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Our issue today is packed with updates of the EUR billions worth of agreements hammered out during the Egypt-EU investment, news of Act Financial’s results in the first five months of the year, and much more.
BUT FIRST-
PSA- The Local Development Ministry says the new closing hours (10 pm) for shops, malls, cafes, and restaurants will continue through to Thursday 26 September.
In other news:
The new cabinet could assume office as early as this week after the Prime Minister met with 65 potential candidates over the past month, anonymous government sources told local press.
Act Financial reports over EGP 24 million in profits in first five months of 2024
The Clap:
Investment management firm Act Financial — which has set July 23rd as the targeted date for its debut on the EGX — has reported EGP 24.35 million in net income for the five months ending in May.
Revenues:
The company recorded EGP 138.41 million during the period.
Remember:
The firm will price its shares at EGP 2.90, planning to list 32% of its shares.
Business model:
The firm’s strategy is to generate value by investing in Egyptian businesses, channeling their investments toward boosting their portfolio firms’ business operations, gaining market dominance, and sharpening corporate management. After reaching their targets, the company plans to offload their stake in its portfolio companies after an average two-year holding period.
Noteworthy investments for Act Financial:
A minority stake in Beltone Financial from 2015 to 2019.
A minority stake in CI Capital from 2019 to 2020.
A minority stake in “Heliopolis Housing” from 2020-2021.
Powered by their consortium, they acquired the largest single stake in SODIC from 2020 to 2021.
Egypt-EU investment conference wraps with USD 72.4 billion worth of agreements signed
The Clap:
The Egypt-EU investment wrapped on Saturday, seeing EUR 67.7 billion (c. USD 72.4 billion) committed to development projects through 35 agreements and MoUs, mainly in the manufacturing and green hydrogen production front.
First up: manufacturing
El Araby Group’s chief said in an interview with Al Arabiya business his company is partnering with Taiwan’s Rechi, Japan’s Sharp, as well as another undisclosed Japanese company to build a USD 500 million industrial complex in Quesna, Menoufia.
ALSO-
The firm also signed an MoU with German home appliances maker Heller to produce their goods utilizing domestically sourced parts in the fourth quarter of 2024 with a total investment of EUR 70 million during the initial three years of production.
Now onto green hydrogen + renewable energy:
Hassan Allam Holding, UAE renewables giant Masdar, BP, and Infinity Power signed an agreement on the sidelines of the conference to establish a new green hydrogen plant in the Suez Canal Economic Zone (SCZONE) at a USD 12 billion investment ticket, Asharq Business reported. The project is slated for operation by 2034, and will boast an 8 GW electrolysis capacity.
What else?
Belgian energy firm DEME Group signed an agreement with the New and Renewable Energy Authority and the Alexandria Port Authority to establish a green hydrogen and ammonia plant with a EUR 24 billion price tag in Gargoub.
AND-
The Sovereign Fund of Egypt and DAI Infrastructure have agreed to establish a USD 10 billion green ammonia project in East Port Said with output geard for export, Enterprise reported.
Also
An agreement was signed by Egypt’s NREA and the Red Sea Ports Authority with France’s EDF Renewables and Egyptian-Emirati firm Zero Waste for a EUR 7 billion three-phase green hydrogen and ammonia project at Ras Shoukair. The first phase is expected to generate 1 million tons of green ammonia each year.
More:
A green ammonia facility worth USD 4.3 billion will be established in Ain Sokhna by Abu Dhabi’s Ocior Energy They have signed a deal with the SFE for this project at the Port of Ain Sokhna, The plant is mainly serving European markets, meeting the increasing need for environmentally friendly ammonia.
Taqa Arabia and France’s Voltalia will collaborate to construct a USD 3.5 billion green ammonia project at Ain Sokhna, as part of a new agreement with SFE.
The Egyptian Petrochemical Holding Company, Misr Fertilizer Production Company (Mopco), and Scatec and Yara International signed an agreement to produce green hydrogen in Damietta at initial investments of approximately USD 890 mn to initially produce 150,000 tons of green ammonia each year annually at Mopco’s facilities before shipping it to Yara in Norway.
The SFE also signed a contract with Orascom Construction, Scatec, and Fertiglobe for the production of 100 MW of green hydrogen from its Ain Sokhna facility. The trial phase of the plant began in November 2022 with the goal of producing around 13k tons of green hydrogen annually.
Danish company Vestas said it will soon undertake a feasibility study to establish a USD 600 million production plant in Egypt to manufacture wind turbines.
Analyst’s take:
“To me, until these MOUs turn into official agreements and binding contracts, they can only be referred to as “potential”. Once we start seeing one or two MOUs being implemented, we could well see a snowball effect with more MOUs turning into contracts. Granted, companies involved in green energy projects will be key beneficiaries,” Chief Equity Strategist at Rumble Amr Elalfy told us.
Remember:
Egypt wants to position itself as a regional green hydrogen hub, with production targets amounting to 3.2 million annually by 2029 and 9.2 million tons per year by 2040.
