Energy Challenges Egypt’s Next Battle

Energy Challenges: Egypts Next gy g gypBattleThi d R d T bl f UN Gl b l C t L l N t k / ECRC Third Round Table for UN Global Compact Local Network / ECRC

Hisham Zaazou, First Assistant to the Minister of TourismMinistry of Tourism, Arab Republic of EgyptMinistry of Tourism, Arab Republic of Egypt

Cairo : 27 Sep, 2010

MoT is implementing the Green Sharm Strategy that will position Sharm as a global leader in holistic greening of tourist destinations

Eco Tourism is the way of the future this is the right time to get on board while some first moverGreen Sharm Initiative Highlights

Eco-Tourism is the way of the future - this is the right time to get on board while some first-mover advantage is still attainable

To become a Green Tourist Destination, a holistic approach has to be used, based on four key Greening components: Reduced Carbon Emissions, Sustainable Water Supply, Effective Waste Management, Healthy Bio-Diversity

Sharm has a lot of opportunity for substantial improvement along all greening components - if the currenttrend of environmental degradation is not reversed, Sharm risks losing at least 16 - 35% of its annual revenue (USD 300 600 Mn per year)revenue (USD 300-600 Mn per year)

A holistic Green Sharm Initiative has been developed to address all four greening components through a set of 33 integrated projects

Th I iti ti t t t t St 1 hi li ti lt f Sh i th h t The Initiative uses a two-stage strategy: Stage 1 achieves realistic green results for Sharm in the short-medium term, while Stage 2 aims for a more radical green approach in the longer-term

The Initiative requires a cumulative investment of EGP 1.6 Bn over the next 10-years (above 2% of Tourism Revenue from Sharm annually) 48% of which offer strong returns-on-investment for local

STRICTLY CONFIDENTIAL - FOR INTERNAL USE ONLY 1

Source: Booz & Company analysis

y) gbusinesses and can thus be financed through the private sector

The Pressing Need for ChangeThe Journey to Becoming a Green SharmThe Journey to Becoming a Green SharmNext Steps


Global tourism market is responding to demand for eco-tourism,

Shift in Global Tourism towards Eco-Tourism

and successful tourist destinations are quickly becoming green

1,600

1,800Mn Tourists

4.0%

Global Tourism Demand- Mn Tourists; 1997-2008

Total World

1,000

1,200

1,400

, Total WorldTourism

400

600

800

14.9% Ecotourism1

0

200

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008


15% 19% 23% 24% 27% 29% 32% 33% 35% 38% 41% 45%% of Global

Note: 1) Ecotourism is referred to by the WTO as nature based tourismSource: World Travel and Tourism Council; The International Ecotourism Society; UNWTO; Locum Consulting; Booz & company analysis

To effectively become environmentally sustainable and capitalize

Baseline Analysis Dimensions

on eco-tourism trends, a destination must address four key areas

Analysis Dimensions

Emissions

1

m

p

o

n

e

n

t

s

Water Supply

Emissions

2

n

a

b

i

l

i

t

y

C

o

m

pp y

Solid & Liquid Waste

Technology & Operations

Stakeholder Choices & Behavior

Regulations & Governance3

S

u

s

t

a

i

Bio-diversity

4


Source: Booz & company analysis

44% of carbon emissions in Sharm are locally driven, while 100% of Sharms energy supply is emission generating

Breakdown of Energy Supply in Sharm1

Carbon EmissionsA

Breakdown of Total Sharm Emissions - 2007 (Kt CO2)

Limited LocalI fl

Breakdown of Energy Supply in Sharm- in Bn MJ in 2007 -

27%Hotels

Influence Area of FullLocal Influence

1% Diesel1%

30%Fuel Oil2

68%Gasoline

56%Air Transport

11%Other

Natural GasDiesel%Gasoline

Total = 3.02 Bn MJ

3%2%

Infrastructure

Water TransportLand Transport

Avg. Global Energy SupplyOil 34%Coal 25%Gas 21%Total = 992 Kt


Renewable 13%Nuclear 7%

20%Green EnergyNote 1) Excludes air transport and electricity (electricity is generated outside Sharm)

2) Source: CAPMAS; Booz & Company interviews; Booz & Company analysis

Transport emissions in Sharm are higher per passenger km than benchmarks, mainly driven by taxis and local dive boats

Carbon EmissionsA

Average Land Vehicle Emissions- gm of CO2 per passenger km -

160Future land transport

options for Sharm International

Sharm-Hurghada

Trips3% 1%

Boat Fuel Consumption- Litres per Nautical Mile in 2009 -

140

11599

options for Sharm InternationalTrips 6.0

Max.

