be more capital intensive than aeronautics. Therefore, state’s funding might not be sufficient.

Administration burden Aeronautics experience showed that administrative constraints are not insurmountable

Reliable energy supply for industries

CSP industry is energy intensive

R&D and engineering R&D is an important challenge for aeronautics to continue going toward a high-tech industry. It should be at least as critical for CSP suppliers that will have to produce CSP-quality components.

➔ ➔ ➔ ➔

Neutral Decisive

Source: EY.

Table 2.8 ■ Technical Data of kuraymat ISCC Plant

Technical Data value Unit

Solar Field total Area (mirror surface) (Source: Flabeg) 148169 m²

Number of mirrors (Source: Flabeg) 55502 N°

Total length of the rows 23600 m

Number of Collector-units (~ 12 m long, 6 m wide) (Source: Solar Millennium)

2000 N°

Receivers 5900 N°

Number of Loops 40 N°

Hot Leg HFT Temperature 393 °C

Cold Leg HFT Temperature 293 °C

Gas Turbine Generator 74,4 MWe

Steam Turbine Generator 59,5 MWe

Solar Field Design Thermal Power at Reference Conditions 50 MJ/s

Output solar field (electric power) (Source: Flabeg) 20–25 MWe

Installed power specific investment costs 4.935 US$/kW

Sources: Fichtner Solar, Flabeg, Solar Millennium, Fraunhofer ISE



commercialoperationbyApril2011.TheISCCkuraymatisthefirstofitskindwiththeprojectsinAlgeriaandMorocco.Thesolarfieldthermalpoweroutputisestimatedat50Mj/swhichcorrespondstoestimatedelectricpowerof20to25MWeatreferenceconditions.

Value chain for Kuraymat

ThekuraymatprojectisfinancedbytheEgyptianNewandRenewableEnergyAuthority(NREA),theGlobalEnvironmentalFacility(GEF)andthejapanBankforInternationalCooperation(jBIC).TheGEFhasprovidedauS$49.8milliongrant for the solarfielddue to theproject’s exemplary status.The remainingforeigncurrencyportionisfinancedbyjBICandthelocalcurrencyportionofthe investmentbyNREA.About60percentofthevalueforthesolarfield isgeneratedlocally.Civilworks,themountingstructure,thetubes,electricalcables,

Figure 2.7 ■ value chain for the iScc plant in kuraymat, Egypt with involved companies

ComponentsProject

Develop. Materials

EPC

Valu

e ch

ain

Power Block GridConnection EPC

Mirrors Receiver HTFMountingStructure

Othercomponents

SteamGenerator

Components

Com

pani

esCo

mpa

nies

Com

pani

es

Raw & Semi-�nished

Operation Distribution

Operation &Maintenance

Utility / TransportDistribution

Valu

e ch

ain Finance &

OwnershipResearch &

DevelopmentPolitical

Institutions

Esse

ntia

l par

tner

s

ConceptEngineering

TubesValu

e ch

ain

• Fichtner Solar• Orascom

• Orascom• NSF Engineering

• Orascom • EEHC (Egyptian Electricity Holding Company)

• GEF / World Bank• AFDB• JBIC (Japan Bank for IC)• NREA (Finance, Owner)

• NREA• Ministry of Electricity & Energy (MOEE)

• Siemens • — • NSF Engineering

• Egyptian Electricity Transmission Company EETC

• Orascom• Fichtner Solar• Flagsol

• — • NSF Engineering• Orascom

• Flabeg Gmbh • Schott Solar AG

• Linde



gridconnection,theengineering,procurement,andconstructionresponsibility(engineeringstronglysupportedbyFichtnerSolarandFlagsol),theoperationisby local industry.howeversomeof thekeycomponentsarestillprovidedbyinternationalindustry(e.g.,themirrors,receiver,heattransferfluid,andsteamgenerator).

Key Findings from interviews and project experience

ThekuraymatISCCplantmightbecomeareferenceprojectforpureCSPplantsintheregion.DespiteunfavorableconditionsforCSPapproximately60percentlocalvaluegenerationforthesolarfieldshowsthatlocalindustryisalreadycapableofrealizingCSPprojects.Theprojectdevelopmentforthesolarfieldwasundertakenbyinternationalcompanies.ButthisisoneofthefirstCSPprojectsinNorthAfricaandinternationalindustryalreadyhasexperiencewiththedevelopmentofCSPplants;itislikelythatlocalengineeringofficesandEPCcontractorswillbeabletotransfertheirexperiencestofutureprojects.InkuraymattheEPCcontractorOrascomwasstronglysupportedbyFichtnerSolarandFlagsolwiththeconceptualdesign,engineering,andtechnicaladvisoryoftheassembly.however,materialswerepurchasedpartlyfromlocalsides:thewindbreakerswereconstructedfromlocally manufactured bricks; the cables, steel for the mounting structure, andtubes(performedbyNSF)werealso locallyproduced;theSkAL-ETcollectorwasassembledbyOrascomclosetothesitefromapre-fabricatedlowcoststeelstructure;andlocalsubsuppliersdeliveredthepre-fabricatedweldedsteelpartsoftorqueboxframesandplates,cantileverarms,andhCEsupports.

Thesiteconditionsatthekuraymatplantarenotidealforasolarfield.Thechosenfieldareaisrockysothecivilworksbecamemuchmorecomplicatedandexpensivethanexpected.Becauseofhighwindloads,windbreakershadtobebuiltandthecollectorsreinforced.Stronglyvaryingtemperaturesmadeitnecessary

toaddafreezeprotectionunitwithanaturalgasfiredfreezeprotection heater and freezeprotectionpumpsforthehTF.

Theprojectsufferedfromdifferentcostandschedulingissues. Since two differenttenders for the solar fieldandpowerblockofthecom-binedcyclewerecontracted,coordination problems oc-curred.Also a relatively lowsolar sharedoesnot increasethe efficiency significantly: alarge solar fieldwith smallergas back-up would raise theeconomical parameters of

Figure 2.8 ■ installation of Mirror collector at kuraymat Site

Source: Solar Millennium.



theplant.Furthermorethefinalpricethatwastenderedforthesolarfieldwascomparativelyhigh.

Conclusion for future CSP plants in Egypt

ThekuraymatISCCplantprovesthatinternationalknow-howandtechnicalsup-portinprojectengineeringcombinedwithlocalknow-how,rawmaterialsupply,andlocallymanufacturedcomponentsisfeasibleandservesasamodelforfutureprojects.Withavaluegenerationofabout60percentforthesolarfieldalreadyin2010,thelocaleconomywillseesignificantbenefitsfromthisinvestmentinrenewabletechnology.Currently,localindustriesconfirmthattheysufferfromalackofengineeringexperts.Fortheseprojectstobesuccessful,localindustriesandthecountryasawholewillneedtoinvestfurtherinR&Dandeducation.ButbecauseCSPisnotahighlyspecifictechnologyandEgyptalreadyhasin-dustriesthatproducesomeofthenecessarycomponents,actionstosupportCSPindustrieswillhavesynergieswithotherindustrysectors(steel,glass,cables,andengineeringingeneral).

ThecriticalaspectsofthetenderprocedureanddesignofISCCSplantsshouldbeassessedfurther.AlargersolarsharewouldbeagoodalternativetoprovidepuresolarpowertotheEgyptianelectricityconsumerinthefuture.

ISCCS power plant in Aïn Beni Mathar, Morocco

TheISCCSplantinAinBeniMathar,Morocco,wasconstructedbyAbenerincooperationwithAbengoaSolar.Ithasatotalcapacityof470MWofwhich20MWwillusethermalenergyfromasolarfield.Thelargestsharewillbegeneratedbyaconventionalcombinedcyclesystem.Thesolarfieldcountsonareflectingsurfaceofmorethan180,000m²andhasacapacitytogenerateapowerof20megawatts.AbenerEnergiawonthebiddingofONEandGEFfortheEPCcontractfortheconstruction.Abenerprovidesglobal,innovative,andsustainablesolutions,whichhavebeenappliedtothedesign,constructionandoperationforenergyandindustrialplants.TheequipmentandcomponentsaremainlyimportedfromEuropeancountrieslikeSpain,France,andTurkey.Thecivilworksandconstructionareundertakenbyinternationalfirmsthatuse a few subcontractors to provide basic and elementary ground breakingwith local work force and their own machines. Figure 2.9 shows the maincompaniesinvolvedintheproductionofcomponentsandequipmentandtheconstructionoftheplantatthesitewhichlies80kilometersoutsidethecityofOujdainEast-Morocco.