IN OTHER Egypt-EU news:
The EU has agreed to extend Egypt EUR 1 billion in macro-financial aid in late 2024, which is the initial portion of a total of 5 billion euros in concessional loans. The initial installment will be provided as soft financing with extended repayment terms and low interest rates.
The Clap:
Egypt experienced a surplus in its net foreign assets for the first time in more than two years.
A first since February 2022:
Egypt’s net foreign assets became positive for the first time since February 2022, with the surplus increasing to almost USD 14.3 billion in May from a deficit of USD 3.7 billion in April, Bloomberg reports.
Remember:
Egypt’s net foreign asset (NFA) deficit contracted by USD 586 million in April, marking the third consecutive month of decline, according to data by the Central Bank of Egypt.
For the CBE:
The Central Bank of Egypt had a surplus of USD 9.7 billion net foreign assets, a significant increase from the USD 763 milion deficit in April. Meanwhile foreign liabilities decreased by USD 5.6 billion, Enterprise notes.
Commercial banks shifted from having a deficit to having a surplus in their net foreign assets, with a surplus of USD 4.6 billion in May compared to a deficit of USD 2.9 billion in April. During the same period, commercial banks witnessed an increase of USD 6.9 billion in their foreign assets, as their foreign liabilities decreased by USD 625 million, according to numbers crunched by the news outlet.
For the banking sector:
“Net foreign assets of Egypt’s banking system have improved by a staggering USD 43 billion since January. International support likely played a role, especially the USD 35-billion mega investment from the UAE. But the scale also suggests portfolio inflows are back.” Bloomberg Chief Emerging-Markets Economist Ziad Daoud said.
Analyst’s take:
This was expected after the USD 35-billion Ras El-Hekma deal, which included an injection of USD 24 billion in fresh cash flows and USD 11 billion in deposits held with the Central Bank of Egypt. This reduces the banking system’s exposure to foreigners, which alleviates pressure on the Egyptian pound and helps reduce the backlog of goods held at ports as well as the payment of dues to international oil companies, “ Amr Elalfy explained.
The Clap:
A source from the Electricity Ministry informed Enterprise on the condition of anonymity that the government has made the decision to delay planned increases in electricity prices from the rumored date of July until September. The source mentioned that the government has delayed enacting the increases until the electricity crisis is solved.
This comes as dwindling gas supplies amid a summer heatwave drove several fertilizer companies including Abu Qir and Sidpec to shutter their doors for the second time this month, and cabinet to reinforce closures for commercial stores at 10 PM.
Remember:
The state is prepping a strategy to entirely slash electricity subsidization over the next four years, after delaying the phaseout strategy from an initial 2019 deadline. The government said in 2022 electricity subsidies will cost the treasury EGP 76 billion by 2027.
Why this matters:
Ending energy subsidies is one of the IMF’s demands to unlock the USD 8 billion loan program. The IMF called on the government to control “unaffordable energy subsidies” and fuel prices in compliance with the prices mandated by the automatic fuel pricing committee, and channel spending instead toward social support programs.
Analyst’s take:
“The rationing of power usage can help reduce the country’s need for natural gas required to operate the power stations. However, this is only one side of the story, where costs can be reduced but on the other hand economic activity can be negatively impacted, especially in the retail and food & beverages sector which play an important role in the country’s consumption and hence GDP. That said, I believe the impact from this decision on companies listed on the EGX will be limited to companies with exposure to the retail and food & beverage sectors, like Raya Holding [RAYA] which has a subsidiary in that segment, namely Raya Restaurants, but it is a minor contributor to RAYA’s revenues and profits,” Amr Elalfy told us.
What else is clapping?
BDO Key Financial Consulting, an independent financial advisor, has valued Elsewedy Electric at EGP 112.1 billion. This assessment is based on Electra Investment Holding’s bid to purchase a 24.5% stake in the company, at EGP 52.38 per share.
Egypt Kuwait Holding’s Alexandria Fertilizers Company (AlexFert) has become the latest in a string of fertilizer production firms to close its plants amid a shortage in gas feeds.
Egypt’s foreign debt dropped by USD 7.4 billion to USD 160.6 billion during Q1 2024, compared to the USD 168 billion reported at the end of 2023.
Misr Chemical Industries saw its net profits rise 18% YoY in the first 11 months of the fiscal year to EGP 593.5 million on the back enhanced investment income and currency difference gains.
Sovereign Fund of Egypt CEO Ayman Soliman told Al Arabiya Business that government-owned service and fintech companies will start offering shares in IPOs in October.
Egypt expects to increase its merchandise exports 8% You in the first half of 2024 to USD 20 billion.
EFG Corp-Solutions has issued EGP 433 million of short-term notes, attracting a diverse range of investors, including asset managers, insurance companies, and a corporate client, it said.
Eastern Company has agreed to sell the plot of land, buildings and equipment in the industrial complex it owns in Sixth of October dubbed “Factory no. 9.”
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