3122

LocalDivingTrips

97%

1.4

4.32.5

Avg.

22

Sharm Taxis

Italian and French Taxis

Battery Electric (Natural

Plug-in Hybrid

Battery Electric

(Renewable

Buses1

Sharm Diving Boat2Glass-bottom Boat

T t l CO2


Taxis(Natural Gas)

(Renewable energy)

Note 1) Passenger load factor for buses is assumed at 60%2) Based on the daily distance traveled to Ras Muhammad (10 nautical miles) and Tiran Island (20 nautical miles) from Travco Marina

Source: How green is your diving? - divernet.com; On the road in 2035 MIT; Booz & Company interviews; Booz & Company analysis

Total CO2 = 34,424 tons

similarly emission related to hotel energy consumption is both high relative to benchmarks, and rising per guest night

Carbon EmissionsA

37Alto Green Hotel1

Sharm Hotel Emissions vs. Guest Nights Growth Average Hotel Energy Consumption per Guest Night- MJ/GN; 2007 -

e

s

t

c

t

i

c

e

s

7251

140

Seychelles Islands

Majorca

Melbourne Green HotelsCO2e = GN * Energy/GN * CO2e/Energy

B

e

P

r

a

c

B

e

a

c

h

s

t

i

n

a

t

i

o

n

s

164225

212

Africa

Middle East

Sharm 2

CO2e =

25 7%

X XGN Energy/ GNCO2e/

Energy

18 0% C t t6 5%

B

D

e

s

y

n

t

244240237

226

North America

Caribbean

Asia and the Pacific

Europe 25.7% 18.0% Constant6.5%

A

v

g

.

b

y

C

o

n

t

i

n

e


Note: 1) In Melbourne2) For Holiday Inn; Laguna Beach and Laguna Gardens Resorts

Source: Sustainable Tourism Project Report; UNWTO; Green Globe; Booz & Company analysis

Water desalination in Sharm is energy intensive, while water wastage as well as water consumption per GN are relatively high

C

Water SupplyB

7 20%

%

Water Waste as % of Total Production- Sharm vs. Benchmarks -

- %; 2007 -

Water Waste as % of Total Production- Sharm vs. Benchmarks -

- %; 2007 -

Electricity Consumption in DesalinationBy Reverse Osmosis1

- KWh per m3 -

13%

7%5%5%

10%

SharmParisBerlinTokyo California Albuquerque2

4 Max

3

SharmParisBerlinTokyo California Albuquerque2

Average Water Consumption per Guest Night- Liters/GN; 2007 -

450416413

1 Min

Best Practice1Sharm

279149

Greece CaribbeanSharmSpain -Malta


Note: 1) Libert, J.J., Desalination and Energy, Desalination2) Largest city in New Mexico - US. Albuquerque's climate is usually sunny and dry

Source: Quantum Sphere Inc; Governorates Environmental Affairs Office; Caribbean Alliance for Sustainable Tourism; International Tourism Partnership; UNWTO; Sustainable Urban Infrastructure, Siemens, 2008; www.cabq.gov; Booz & Company analysis

(Aegean Islands)

Balearic Islands

Waste management practices in Sharm are significantly below acceptable standards, leading to negative tourist perceptions

Level 5Waste ManagementC

t

e

Level 1

S

o

l

i

d

W

a

s

t

Waste Collection and Transportation

Recycling/ Processin

g

Energy RecoveryDisposal

Waste Optimizati

on Prevention, and

minimization of Collection of

waste in closed Transportation of waste in Sorting and

recycling of Using waste to Disposal of

remaining waste Best-waste at main sources

carts or disposal bags

of waste in closed trucks

recycling of waste generate energyin a sanitary landfill

practice

Current Sharm Baseline

Waste is collected in closed carts and

transported in closed trucks

Dumping in desert in non-

sanitary landfill

q

u

i

d

W

a

s

t

e

2008 Breakdown of Liquid Waste Treatment Capacity

by Methodology46%54%

Minister of Housing issued a decree (no. 44 of 2000) that allows level-2 treated water to be used in irrigation1