Main lessons from this project

AnexaminationofthefirstCSPprojectasanIntegratedCombinedCycleSysteminMorocco reveals some important lessons learned.FutureCSPprojectswillnothavecompletelythesameprojectstructureandanEPCcontractorwillbe



involved.Butsomeaspectsofthisprojectreflectthegeneralsituationofmanu-facturing,construction,andprojectfinanceinMorocco:

• AllmaincomponentsandequipmentareimportedfortheAïnBeniMatharprojectfrominternationalmarketplayers.

• InternationalEPCcontractorAbenercommissionedtheprojectsuccessfullybytheendof2016(durationofconstructionwillbe3years)

• AbengoaandAbenerobservedsmallcostdifferencesformetalmountingstructuresinMoroccobecauseofthesmallmarginbetweenimportsandlocalmanufacturers(noadvantageforlocalcomponents)

• Abengoa andAbener lacked significant international experience in CSP,whichmadecontractingwithlocalcompaniesmorecomplex

Figure 2.9 ■ value chain for iSccS power plant in ain Beni Mathar

ComponentsProject

Develop. Materials

EPC

Valu

e ch

ain

Power Block& pumps

GridConnection EPC


StorageSystem

SteamGenerator/

HeatExchanger

Components

Com

pani

esCo

mpa

nies

Com

pani

esRaw & Semi-

nished




Valu

e ch

ain Finance &

OwnershipResearch &


Institutions

Esse

ntia

l par

tner

s

ConceptEngineering

ConnectingPipingVa

lue

chai

n

• Abengoa Solar• Fichtner

• Abengoa Solar

• Abener• ONE

• ONE

• GEF• ONE• AFDB

• MASEN• No

• Alstom • No • Alstom • Abener • Abener• ABB• Teyma

• Rioglass Solar

• Abengoa Solar

• Schott Solar AG

• Solutia

Source: Authors.



• Thereweredoubtsabouttheabilityoflocalindustrytosupplyinquantityandinatimelyfashionanditwasconsideredalowerrisktobuyfromlargeinternationalsuppliers)

• Problemsoffindingwelltrainedandhighlyskilledworkers• Problemsoflocalproductsandsteelconstruction:mainlyqualityandprice• Issuesrelatedtointra-Moroccologistics:importingcomponentsfromabroad

seemedeasierthanshippingbyroadfromeconomichubs(Casablancaforexample)toAinBeniMathar.

• AvailableinMorocco:Largemachines(alltypes)• Administrationandbureaucracy:Lowerspeedofimplementationofproject• Reasonsforimports:Noimporttaxes(priceadvantagestolocalproducts/

pricedifference6–10percent)• O&M has to be undertaken by internationally experienced company to

sustaintheperformanceofplant

Conclusion for future CSP plants in Morocco:

Strongly supportedby internationaldonors, thefirstCSPproject inMoroccowillproduceelectricityfortheMoroccanmarketbytheendof2010.Thispilotproject will increase knowledge, experience with operation and maintenance,andacceptanceforCSPprojectsinMorocco.Butlocalmanufacturingoutcomeshavenotprovedpositive:

• Lowparticipationoflocalindustryinthisinitialprojectmayleadtolowlevelsoftechnologytransferandlittlelearning

• Many international component suppliers have made first steps into theMENAmarketbysellingtheircomponentsinMorocco,butcostadvantagesforlocalcomponentsandservicescouldnotbeidentified

ISCCS power plant in Hassi R’mel (Algeria)

ThisprojectisbeingpromotedbySolarPowerPlantOne(SPP1),anAbenerandNEALjointventureformedforthispurpose,whichwilloperateandexploittheplantforaperiodof25years.TheAlgerianstatesociety,Sonatrach,willbuyallthepowerproducedunderaBuildownoperate(BOO)contractwithAbener.Theprojectcompanyisownedbyfourshareholders:Abener(51percent),Neal(20percent),Sonatrach(14percent)andCofides(15percent).TheleadbankforthisprojectwastheAlgerianbankBEA,BanqueExtérieured‘Algérie.Thetotalinvestmentwasissuedfor315MioEurotoAbener.

Theplantwillbecomposedofa25MW(183,860m²)solarfieldofparabolictroughtechnologythatwillprovidecomplementarythermalenergytoa150MWcombinedcycle.Theconceptincludesadrycoolingsystemthatusesonly10per-centofawater-cooledsystem.TheleadingroleofAbenerasEPC-contractorandAbengoaSolarascentralforthesolarfielddevelopmentisshowninFigure2.10.



Main lessons from this project:

ThefirstprojectinAlgeriawasbuiltbecausetherewasstrongpoliticalwillforaCSPplantinhassiR´meltobebuiltinatotalprojecttimeof33months.ThenextseriesofthreesolarthermalplantsinAlgeriacanprofitfromthetechnologi-calexperiencegainedinthisfirstproject.

• EngineeringcompanyAbenerisresponsiblefortheEPCofthetotalISCCSplant;Abengoa´ssubsidiaryisthemainsupplierforthecomponentsandengineeringofthesolarfield

• Ninetypercentofequipmentandcomponentsareimported• Solar field is 30–40% of total project cost, engineering 10–15% of total

projectcost

Figure 2.10 ■ value chain for the iSccS power plant in hassi R`mel

ComponentsProject

Develop. Materials

EPC

Valu

e ch

ain

Power Block& pumps

GridConnection EPC


StorageSystem

SteamGenerator/

HeatExchanger

Components

Com

pani

esCo

mpa

nies

Com

pani

esRaw & Semi-

nished




Valu

e ch

ain Finance &

OwnershipResearch &


Institutions

Esse

ntia

l par

tner

s

ConceptEngineering

ConnectingPipingVa

lue

chai

n

• Abengoa Solar• Fichtner

• Abengoa Solar

• Abener• ONE

• ONE

• GEF• ONE• AFDB

• MASEN• No

• Alstom • No • Alstom • Abener • Abener• ABB• Teyma

• Rioglass Solar

• Abengoa Solar

• Schott Solar AG

• Solutia

Source: Authors.



• Nolocalmanufacturingwasusedforthesolarfield• CivilworkatAlgeriansiterangesupto30percenthigherthaninSpain• Abenerexpectstouselocallyproducedsteelmountingsystemforfuture

projects• Limitedknow-howforprojectdevelopmentof(conventional)powerplants

existsinAlgeria;EPCcontractoralwaysinternationalcompany• LocalcompanySarpiprovideselectronicequipmentfortheplant• ThemainO&MisdonebyAbenerbutanAlgerianengineeringcompany

(Algesco)willprovideturbinemaintenanceduringoperation

Conclusion for future CSP plants in Algeria:

• LowdevelopedprivateindustrialsectorreducesthecapabilitiesofAlgerianindustrytoreactefficientlyandquicklytomarketdemandandprojectneeds

• TurnkeyprojectspreferredinAlgeriabecauseoflimitedexperiencewithpowertechnologies

Theshareoflocalinvolvementintheprojectisverylow.TheAlgerianindustrycouldplayalimitedroleinlocalmanufacturing,butevencomponentsandserviceswithalowertechnologylevelhavebeenprovidedbyinternationalcompanies.

Conclusion on feedback from MENA ISCCS

ThelocalsharehasbeenverylimitedforhassiR’MelandAïnBeniMatharasmostcomponentshavebeenimportedbytheEPCcontractors.Thiscanbeex-plainedbythefactthatthefirstaimwasnottodevelopthelocalCSPrelatedindustrybuttodeliverafunctionalISCCSwithintightdeadlines.Ontheotherhand,thekuraymatISCCSachieved60percentlocalproduction.ThekeytothatsuccesswastheinvolvementofalocalEPCcontractor,OrascomIndustries,andthesupportofFichtnerSolarandFlagsolfortheconceptualdesign,engineering,andthetechnicaladvisoryoftheassembly.AsOrascomisanEgyptiancompany,itwaseasiertoinvolvelocalsubcontractors,likeNSFforthesteelstructure.Thelocalcompaniesinvolvedinthekuraymatprojectgainedknow-howandshouldbeabletouseitforfutureprojects.

ApromisingapproachtodeveloplocalCSPcomponentsproductionwouldbetocombinethefollowingelements:

• Internationalcooperationtofacilitateknowledgetransfer• InvolvementofalocalEPCcontractortofacilitatetheinvolvementoflo-

calcompanies• Theprovisionofincentivestocompaniesformakingtheefforttoinvolve

localcompaniesandcomponents.

Within such a framework, theMediterraneanSolarPlan is oneof thekeyprogramsundertheunionfortheMediterranean(ufM)thatprovidespolitical



momentumforinitiativessuchasDesertecatabilaterallevel.MENACSPcouldmakesolarenergytradeafundamentalpillarofMENA-Eueconomicintegration,anditthereforepresentsamajoropportunityforMENAtoearnexportrevenue.MENACSPcouldbekeytorealizingtheEu’sGhGemissionsreductionandenergy security objectives.TheApril 2009 Eu Renewable Energy Directive,withitsprovisionsfortheimportofrenewableenergytoachievethemandatoryrenewableenergytargetsofEumemberstates,isafirststepinthatprocess,asaretheDesertecIndustryInitiativeandtheTransgreen/MedgridInitiative.

2.2.4 Potential Involvement of International Players in Local Production

International companies and partners are already involved in recent CSPprojectsintheMENAregion.Inthefuture,localmanufacturingcapacitiesbyinternationalcompanieswillbeakeytoincreasingmanufacturingatthelocallevel.SeveralexpertinterviewswithinternationalEuropeanmarketleadersinSpain,France,andGermanywereconductedtoidentifythepositionofindustrywithregardstotheMENAmarket.Strategiestoenterthemarketortobuilduplocalproductionfactorieswerediscussed.Thissectionisdividedintofourtopics:expectationsonmarketdevelopment,experts’experiencesinMENA,thepotentialforlocalmanufacturingbyinternationalindustry,andreasonablesupportmechanisms.

Expectations of CSP market development worldwide and in North Africa

Intheshortandmediumterm,thelargestmarketswillbeintheunitedStatesandSpain.WhileAsia(ChinaandIndia)will increasetheir solarmarkets sig-nificantlyinthenearfuture,expectationsfortheMENAregionarelimitedtoaslowgrowthbutcouldincreaselaterifsupportmechanismsareinstalled.OneimportantfactorwillbethecostdisadvantagesofCSPcomparedtofossilfuelsincountrieswherelocalresourceslikegasoroilareavailable(Algeria,Egypt).MoroccoisseenasthemostimportantandfastgrowingCSPmarketintheregion.

Experiences in the region

TheCSPregionalmarket is subject toeconomic,political, and legal factors.Positiveandnegativeexperiencesstronglyinfluencefurtherbusinessdecisionsonthepartofinternationalcompanies.Almostallthecompaniesinterviewedhave conducted business in the region. EPC companies likeAcciona,ACSCobraorFerrostaalhaveextendedexperienceworkinginMENAfrompreviousbusinessactivities.Forfutureprojects,engineeringcompanieslikeFichtnerandFlagsolcanmakeuseoftheexperiencegainedattheISCCSplantsinMoroccoandEgypt.Theproblemsassociatedwithdoingbusinessintheregionareper-ceivedindifferentwaysbydifferentcompaniesworkingindifferentregions.CompanieswithlongerexperienceinMENAdescribefewerproblemsbecausethey have found stable local partners for their activities; local partners and



politicalsupportareimportantfactorstosuccessinthesemarkets.Intermsofregionalvariation,Egyptisseenashighlyattractiveduetoitstechnicalexpertiseandqualifiedworkforce.

Politicalrisksarecriticalforinternationalindustry.TheindustryranksthemamongthemostsevereproblemsinNorthAfrica.Politicalrisksleadtoseveralbarrierstoproductivity:directinvestmentsarelimitedandveryexpensivebecauseofcountries’highriskratings,andthefullpotentialforlocalvaluegenerationisnottapped.TheCSPmarketcanonlyreachitspotentialwithaforeseeablemarketdevelopmentandlowerdebtcosts.Companiesareseekinglong-termguarantiesandlong-terminvestmentinthesolarmarket.Onecompanyalsorecommendedthecreationofanarbitrationcourtwithinternationalstandardstosecurepay-mentsforsuppliedcomponentsandlong-termcontracts.

Security concerns are important for international firms. Companies oftenincurextraexpensesforon-sitesecuritystaff,iftheysendtheiremployeesintothecountriesofNorthAfrica.

CustomsdutieshinderbusinessactivitiesintheCSPmarket.ForanintegratedMENAmarket, intra-MENAcountries’ logisticsmightbe a relevant aspect ifbarriersofinternationaltradecomeintothefocus.

Educationandqualificationsof theworkforce are lower inNorthAfrica,butthisisnotseenasaprimaryproblemforinternationalcompaniesbecausetrainingonthejobispossible.Wagesforlocalstaffare1/3to1/4lowerthaninEurope,whichhelpsoffsetlowereducationandefficiency.howeverforexperttaskstheinternationalcompaniesstillusetheirregularemployeesfromEurope.

Insummary,theinterviewsindicatedadifferentratingofriskandproblemsindifferentcountries.Stableframeworksincombinationwithstronglocalbusi-nesspartnerscouldfacilitategrowth.Furtherregulatoryandlegalsupportwouldhelp international companies build up local subsidies and joint ventures andconsequentlynewfactoriesandproductioncapabilities.

Potential for local subsidies and local manufacturing by international companies

EPCcompaniesandprojectdevelopersalreadyactiveintheregionhavelocalofficesclosetoCSPprojectsandtheircustomers.Thecompaniesemploylocalandinternationalworkersforprojects.Aswithconventionalpowerplants,CSPcompaniesexpectalargeshareofprojectdevelopment,management,andengi-neeringwillcomefrominternationalcompanieswithknowledgeandexperienceinthesekindsofprojects.

Table 2.9 ■ barriers and Problems Expressed by the CSP Industry

Often mentioned problems in countries of north Africa

Payment of bills Security concerns

Political risks Qualification and education of work force

Corruption Problem of time scheduling



SchottSolarseessomecriticalissuesforhightechnologyreceiverproductioninNorthAfrica.Complexandexpensiveproductionfacilitiesrequireasophis-ticatedtechnologyframeworkforoperationandmaintenance.InSpainalocalcontent clausewas themaindriver tomovea factory toSpain.According toSchottSolarlocalmanufacturingofreceiversisproblematic,butmaybefeasibleinthelong-term.

Mirrorproductionrequiresalargelocalmarkettobeeconomicallyviable.CSPdevelopersexplainthatthemetalsupportstructurecouldbeeasilyproducedinMENAiflicensesforthedesignandassemblingareobtainedbylocalcompaniesinthesteeltransformationindustry.Otherinstallationworkscouldalsobedonelocallyinthenearfuture.

Asawhole,theCSPindustryreiteratesthat“if the local market is large and stable enough, we will produce locally.” Astheaveragefactoryformirrorsaswellas for receivers has an output of 200–400 MW per year this is the absoluteminimummarketsizerequiredtomotivatecompaniestoinvestinlocalplants.Theindustryunderlinestheimportanceofastableandgrowingmarket.Iftheindustryisnotconvincedthatalocalmarketwilldemandamoreorlessstableamount of components per year, companies will not invest in local factories.Table2.11showstheoutputofatypicalfactoryforcoreCSPcomponentsandcorrespondingjobsandfactoryinvestmentcosts.

Support actions for a predictable and stable market

IninterviewscompanieswereaskedwhichsupportmechanismwouldimprovethesituationofCSPintheMENAregion.

Threecentralanswersemergedtothisquestion:

• Long-termsecurityforplanningandfinancingbyfeed-intariffs• Needtoimprovethelegalframeworkforenforcementofcontracts• GuaranteesfromEuropeancountriesorinternationalfinancialorganizations

toreducecountryspecificriskandfinancialcosts

Table 2.10 ■ Industry view on Potential of local Manufacturing

ComponentLocal manufacturing possible?

Services and power block

Local manufacturing possible?

Mirrors Yes, large market Civil works Yes, up to 100%

Receivers Yes, long-term Assembling Yes, up to 100%

Metal structure Yes, today Installation works (solar field)

Partly, up to 80%

Pylons Yes, today Power block No

Trackers Partly Grid connection Yes, up to 100%

Swivel joints Partly Project development Partly, up to 25%

HFT systems No, except pipes EPC Partly, up to 75%

Storage system Only small share Financing Partly



Asustainablemarket isdifficult to achievewithgrants that are foronly alimitednumberofprojectsintheregion;afeed-intariffwouldgivetheindustryalong-termplanningscenario.Ifalong-termperspectiveismissing,internationalcompanies have a limited interest in investing in the region. Some interviewpartnersrecommendedPPAswithalong-termperspectiveoftenderprocedureswithaconstantannualinstallationvolumeover5to10years.Investmentdeci-sionsdependmoreontheexistenceofapredictableandstablemarketthanonsecondaryfactorslikeskilledworkersorbusinessnetworks.

2.2.5 mapping of Potential cSP meNa Players

ThissectionmapsthepotentialCSPindustriesintheCTFMENAregioninregardtothesizeofthecomponentsmarketandthreeterms,2015,2020and2030.