In 2002 the Minister of Agriculture issued decree no. 603 allowing irrigation of inedible plants using treated wastewater

Filtration Chlorination


Note: Executive regulations of law 4 of 1994 prohibit the emanation of bad odor from treated wastewaterSource: Governorates Environmental Affairs Office; Law 4 of 1994 and its Executive Regulations; Booz & Company analysis

L

i

q

100% = 42,805 m3/daywastewater However, Red Sea Governor recently prohibited use of

treated waste water in irrigation except after disinfection

Sharm suffers from over-use of diving sites, significant above recommended levels, thus threatening the survival of coral reefs

Summary of Current StateBio-DiversityD

Prices for diving are low and not proactively managed

Regulation & governance are inefficiently applied

Demand is intense and threatening biodiversity

Market Economics Regulations & Governance

Summary of Current State

1 4 6

Sector Overview

Diving fees (USD 9) low versus benchmarks

Advanced divers willing to pay up to USD 18

Distribution of mandates across, MoT, EEAA & CDWS, Coast Guards & Marine Police is creating overlaps in regulation setting and poor enforcement

~80,000 dives and snorkel stops per site - 4x above internationally accepted levels

At current rate, dives expected to reach 172,000 by 2020

No fee plan across sites

Fees not collected consistently

Dive operators are sensitive to demand fluctuations

Capacity is not actively managed Infrastructure (moorings, marinas,

boats) cannot meet forecasted demand in 2015

2

5

Dive operators have high fixed costs ( ~70% ) which makes them sensitive to changes in demand volumes

Reefs are in good health due to their natural structure, yet threats to coral reefs will continue to intensify, mainly due to:

Shoreline construction (frozen)

3


( ) Fishing Desalination sludge

Source: Booz & Company Analysis

In summary, the current rate of environmental degradation in Sharm risks the loss of 16%-35% of tourism revenue in 10 years

Why Sharm Urgently Needs To Change NON EXHAUSTIVE

Tourism Revenuefrom Divers

Potential Loss due to Coral Reef Degradation

Tourism Revenuefrom Sharm

Total # of Tourists in Sharm

Tourists who visit Primarily for Diving

Avg. Companionsper Diver

Total # of TouristVisits at Riskin Sharm

2.3 Mn

x

Primarily for Diving

7 - 15%

per Diver

1.5

x x

Visits at Risk

0.4 - 0.86 Mn

Avg. Spendingper Tourist Stay

$780

Avg. Spending per Diver Stay

$636

Avg. Spending per Companion Stay

$780

Avg. Spend Per Diver& Companion Stay

$726

Total Revenue From Tourism in Sharm

$ 1.8 Bn

Total RevenueFrom Divers

$102-219 Mn

Total RevenueFrom Companions

$189-405 Mn+

Net Revenue at Risk

$ 291 Mn $ 624 Mn(16%) (35%)


Source: Ministry of Tourism, Booz & Company analysis

The Pressing Need for ChangeThe Journey to Becoming a Green SharmThe Journey to Becoming a Green SharmNext Steps


Green Sharm team has successfully completed Phase II project design and with implementation pending

(2 th ) (6 M th ) O G i

Phases of Transformation into a Green Tourism Destination

Completed Completed

Phase IScoping & Target Setting

Develop Green framework for Launch high-priority projects Finalize the implementationK

Phase IIProject Planning & Design

(2 months) (6 Months) On-Going

Phase IIIMulti-year Implementation

Develop Green framework for Sharm

Baseline key environmental components (as-is situation)

Benchmark best practices in other tourism destinations

Launch high-priority projects identified in Phase I

Develop detailed transformation blueprint, e.g. Detail legal and/or regulatory

framework

Finalize the implementation roadmap to become a green destination

Secure public and private commitment

St t d d ll h d

Key Elements

other tourism destinations Identify key gaps in achieving

environmental sustainability Develop green strategy and key

strategic initiatives Develop a multi-year

Detail future investment needs, and study public and private financing opportunities

Outline delivery platform for key environmental components

Structured and well-phased implementation of all individual initiatives identified in Phase I and II