ThemappingofplayersforCSPcomponentsotherthanmirrors,mountingstructures,andelectric/electroniccomponentsshouldbelessdynamic.Ontheonehand,componentsthatarenotspecifictoCSP(cables,balanceofplant,etc.)willbesuppliedbyplayers thatarecurrentlyactiveonconventionalmarkets.MarketsharesshouldevolveaccordingtotraditionalmarketdriverslikeMENAindustriescompetitiveness,changerate,availabilityoflowcostmaterials,etc.Ontheotherhand,hightechcomponentsthatarespecifictoCSP(hTF,receivers)willcontinuetobesuppliedbyaverylimitednumberofinternationalcompanies;themappingforthesecomponentsshouldnotchangecompletely.

2.2.6 Illustrative Business cases of current or Potential cSP meNa Players

CSP mirrors

Sphinx Glass

MENA Glass, through its fully-owned subsidiary Sphinx Glass, is a companyestablishedbyCitadelCapitalandagroupofleadingregionalinvestorstopursueinvestmentsinthepromisingMENAglassindustry,withaninitialcapitalof$120million.SphinxGlass’greenfieldplantislocatedinSadatCity,70kmnorthofCairo,andhaslicensedworld-classproductiontechnologiesfromPPGInd.Inc.

Table 2.11 ■ Component Specific Parameter for Typical factories

Components of the value chain

Annual output of a typical factory

(MW/year)

Investment per factory (in

Million €)

Jobs per factory

(Jobs per year

Specific Jobs

(Jobs/MW)

Com

pone

nts Receiver 200–400 MW €40 140 Jobs 0.3–0.7

Mirrors 200–400 MW. €30 300 Jobs 0.7–1.5

Steel structure 50–200 MW. €10 70 Jobs 0.3–0.5

HTF Very high — — —



Figure 2.11 ■ Mapping of potential cSp industries and their Respective Markets

Current situation 2015 2020 2030

MENA market(capacity, nbof plants, sizein billion $)

Descriptionand drivers

70 MW, 3 ISCC, ~ 0.5 300 MW,3–5 plants, ~2

~1 GW, 10–20 plants, ~8

~ 2 GW, 20–30 plants, ~15

Mirrors

Mountingstructures

Marketsize (M$)

Marketsize (M$)

25 100 400–450 800–1000

FlabegRioglasssolar

Egyptian Glass Company Dr Greiche Sphinx Glass SIALA

NSF Engineer-ing Delattre Levivier Maroc

Abengoa Solar

Acciona Areva

Very limited nb of intl. companies

NSF Engineering Ynna Holding DLM AOI

DLM AOI NSF Engineering Ynna

Holding El Fouladh + other

new entrants

Potential new entrants Sphinx Glass Dr Greiche EGC SIALA

Flabeg Rioglass solar Saint-Gobain

Guardian Ind. Pilkington

~ same players

Saint-Gobain Guardian Ind. PPG

Flabeg Rioglass solar Saint-Gobain Guardian IndustriesPilkington

• All ISCC supplied by international companies

• MENA market size not large enough for local CSP glass and mirror production

• Large interna-tional companies getting interested in MENA market

• Part of value chain produced locally (coating) by local glass transformers

• MENA market size still too small for full value chain integration

• Regional market size becoming signi�cant

• Integration of full value chain by local players

• Implementation of a large internation �rm’s a�liate and development or reconversion of assets by pure local players

• Developmentof local assets, increaseof local producers market share driven by call for tenders’ local production clauses

• Consolidation of all «historical» stakeholders’ position


• Abengoa supplied Aïn Beni Mathar and Hassi R’mel

• NSF engineer-ing designed and produced the Kuraymat mounting structure

• Increased interest of company with R&D capacity and already producing complex metallic structures (roofs, windtowers)

• International developers preferring «standard» mounting structure design already implemented in other CSP plants

• Cost reduced by local production (especially through low transport and low labor costs)

• Development of local knowledge and experience gained in �rst MENA projects

• Very speci�c needs of international developers

• Perfect command of mounting structure construction techniques

• Previous economic aldrivers still in¥uent

• Only «pure» local production as no need for know-how transfer any more and industrialisation of production

Abengoa Solar

NSF Engineering

~ 50 ~ 225 800–1000 1500–1700



Thenewstate-of-the-artfacilityhasaproductioncapacityof600tons/dayandsellstobothlocalandexportmarkets.Twohundrednewjobswillbecreatedinitially.Theconstructionphasehasemployedsome2,000workers.

Thenewplant isproducinghighqualityclear,colored,andreflectivefloatglassforuseinboththeautomotiveandconstructionindustries.Glasssizesvaryinthicknessbetween2–19mm.

hishamEl-khazindar,ManagingDirectorandCo-FounderofCitadelCapital,seesstrongcompetitiveadvantagesinEgyptintheglobalglassindustrywithalargesupplyofhigh-qualityrawmaterials, localavailabilityofnaturalgas,lowlaborcostsandageographiclocationthateasilysupportsexports.Thecountryisperfectlysuitedtobecomeanimportantmanufacturerandexporterofbothfloatandcontainerglass.

Saint-Gobain

TheSaint-GobainandŞişecamgroupshaveagreedtojointlydeveloptheirflatglass(float)activitiesinEgyptandRussia,bycarryingouttwoprojectstogether.ŞişecamwilltakeaminoritystakeinSaint-GobainGlass’sinvestmentprojecttobuilditsfirstfloatglassproductionlineinEgypt,alongsideSaint-Gobain’slocalpartner,MMID.

Figure 2.11 ■ Mapping of potential cSp industries and their Respective Markets (continued)

Current situation 2015 2020 2030

MENA market(capacity, nbof plants, sizein billion $)


70 MW, 3 ISCC, ~ 0.5 300 MW,3–5 plants, ~2

~1 GW, 10–20 plants, ~8

~ 2 GW, 20–30 plants, ~15

Electric andelectronic

equipment

Marketsize (M$) 2 5–10 ~30 ~50

: Import in MENA : local production (implantation of international players)

: “pure” local production (current local players)

Developper’sinternational suppliers

El Sewedy Cables Groupe Elloumi TECI

El Sewedy

Cables Elloumi

TECI+ new

entrants

Developpers international

suppliers

Leoni Câbles, Delphi, Yakazi, Sumitomo, Nexans + new entrants

~ same players

~ same players

• High tech components supplied by conventional international suppliers

• Low added value compo-nents (cables, etc.) supplied by local companies

• Local players used to comply with stringent require-ments from international clients developing speci�c CSP components

• New entrants in high tech components (trackersfor example), as aeronautical or autmotive companies

• Consolidation of market shares by local players

• Decrease of components import becauseof the combination of competitive local productsand local production clauses in call for tenders

• Share of the market between top local �rms (competitive on international markets) and international �rms having developped local capacity because of low labor cost and strategic location



Inaddition,ajointventurewillbesetupbetweenSaint-GobainandŞişecamfor the construction of a float line in Russia, in the Republic ofTatarstan.AfeasibilitystudyforthisinvestmentwasrecentlyannouncedbyTrakyaCam,acompanyoftheŞişecamGroup.Outputfromthisplantwillbesoldinthebuild-ingandautomotivemarkets.

Guardian industries

Guardian Industries (GI) operates four float glass plants in Egypt, SaudiArabia,EuA,andIsrael.Theplantsare“hightechandmodern”.Thegrouphastakenover62percentofthestakesoftheEgyptianGlassCompany(EGC),aformerstate-ownedcompany,fromtheEgyptkuwaitholdingCo.Withthesameinfrastructure,thecompanymanagedtoincreasethedailyoutputfrom400to500tons.Floatglass inEgypt ismuchcheaper than intheuS(uS:uS$350–400/ton,Egypt:uS$200/ton).however,GIhasexpressedconcernsin interviews for thepoorconditionof infrastructure in thecountryand intheregionasawhole.

InthecontextofCSP,GuardianIndustryisproducingflatmonolithic,bentmonolithic,flatlaminatedandbentlaminatedmirrorsintheunitedStatesandinIsrael.Laminatedmirrorshavebeendevelopedforhigherreflectivityand increaseddurability.Guardian industry isalreadyexperienced inCSPmirrormanufacturingwithannualproductionfiguresof7.4millionsquaremetersbent,9.2millionsquaremeterslaminated,20.4millionsquaremetersmirrored

Amongotherprojects,GuardianIndustrieshasalreadysuppliedthefollowingsolarfields:

• Acciona(Parabolic)LaRiska• Acciona(Parabolic)PalmaDelRio• Acciona(Parabolic)Majadas• NovatecBiosol(FlatLinearFresnel)PuertoErado2

GIhasalteredthebendingfurnacesusedforautomotiveglassdramaticallyinordertostepintotheCSPindustry.Theconversiontookoverfouryearsasbendingparabolasrequiresahighdegreeofaccuracy.

GIconsidersthattherearedifferentwaystodeveloplocalintegrationforCSPmirrorconstruction.Forexample,mirrors thatarealreadybentcouldbesenttoCTFMENAcountries.Localindustriescouldthenundertakethehighaddedvaluestepofsilveringandtreatingtheglass.

GuardianIndustrieswouldbereadytomanufactureCSPmirrorsinCTFMENAcountriesifthemarketwasthere.Atthebeginning,localMENAcom-paniescouldtakeononlysomestepsofthemanufacturingprocessandtheneventuallyintegratethefullCSPmirrorvaluechain.ThelocalproductionofCSPcomponentscouldbeinitiatedbythedevelopmentofjvswithpublicauthorities.



CEVITAL

AnindustrialglasscomplexthatwillbeamongthelargestintheworldisbeingdevelopedbyCevital.Threeproductionlineswillbe implementedasfollows:thefirstlineof600tons/daywillcomeintoproductionbytheendof2010,asecondlineof700tons/dayandathirdlineof900tons/daywillthenbeadded.AccordingtoCevital’schairman,thetotalcostoftheprojectinvestmentisuS$181millionfundedby75percentequityand25percentbankcredits.Thecomplexwillcreateover2,500directjobsonthesiteofLarbaa.Thefirstlinewillemploy375staffincluding15expatriates,the2ndand3rdlineswilladd300jobseach.

Sandandfeldsparnecessaryforproductionwillbesuppliedtothesitefromtwolargequarries,inAlgeria.

AccordingtoCevital’schairman,theplantwillbehighlycompetitiveonworldmarketsduetolowAlgerianenergycosts.

CevitalhasbuiltapartnershipwiththeChinesecompanyCLFG.CLFGisamajorplayerinthefloatglassIndustryintheworldwith10productioncentersinChina.Inthiscontract,CLFGoperatesinfourareas:engineering,technology(licensedandknowhow),andassistanceintheacquisitionofproductionequip-mentandproductionmanagement.

SIALA (Tunisia)

SIALA isproducing6,000 tons/yearofmirrors, its activity is limited to glasstransformation.SIALAcouldbeinterestedinCSPmirrorsasawaytodiversifytheirindustry.

Anovenfortoughened/temperedglasswillbebuilt inthenextmonths.Itwillproducemirrorsofathicknessof4millimeters.ThisistoothickforCSP,butSIALAmightreconsidertheirpositionandassesstheadditionalcostneededtoproducethinnermirrorsthatwouldbecompliantwithCSPspecifications.

Dr Greiche Glass

Productsof thecompanyaremostlyflat glass forbuildings, automotiveglass,andmirrors.ThecompanyhasaclearinterestinmanufacturingmirrorsforCSPandiscurrentlyinvolvedinprovidingmirrorsforapilot/demoplantwithCairouniversity(~60squaremetersofslightlybendedmirrors).Thecompanyisin-terestedinextendingitscurrentbusinessintoCSP.

ThemainconditionforbecomingmoreheavilyinvolvedinCSPtechnologyisgrowthofthemarket.SuppliersofglassmanufacturingmachinesarethesameforCSPglassasforordinaryglass.TheminimummarketsizetodevelopanewfactorytolocallymanufactureCSPmirrorsinEgyptisonemillionsquaremetersperyear.WhiteglassasthemaininputmaterialiscurrentlynotproducedinEgypt.Theminimummarketsizetoopenafactoryforwhiteglassis20,000tons/year.

Themainbarrierforlocalmanufacturingatthemomentisthatthemarketdoesnotexist.Dr.GreicheGlassiswillingtotakesomerisk,butbeforemaking



investmentsinCSPtheywanttoseeacleargovernmentpolicyandprojectedtrajectoryonCSP’sroleinenergyproductionforthecountry.

Raw material suppliers and mounting structure manufacturers

SONASID

CreatedbytheMoroccanstatein1974todevelopafully-integratedsteelcom-pany,in1996SONASIDintroduced35percentofitscapitalintheCasablancastockexchange.In1997,thestatesold62percentofthecapitaltoaconsortiumofinvestorsandindustrialsincludingArcelor.

SONASIDcontrols75percentoftheMoroccanmarket.Somesubsidiariesarespecialized indownstreamactivities(forexample,LongometalArmatures,specializedintheconstructionandinstallationofmetalarmatures).SONASIDwasanactivefounderoftheprofessionalassociation,theASM(AssociationdesSidérurgistesMarocains”),andemploys930people.

AbroadestimateoftheneedforsteelforthePlanSolaireMarocainshowsthatthisdemandcouldeasilybesatisfiedbylocalsteelproduction:

• Withaprojectedestimateof10,000to15,000tonsofsteelfora50MWCSPplant,by2020thedemandcouldreach40,000to60,000tonsin10years.

• TheactuallongproductproductioncapacityinMoroccoreaches2.2mil-liontonsperyear.

EzzSteel

Afterbeingaleadingimporteranddistributorofsteelproductsfromthe1970stothe1990s,theEzzfamilylauncheditslongsteelproductionin1996.Today,EzzsteelisthelargestindependentproducerofsteelintheMENAregionandthemarketleaderinEgypt.

Itsfourplants(Alexandria,Suez,SadatCity,10thofRamadanCity)producelong products, principally rebars and wire rods, and also flat products, whichconsistofhotrollcoil,foruseinawiderangeofapplications.

Ezzsteel’stotalproductioncapacityis5.8milliontonsperyear(3.5MTPyoflongproductsand2.3MTPyofflatproducts).Itemploys6,300workersandtheturnoverreached$2billionin2009($288millionofwhichwasexportsales).TheEuisEzzsteel’s largestexportmarketaccountingfor59percentof totalexports.TheMENAregioncountriesaccountfor15percent.

Today, Ezzsteel exclusively produces reinforcement bars and wire rods.Diversificationisnotintheagenda,whichimpliesthattheregion’slargestpro-ducerwouldnotbedirectlyinvolvedintheCSPvaluechain.

DLM (Delattre Levivier Maroc)

DelattreLevivierMaroc(DLM),theleadingheavysteelconstructioncompany,andboilermakingandpipeworkspecialists,hasbeenapresencefor50yearson



Morocco’snationalmarketandoninternationalmarketsandhas1,300employees.Thankstoitslongexperience,technicalexpertise,cutting-edgeindustrialtool,andtheexpertiseofitsteams,DLMhaswonthetrustofthelargestoperatorsandengineeringofficesinawiderangeofsectors(MinesandChemicals,OilandGas,Infrastructures,CementandEnergy).

DLMiscurrentlyconcentratingonthreenewaxesofdevelopment:export,withincreasingpresenceinAfricaandtheMiddleEast;windpower,withcon-structionofanewproductionline;andoffshoreoil.DLMhasshownabilitytoadapttonewmarkets(e.g.,windmasts,offshoreplatforms).

NSF (National Steel Fabrication)

NSFwasestablishedin1995,withasingleproductionfacility inEgyptandatotalannualproductioncapacityof36,000tons.TheynowownandoperatefourmajorfacilitiesinEgyptandAlgeriawithatotalcombinedproductioncapacityof120,000tonsannually.NSF’splantscoveratotalareaof1millionsquaremeters.

NSFisinvolvedintheproductionofspecialistpressurevesselsandboilers,aswellassteelstructurecomponentsforprojectsincludingbridgesandmilitaryairports.TheysuppliedanderectedthesteelstructureforthekuraymatISCCSproject(around3,200tonsofsteel).Thescopeoftheirworkincluded:

• Preparationofshopdrawingsasperspecificationsanddatasheets• Supplyofcarbonsteelmaterials• Pre-fabricationofsteelworkatNSFforsiteassembly• hotdippedgalvanizationforallsteelparts• Supplyofhuckbolts• Erectionofsteelelements

NSF’s production facilities include the latestCNCmachines, laser cuttingequipmentandhighlyautomatedrobots.Inaddition,NSFproductionisexecutedinlinewithASME,AISC,BS,DINandEuronormqualitycertificates.

Electric and electronic components manufacturers

Chakira cables (Elloumi group)

Chakira isoneof themaincablemanufacturers inTunisiaand in theMENAregion.ChakiradoesnotseeanyissueinsupplyingCSPplantwithcablespro-ducedlocally.

Chakira is looking forward to diversifying its production and is alreadyproducing Pv cables.The company would be ready to invest inr CSP cableproductionastheyknowthattheywouldgetfinancialandtechnicalsupportfromtheMinistryofIndustrysinceapublicfundaimedatsupportinginnova-tioninTunisiahasalreadybeenestablished.TheElloumiGroupalsoincludesanentitywhich isspecialized inelectric installations.ThisentityconstructedtheelectricnetworkofthefirstwindfarminTunisia.Furthermoreasubsidiary



ofElloumigroupisinvolvedinR&Dforelectricvehicles(cablesenablinghighspeedchargeofvehicles).