Ongoing monitoring of implementation progress

Develop a multi-year transformation plan

Identify projects that can produce change momentum

Phase and prioritize initiativesIdentify key success factors for

Initiate discussions on relevant public-public partnerships with key stakeholders

Build consumer demand approach to brand, market and promote green tourism in Sharm


Identify key success factors for program delivery

green tourism in Sharm

Outcome of Green Sharm Initiative Phase I was approved by H.E. Th P i Mi i t ith th l f hi 7 k t t b 2020The Prime Minister, with the goal of reaching 7 key targets by 2020

Green Targets for Sharm by 2020

G T t b 2020G C t

Emissions

1 a

Green Targets by 2020Green Components

Coral Degradation (% per year)

Emissions(Ktons)

128

323 5%Hotels Energy

172b

Reduce destination related emissions by 36% compared to business-as-usual.

Reduce Hotels energy consumption per

Water Supply

2 c

Liquid Water C d

323

505

48%

5%

L 1

Consumption(MJ per GN)

172184

212

b Reduce Hotels energy consumption per GN by 13%

Decrease water consumption per guest night for existing hotels by 13%, and for new hotels by 28%

Waste Management

3

d

e

qWasteIndex

Consumed(litres per GN)

L3L2

L 1413

359336

L3

L 120%

Reduction in water wastage in supply network by 75%

Achieve at least level 31) in solid waste management best practice (Level 5 is highest standard)Management

Bio-diversity

4

f

g

Water Waste(%)

Solid Waste IndexL55%

highest standard)

Achieve at least level 2 in sewage treatment best-practice (Level 3 is highest standard)

Reduce the rate of degradation of

Prepared for H.E. The Prime Minister of Egypt 14

y g

1) Level based on qualitative Booz & Company evaluationSource: Booz & Company analysis

gbiodiversity to 5% per year

Long-term Vision 2020 Target Baseline (2008)

Reaching these targets requires undertaking 14 Programs (detailed i t 33 j t ) th t dd ll f (4) i tinto 33 projects) that address all four (4) greening components

Overview of Green Sharm ProgramsEach of the below programs has been further detailed

into a set of 33 Waste1 2 3 4

Green Air Access

Conservation of Bio-diversity

Effective Waste Management

i

ii

iii

interlinked projects Water SupplyWaste

ManagementBio-diversity Emissions

Effective Waste Management

Green Energy Infrastructure

Green Land Transport

Operational Efficiency Improvement for Hotelsvi

iv

iii

v

i

n

g

P

r

o

g

r

a

m

s

Operational Efficiency Improvement for other Buildings

Green Building Design

Green Water Transport

vii

viii

ix

G

r

e

e

n

Resilient Water Supply

Legislation & GovernanceEnabling programs are developed to ensure

implementation and increase effectiveness of all 10 green strategic programs so that all greening

Funding & Financing

Marketing & Branding

x

xi

xii

xiii

E

n

a

b

l

i

n

g

r

o

g

r

a

m

s


components are effectively addressedMarketing & Branding

Awareness & Community Education

E

P

r


xiv

Green Sharm Initiative - Phase II covered 17 projects that focus on i i h bi di it d lid t tpressing issues, such as bio-diversity and solid waste management

1 iiPhase II Project List

Develop Sustainable Diving Management StrategySet Standard for Technology Upgrade of Marine EnginesSet Measures to Reduce Excessive FishingSet Environmental Standards for Water Sports Operators Establish Effective Solid Waste Managementn

g

t

s

Conservation ofBio-diversityBio-diversity

1 ii

iiiEstablish Effective Solid Waste ManagementEvaluate & Develop Recycling PlanEvaluate & Develop Organic Composting PlanEvaluate & Develop Waste-to-Energy Conversion PlanSetup a Bus Rapid Transit System

G

r

e

e

n

i

n

P

r

o

j

e

c

t

Effective Solid Waste Management

Green Land Transport

Waste Management2

vvi

Adopt Green Best Practices in Hotel Operations EfficiencyDevelop Eco-label Certification Program

Operational Efficiencyfor Hotels

Emissions3vi

xi

E

n

a

b

l

i

n

g

P

r

o

j

e

c

t

s

Legislation & Governance

Funding & Financing xii

xiii

Establish Green Council & Green CentreReview & Update Green LegislationCreate Green Funding StrategyInitiate Fundraising CampaignDevelop Tourism Marketing Center