Arab British Dynamics, affiliate of the Arab Organization of Industrialization (AOI)

ArabBritishDynamics is state-owned andwas established in1978 as a jointventureofAOIandBritishAerospacefordesignofdefensesystems.Since1998itiscompletelyownedbytheAOI.

Theirmainproductsaredefenseproducts(wirelesscommunicationsystems,rocketsystems),aircraftharnessesandcablesfornavigationsystems,gas-andoilburners,gastaps,medicalequipment(e.g.hospitalbeds).ProductionlinesareComputerNumericallyControlled(CNC)andarecertifiedISOstandard9000&14001andawardedbynationalstandardcertificates.AOIbelievesaproduc-tionofCSPmountingstructuresispossiblebutisnotyetwellinformedaboutit.

AOImighthavethecapabilitiestoenterintomanufacturingofCSPcompo-nentsbutcurrentlytheawarenessaboutthetechnologyislowandthefocusisonothertechnologies(mainlyPv).

AOI-Electronics Factory

AOI-ElectronicsFactoryisalsoanaffiliateofAOIandproducescommunicationsystems(military)andconsumerelectronics(LCDtelevisionscreens,speakers,etc.).Thecompanyisinterestedinrenewableenergiesandalreadydidthedesignofawindturbinecontrolunit(butmanufacturedonly2piecesintotal).

El Sewedy Power

ElSewedy’scompaniesareactiveinalargevarietyofsectors:cables,electricalproducts,communications,transformers,meters,steelstructures,windturbines,EPC.ElSewedyexportstoover100countriesandoperates30manufacturingplants in 16 countries. It is the 4th largest cable manufacturer worldwide. ElSewedyPowerownsthebiggestgalvanizationfactoryintheworld.

ElSewedyPowerholdsa90percentshareinSpanishwindmanufacturerMTorresandmanufactureswind turbinesandblades.Currently thecompany isnegotiatingwiththegovernmentfortheerectionandsupportofa300MWwindparkinEgypt.TheagreementwouldstatethatElSewedyPowerwouldbegiventhecontractbutthattheturbineswouldbeproducedlocally.

2.2.7 competitive advantages and Weaknesses of cSP value chains in meNa

The readinessof economies to adoptnew technologies and to implement in-novationactivitiesinthefutureisacrucialfactorforsustainabledevelopment.ToallowforthedesignofasuitableactionplanforthepromotionofCSPcom-ponentmanufacturingwithin theMENARegion it is important toassess the



innovativecapabilityandthecompetitivenessofcountryeconomies.AgeneralSWOTanalysisoftheCSPvaluechainsintheMENAmarketcanhelppointoutthecompetitivemarketpositioningofcompanyplayersinthevaluechain(seeTable2.13).Itisbasedmainlyonthefindingsfromexpertinterviewsduringthefieldstudy.ByanalyzingthestrengthsandweaknessesthisassessmentfocusesonthebarriersthatmustbefacedbyMENAmarketplayersinordertopenetratetheCSPvaluechain,andonfirstdirectionsforaddressingthesedifficulties.Theanalysisissupplementedbyinformationonthegeneralconditionsoftheresearchsystem,thetechnologicalcapability,theconditionsfortechnologydiffusion,andthegeneralinvestmentclimateinthecountries.

Information on aspects of general competitiveness and investment friend-liness of 133 countries is aggregated in the Global Competitiveness Report(GCR)bytheWorldEconomicForum(WorldCompetitivenessReport2009).TheReportcompilesdataon113variablesandprovidesarankingbasedontheGlobal Competitiveness Index (GCI).The GCI is split into three categories:basic requirements, efficiency enhancers, and innovation and sophisticationfactors,whicharesplitintoseveralsub-categories.Aselectionofdatainthesesub-categoriesisusedinthisreporttoconductacross-countrycomparisonoftheCTFcountries(Table2.12).TheCTFMENAcountriesarerelatedtotheremainingMENAcountries(non-CTFcountries6)andarelativecomparisontoothercountriesisprovidedbytheinternationalrankingintheGCR.Toallowforasimplifiedoverview,anaveragevalueforthenon-CTFMENAcountriesiscalculated(Table2.12,rightcolumn).

Inaverageterms,thenon-CTFMENAcountriesshowslightlyhigherscoresinallpresentedsub-categoriescomparedtotheCTFcountries,butastheMENAeconomiesareheterogeneousintheirdevelopmentandrepresentawiderangeinaninternationalcomparison,amoredifferentiatedoutlinefortheremainingMENAcountries,regardingsinglesub-indicatorsofspecialinterest,isnecessary.

Thebasicrequirementsforthedevelopmentofaneconomyare,efficientlyfunctioning institutions, a well developed and maintained infrastructure, andmacroeconomicstability.Thesecharacteristicsmanifestthemselvesinaprecisedefinition and strong protection of property rights and intellectual property,righteousnessandindependenceofthepoliticalandlegalsystem,andtheexis-tenceofoverallcorporateethics.Theinfrastructureencompassesnotonlythedevelopmentandqualityofroads,railroads,air-andwaterwaysbutalsoelectricityandtelephonelines.

Concerning these fundamentals of economic development, the five CTFMENAcountriesmostlylieinthemiddleofthescale,indicatingthattheymeetthebasicrequirementsrelativelywellinmostfields.however,somecountries,Tunisiaandjordaninparticular,haveabove-averagerankings,andAlgeriasur-passesallexaminedMENAcountriesinmacroeconomicstability,achievingthe

6Thisgroupconsistsoftencountries:Bahrain,Israel,kuwait,Libya,Mauritania,Oman,qatar,SaudiArabia,Syria,unitedArab.Emirates.DataforDjibouti,Iraq,Iran,Lebanon,SudanandyemenisnotprovidedintheGCR.



secondhighestrankingworldwide.7Nevertheless,therankingsforinfrastructureandpublicinstitutionsinAlgeriareflectsomedeficitsinthesefields.

Onamoreadvancedstageofeconomicdevelopment,theefficiencyofeconomicprocessesgainsimportance.Atthispoint,decisivefactorsforthecompetitive-nessofeconomiesarethestatusofhighereducation(measuredbythenumberofgraduates,overallqualityoftheeducationalsystem,availabilityofspecializedresearchservicesandextentofstafftrainingincompanies),thedevelopmentandsizeofgoods,laborandfinancialmarkets,8aswellastheabilitytoaccessandtoadapttonewtechnologicaladvancements.Thiscanbeexpressedbythelevelofavailabilityofmoderncommunicationsystems(e.g.numberofbroadbandinternet

7Duetorevenuesfromoilandgasexports.8Statusoffinancialmarketsischaracterizede.g.bythedevelopmentoflocalequitymarkets,accesstoloansandventurecapital,stateofinvestorprotection,soundnessofbanksandrestric-tionsoncapitalflows.

Table 2.12 ■ Selection of Scores in gCr-Sub-Categories Illustrating the general Competitiveness of the 5 MEnA Countries

Algeria Egypt Jordan Morocco Tunisia

CTF Average

Non-CTF AverageEval.

Int. Rank Eval.

Int. Rank Eval.

Int. Rank Eval.

Int. Rank Eval.

Int. Rank

Basic Requirements

Public Institutions

3.12 109 3.98 57 4.94 23 3.85 61 5.02 22 4.18 4.36

Infrastructure 2.91 99 4.07 55 4.45 42 3.62 70 4.62 37 3.93 4.24

Macroeconomic Stability

6.39 2 3.46 120 3.97 105 5.24 32 4.77 55 4.77 5.41

Efficiency Enhancers

Higher Education and Training

3.30 102 3.62 88 4.45 42 3.40 99 4.70 32 3.89 4.01

Labor Market Efficiency

3.45 127 3.46 126 3.97 106 3.42 129 4.07 98 3.67 4.36

Financial Market Sophistication

2.79 132 4.01 84 4.45 52 3.81 96 3.97 87 3.80 4.19

Technological Readiness

2.56 123 3.35 82 3.75 61 3.41 76 3.82 55 3.38 4.02

Innovation and Sophistication Factors

Business Sophistication

3.13 128 3.98 72 4.30 49 3.83 78 4.24 54 3.90 4.16

Innovation 2.64 114 3.03 74 3.27 59 2.88 96 3.64 38 3.09 3.37

GCI (total score)

3.95 83 4.04 70 4.30 50 4.03 73 4.50 40 4.16 4.39

Note: Indicators range between 1 (= weak position) and 7 (=strong position). Light orange: below CTF country average; light blue: above CTF country average; blue: above remaining MENA countries average. International rank ranges from 1 to 133 (source: GCR homepage. Column 7 and 8: own calculation).



&mobiletelephonesubscribers),thegeneraldisposabilityoflatesttechnologies,orthelegislationrelatedtoinformationtechnologies(e.g.consumerprotection,useofdigitalsignatures).

heretheMENAcountriesagainappearmostlyinthemediumrangeofthescaleaswellastheinternationalrankingwithstrengthsindicatedinthefieldsofhighereducation(inparticularinjordanandTunisia)andfinancialmarketso-phistication(inparticularinjordanandEgypt).Deficitsareindicatedconcerning

Table 2.13 ■ SwOT Analysis of local Manufacturing of CSP Components in MEnA region*

Strengths Weaknesses

• Low labor cost (especially for low-skilled workers)

• One of the highest solar potentials in the world (desert areas)

• Strong GDP growth over the 5 past years in all MENA countries

• High growth in the electricity demand will require large investments in new capacities

• Strong industrial sector in Egypt• Particular proximity of Spain and Morocco• Existing float glass sector in Algeria• Large export industry in Tunisia and Morocco

with long experience with Europe (e.g. auto-motive industry and aeronautics to a lesser extent)

• First CSP/ISCCS plants in three MENA coun-tries constructed by 2010

• Insufficient market size for creation of local manufacturing

• Administrational and legal barriers• Lack of financial markets for new financing• Higher wages for international experts/

engineers• Higher capital costs• Energy highly subsidized at 75% (although

subsidies are decreasing)/Egypt is a net ex-porter of crude oil and natural gas.

• No fiscal, institutional and legislative frame-work for RE development (laws for renew-able energies under development for long periods)

• Despite numerous regulations, implementa-tion and enforcement of environmental regu-lation is often deficient

• Need for strong network, business and politi-cal connections

• Lack of specialized training programs for RE• Partly insufficiently developed infrastructure

Opportunities Threats

• Further cost reduction of all components• Attractiveness to external investors by large

market demand• Solar energy: premises of an Egyptian Solar

Plan or Morocco with 2 GW• Wind energy: 400 MW of wind capacity/year

until 2020 to be developed by the private sector (bid-procedure)

• Political will to develop a local renewable energy technologies industry

• Possibility of technology transfer/spillover ef-fects from foreign stakeholders in MENA

• Export potential (priority given to export in-dustries by GoE)

• Training of workforce and availability of skilled workers not sufficient

• Technical capacities of local engineering firms• Lack of informational awareness of manage-

ment on opportunities in the CSP sector, etc.• Access to financing for new production ca-

pacities, etc.• Presence of public actors in clean-techs

value chain (ex.: Arab Organization for Industrialization (AOI) in turbine blades manufacturing)

• Competition with foreign stakeholders: e.g. historical presence of German players and strong interest of USA in the Egyptian market

• Higher manufacturing costs compared to international players

• Higher transport losses/costs due to insuf-ficient infrastructure

• Competition with other emerging countries

* An analysis of the strengths and weaknesses on a country basis is provided in the annex (cf. page 170 onwards).



thedevelopmentoftechnologicalreadinessandthefinancialmarketsinAlgeria,whichmightbeofparticularrelevancewithregardtofinancingofCSPprojectsandpotentialindustrialinvestmentsintheareaofCSPmanufacturing.

Finally, to be internationally competitive, economies must develop a so-phisticated, innovation-driven approach which allows for the enlargement ofintellectualpropertyrightsandthedesignoftheirown,uniqueproducts.Thisisexpressed,byalargenumberandahighdiversityoflocalsuppliers,welldevel-opedindustrialclustersandnetworks,andtheapplicationofpreciseandefficientproductiontechnologies.The innovativecapacity is reflected in thequalityofresearchinstitutions,theextentofcollaborationbetweenindustryandresearchfacilities,thenumberofrecordedutilitypatents,andthegeneralavailabilityofscientistsandengineers.

OnthishighlevelofeconomicdevelopmenttheCSPMENAcountriesrankmostlyinthelowerrangeofthescale.Nevertheless,Tunisia,jordanandEgyptachieveabove-averagescoreswithregardtobusinesssophistication,indicatingsignificantpotentialforthedevelopmentofbusinessinthesecountries.Thein-novativepotentialofMENAcountriescouldbeimprovedthroughthepromotionofresearchfacilitiesandthedevelopmentofintellectualpropertyrights.

2.3 Conclusion of Chapter 2

Industry capabilities for CSP components and services

SeveralindustrialsectorsthathavethepotentialtointegratetheCSPvaluechainintheMENAregionaredynamicandcompetitiveatregionalandsometimesin-ternationalscales.Theglassindustry,particularlyinEgyptandAlgeria,hasbeenaregionalleaderforalongtimeandcontinuestoincreaseitsproductioncapacity.Thecable,electricalandelectronicindustrycanalsoclaimthesameposition,es-peciallyinTunisiaandinMorocco.Thesuccessoftheseindustriesisfacilitatedbythedevelopmentofjointventuresbetweenlargeinternationalcompaniesandlocalfirmsbutalsobythelocalimplementationofsubsidiariesofinternationalplayers.

Inititally,thedevelopmentofMENACTFindustrieswasdrivenbythelowcostforlaborandenergy(inparticularforAlgeriaandEgypt)andalsobythegeographicproximitytoEurope;adeliverytoEuropewithin48to72hoursispossible.Thisisakeyfactorforshortproductioncycleswithvariablespecifications,forexamplecomponents,cablesandwiringfortheautomotivesector.InordertopositionthemselvesontheCSPmarket,MENACTFindustriesfaceseveralchal-lenges,mainlyadaptingtheirindustrialcapacitytoahighertechnologycontent.Thelandscapeisalreadychanging;thesituationofpuresubcontractingisnowshiftingtowardmorelocalR&Dandtheproductionofhightechcomponents.MENACTFcountriesareaimingtobeconsideredas“centersofexcellence”insteadoflow-costandlow-skilledworkshops.Theshifttowardhighertechnologywillrequireincreasedinternationalcooperation.Forexample,GuardianIndustrieshastakenovertheEgyptianGlassCompany,whileatechnologytransferagreementhasbeensignedbetweenPPGandSphinxGlass.



AlthoughcooperationbetweenwesterncountriesandCTFMENAisthriving,cooperationbetweenindustriesinMENAcountriesisrelativelylow.InitiativeshavebeenundertakentodevelopintraMENAcooperation(forexampleintheaeronauticsindustry)buthaveneverbeenverysuccessful.Sharedresearchandtechnologydevelopmentbetweenpublicbodies(universities,etc.)andcorpora-tionscouldbestronglyenhanced,forinstance,bydevelopingtechnologyplatformsandclusters.horizontalcooperationcouldbebetterutilizedtosupportregionalcentersofexcellence.

ManycompaniesdiscussedinthisstudystillhavealimitedunderstandingofthemarketpotentialofferedbyCSP.RaisingtheawarenessandinterestofthesepotentialplayerswillrequireaclarificationofthemarketforCSPintheMENAregionandbeyond;theidentificationoffuturedemandvolumeswillbecriticalintheinvestmentdecisionprocess.Specifyingthemarketsharesachievableforlocalindustrieswillalsobeusefulforregionalcorporatestrategies.Furthermore,aninvestigationofthepossibilitiesofflexibleproductionlinesmightcontributetomitigatingtherisksrelatedtoentryintotheCSPmarket;forexample,steelstructuremanufacturerscanadapttheirproductiontoolstodifferentproductswithlittleeffort.

In spiteof theobstacles toparticipationof localMENA industries, expertinterviewswithMENAcompaniesandwiththeexistingCSPindustryrevealedpotentialforthelocalmanufacturingofCSPcomponents.TheparticipationoflocalfirmsintheprovisionofconstructionandengineeringservicesfornewCSPplantsintheMENAregionwereidentifiedasanactivitywithpromisinggrowthinthefuture.

keyfindingsofthischapterare:

• Successfullyconstructed ISCCSprojectshave increasedCSPexperienceandexpertiseinMENA(Algeria,Egypt,andMorocco).

• Somecomponentsandpartsforthecollectorsteelstructurehavebeensup-pliedbythelocalsteelmanufacturingindustry(Algeria,Egypt,andMorocco).

• Workforcehasbeen trainedon the job; engineering capacitieshave alsoexperiencedsomeprogress.

• Specializationineachcountrywouldbebeneficial,becauselocaldemandwillprobablyberelativelylowintheshorttomediumterm.

• Severalpartsofthepipingsysteminthesolarfield—forthe(inter)connec-tionof collectors andpowerblock—canalreadybeproduced locallybyregionalsuppliers.

• ThedevelopmentofaCSPmirrorindustryinMENAisapromisingdirec-tionforfuturelocalinvolvement.