E

Source: Booz & Company Analysis

Marketing & BrandingDevelop Tourism Marketing CenterDevelop Branding & Marketing Strategy

A comprehensive list of funding sources was evaluated to ensure th t ll j t d t l fi dthat all projects are adequately financed

Fund Sourcing FrameworkFinancingS Ch l Financing

ContributionSources Channels

Internal Financing

Green Center Generated Revenues Comments

Internal, or self-financing was Green Fees, Taxes & Fines

Multi-Lateral Orgs&

Intl Govs

Cor-porations

Philan-thropy

National Govern-

ment

Indivi-duals

considered to be the primary source of funding, including:

Green fees, taxes and fines that could be collected (e.g. diving fees)

R

e

v

e

n

u

e

s

R

e

v

e

n

u

e

s

Fundraising

Intl Govs

Special Events

Contributions

Sponsorship / Partnership Other revenue generated by Green Center activities (e.g. training fees)

External funding was considered to:

R

p

Capital Market

Financing

Private Sector EquityEquity Sourcing

Debt

Close gaps in required financing

Fill any cash-flow gaps

Provide supplementary funding (to iti t ti i k)e

r

n

a

l

F

u

n

d

s

e

r

n

a

l

F

u

n

d

s


Financing Debt Sourcing Debt (e.g. loans, bonds)

mitigate revenue generation risk)

E

x

t

e

E

x

t

e


To ensure implementation, about EGP 100 Mn. for must have G P j t f th i 3 ill b d dGreen Projects for the coming 3 years will be needed

Must Have Projects

Description 2010-2012 Funding Requirements (EGP Mn.)

Ensure smooth roll-out of Green Sharm Projects Review and update existing legislations Develop a comprehensive training and educational program Build human resource capabilities of protectorates

Green Center 37.3

p p

Implement Diving & Snorkeling Sustainable Capacity Management Launch desert conservation project and prohibit commercial fishing

Biodiversity 29.3

Develop Branding & Marketing Strategy for Green Sharm Establish a Tourism Marketing Center to coordinates national and international

marketing activities for Green SharmMarketing 17.0

Establish the Green Tourism Fund to secure financing for priority programs Launch fund raising campaign

Green Fund

Launch a comprehensive marketing & communications campaign for Green Tourism

11.0


Launch fund raising campaign


External fundraising is currently being pursued from international d h h d i ifi t i t t i G ff tdonors, who have expressed significant interest in Green efforts

Fundraising Contributions2

Wave 1July - August

Wave 2September - December

GFMECDSolar Power Plant

JBIC

USAID

European Neighborhood Policy

Forum on China-Africa

Establish Green Center

Marine Engines

Solar Power Plant

World Bank

CTF

Forum on China-Africa Cooperation

African Development

Liquid Waste Management

Bus Transit System

Waste ManagementOthers

Bank

French Development Agency

Waste Management

Upgrade Water Supply

Establish Green Center

E t bli h G F d


Agency Establish Green Fund

To ensure success of the Green Sharm Initiative, three (3) key f t d t b dh d tsuccess factors need to be adhered to

Success Factors for Green Sharm Initiative

The pioneering factor of the Green Sharm Initiative is driven by its holistic approach to greening. It is this holistic approach that will give Sharm the global leadership role that is required to attract international funding. As such the initiative needs to be launched in its entirety avoiding inclinations to cherry pick amongst projectentirety, avoiding inclinations to cherry pick amongst project

To ensure commitment and support for the green transformation journey from all relevant Ministries and stakeholders, the Green Sharm Initiative must be sponsored and led by the highest levels of government leadership. As such the establishment of a PPP-style Green Council chaired by the Prime Minister, and comprised of all related Ministers (Tourism, Environment, Aviation, Transportation,, etc.) and private sector leaders (Head of Egyptian Hotel Association and Head of Chamber of Diving and Water Sports etc)Hotel Association, and Head of Chamber of Diving and Water Sports, etc)

To ensure continuity and effective implementation of programs, a small team of dedicated full-time project managers must be assigned to the Green Sharm Initiative. As such the

t bli h t f G C t ti t th G C il i iti l f


establishment of a Green Centre reporting to the Green Council is critical for success

Prepared for H.E. The Prime Minister of Egypt

Documents

Energy Challenges Egypt’s Next Battle