• Theinvolvementofinternationalcompanieswillplayanimportantroleinthemid-termdevelopmentofaCSPindustryinMENAcountriesbecauseitwillfacilitatethecreationoflocalproduction.

• Minimumfactoryoutputshave tobe taken intoconsiderationwhen lo-calmanufacturingofspecialcomponentsisenvisaged(parabolicmirrors,receivers,salt,thermaloil).



ThemaindriversforadevelopmentlocalmanufacturingofCSPcomponentsintheMENARegionaresimilartomarketsinSpainortheunitedStatesandincludethefollowingissues:

• attractivenessoflocalmarkets• technologytransferforcapacitybuilding• technological expertise, including precision of processes and lifetime

stability• trainingandeducationofworkforce,includingstructureandskillsofthe

workforce• largefinancialinvestmentsinproductioncapacities• competitivelocationfactorsincludingattractivecostsforlocalmanufacturing,

availabilityofrequiredrawmaterials,andinfrastructureandlogisticnetworks• improvementofqualitystandards• improvementofregulatoryframeworkwithfinancialandlegalissues

Dependingonthespecificcomponentunderconsiderationtheimportanceofeachoftheseconditionsmayvary(Table2.14).

IthastobestressedthattheincreaseinCSPperformancewithstepped-upMENAinvestmentcouldalsotranslateintoaboostforstrongcompetitorsin

Table 2.14 ■ required Conditions for Enhancing local Manufacturing of CSP Components

Component

Attractiveness of local

markets, local demand

Technological Know-how

Training Education

Financial investment

Competitive location factors

Improvement of quality

and assurances standards

Investment regulatory framework

Civil Work x x

Installations X x

EPC Engineers

x X x

Assembling x x

Receiver x x X x x x x

MirrorsFlat & Parabolic

x x X x x x x

Mounting structure

x x x

HTF x x x

Connection piping

x x X x x x

Storage system

x X x

Electronic equipment

x x X x x



technologysupply,ChinaorIndiaforexample,ashasoccurredwithChinesePvmodulesor,toalesserextent,withTurkishSolarWaterheaters.ThiscouldthenjeopardizetheemergenceoflocalCSPrelatedindustriesintheMENAregion.

Tofaceinternationalcompetition,particularlywithChinaorIndia,MENAcountrieswouldneedtostrengthenanddeveloptheircompetitiveadvantages:

• Rapiddeliveryandlowtransportcosts,wouldbestrongassetsasshippingfrom India or China would take several days. however, although rapiddeliveryhasbeenadecisiveassetfortheMENAautomotiveindustry, itmightbelesscrucialforCSPaslogisticsarelesstight.

• EnhancedR&DwouldhelptoimproveCSPcomponents,drivetheircostdown,andincreasetheirquality,comparedtothecompetition.

• MENAindustriescould tailor theirCSPcomponentproduction to localenvironmentalconditions(deserticconditions)whereasnonMENAcoun-trieswouldlackthisspecialization.

Eventually,thedevelopmentoflocalproductionclausesinCSPcallforten-dersthatarecompliantwithinternationalfreetradeagreementswouldhelptolimitcompetitionwithinternationallow-costcompetitors,butthiswillrequirecarefulconsiderationofpossiblenegative impactson learningcurvesduetoalackofcompetition.

Summary of outlook on local component manufacturing

First step: Construction and Civil works

Intheshort-term,allconstructionworkattheplantsiteincludingbasicinfra-structure, installation of the solar field, and construction of the power blockandstoragesystemcouldbeaccomplishedbylocalcompanies.Theseactivitiesaccountforroughly17percentofthetotalCSPinvestmentorapproximatelyuS$1millionperMW(cf.Table1.7).Largecompaniesfromtheconstructionsectorplaythemostimportantroleinthisareaofbasicconstruction.InSpainandtheunitedStates,on-siteconstructionandassembly iscontractedbythelocalconstructionandinfrastructureindustry,andbasicconstruction(civilandinfrastructureworks,plantengineering)isthefirststepinwhichlocalfirmsareinvolved in building the plant. Experience from the ongoing CSP projects inEgyptandMoroccosupportthisfinding.

EngineeringandEPCcompaniesintheCSPindustryarelimited.Intheworldmarket,onlyafewcompaniesalreadyhavetheexpertisetoconstructlargeCSPprojects.Newfirmsarenowentering thismarket,but thedemand for theseservicesisconcentratedinSpainandtheunitedStates.IntheMENARegioncompaniesintheCSPengineeringandprojectmanagingsectorstillneedtobeestablished.TheEgyptiancompanyOrascomisagoodexampleofasuccessfulventureinthissector;itsactivitiesgobeyondtheprovisionoflaborandithas



evenbecometheEPCcontractorforaCSPproject.Orascomusesalargenum-beroflocalstaffforconstructionontheplantsite.FortheinitialCSPprojectssomeoftheEPCandlabortaskswerecarriedoutbyexternal(international)companiesandworkforce.

TheabilityoflocalindustrytoprovideEPCservicesinMENAvariesbycountry.Egyptnowleadsinthisarea,butEgyptrequiredtheexpertiseandmanagementsupport of an international company to reach this position. In other MENAcountriestheshort-timefocusshouldbesetondevelopingEPCcapabilitiestoreachthesamelevel.

Second step: Mounting structure

Themountingstructurecanbesuppliedlocallyifthelocalcompaniescanadaptmanufacturingprocesses toproduce steel or aluminumcomponentswith therequiredhighaccuracy.GenerallyithasbeenfoundthatcompaniesinMENAareverycompetitiveinthefieldofsteelstructuresonaglobalscale.Requiredquality levelsrequiretheadoptionofautomaticproduction lineswithtypicalmachinesandequipment.

Third step: CSP-specific components with higher complexity

Intheshorttomediumterm,thelocalindustryisgenerallycapableofadaptingproductioncapacitiestoproducehighqualitymirrors(glassbending,glasscoat-ingandpossiblyfloatglassprocess)toahightechnicalstandardasrequiredforparabolictroughplants.Thismightrequireinternationalco-operationforspecificmanufacturingstepsintheshortterm.Later,localmanufacturingofcomponentscouldinclude,inadditiontohigh-qualitymirrors,receivers,electronicequipment,insulationandskillsforprojectengineeringandprojectmanagement(seeassess-mentofongoingISCCSconstruction).

Thesuccessofthisprocesswillbedependentontheattractionandintegrationof internationalfirms.Asitmightbedifficultfor localfirmstoentertheCSPmanufacturingmarketofspecificcomponentsimmediately,itwillbeeconomi-callybeneficialforinternationalCSPcompaniestoincreasetheirmanufacturingandproductioncapacitiesintheMENAregiontosupplynewCSPplantswithlocallyproducedequipmentandcomponents. Inthatcase, internationalcom-paniesinvestintheregionwithalong-termobjectiveandstrategy,creatingjobsandwealthlocally.

Particularlyforreceiver(absorber)production,themostpromisingoptionwillbeforinternationalcompaniestomoveclosertoastronglyincreasingmar-ket.ThishappenedintheSpanishmarketwhereinternationalfirms(SolelandSchottSolar),whichhadpreviouslyshippedcomponentsfromplantsinIsraelandGermany,formednewproductioncapacities inSpaintobeclosertotheCSPmarket.



Components with potential in the MENA region

Basedonthecomplexitylevelandthepotentialforlocalmanufacturing(cf.sec-tion1.3)aswellastheshareofaddedvalueintheCSPvaluechain(cf.section1.2),anumberofkeycomponentsandservicescanbeidentifiedwhicharemostpromisingtofosterforlocalmanufactureintheMENAregion(figure2.12).keycomponentsaremountingstructures,mirrors,andreceivers,andkeyservicesrangefromassemblingandEPCtoO&M.

Secondarycomponentscanalsobeidentified,forwhichsomeMENAcountrieshavealreadydevelopedproductioncapabilitiesandwhichmightthuscontributetoanenhancedlocalsupplyoffutureCSPprojects,althoughtheirshareintheoverallvaluechainmightbeofminorimportance(seeFigure2.12).Electronics,cablesandpipingbelongtothisgroup.

ForthesekeycomponentsandservicesintheCSPvaluechain,roadmapsandanactionplanaredevelopedinthenextchapter.

Figure 2.12 ■ key components and Services for cSp

CSP KeyComponents

MountingStructure

CSP KeyServices

CSP SecondaryComponents

CSP otherComponents

Assembling O&M EPC

Electronics Cable Piping

ActionPlan

Mirrors Receivers

Low or MediumComplexity

Potential for LocalManufacturing

Cost Share inValue Chain

Trackers, HTF, Pumps, Storage, Power Block,Control System, etc.

RoadMap


Documents

Review of Manufacturing Capabilities and Potential in MENA