Green bonds soon?
Plus: El Sisi inaugurates ERC and Naguib may be eyeing United Bank

Good morning, friends. It’s a moderately light news day, so what better way to get started than to recognize members of our community whose hard work is being recognized on the regional stage?

KUDOS #1- Our friends at CIB, Sodic and EKH have taken home prizes from the 2020 Middle East Investor Relations Association Awards. CIB was named leading corporate for IR in Egypt, while Sodic took home the prize for best print annual report in the region. EK Holding’s Haitham Abdel Moneim, meanwhile, was given the nod as best investor relations professional in Egypt. You can tap or click here to catch the full list of winners (pdf).

KUDOS #2- The 2019 IPOs of Rameda and Fawry are on the short list for the International Financial Law Review’s “equity transaction of the year” in the Middle East, competing against Aramco’s blockbuster listing. Rameda went public on the Egyptian Exchange late last year, while Fawry went out in late summer. Nominees for Rameda include Matouk Bassiouny & Hennawy, Al Tamimi, Clifford Chance and Norton Rose Fulbright. Meanwhile, Zaki Hashem & Partners and Zulficar & Partners share the nomination for Fawry.

Also getting nods: Zaki Hashem and Matouk Bassiouny are nominated for their work on the acquisition of diagnostics network Metamed from Gulf Capital by a consortium led by Mediterrania Capital Partners. Every lawyer and their pet beagle who touched a part of the Uber-Careem merger has gotten a nomination. Mahmoud Bassiouny is a finalist for managing partner of the year and EFG Hermes is on the list for in-house team of the year (investment banks).

Short-listed for Egyptian law firm of the year: Zulficar & Partners, Zaki Hashem & Partners, Shalakany Law Firm, Sarie El Din & Partners, Matouk Bassiouny & Partners, Helmy Hamza & Partners, Al Tamimi & Company. The full shortlist is online here for your viewing pleasure.

Egyptians abroad have until 10 October to register to vote in the upcoming parliamentary elections. Expats from 14 governorates will go to the polls on 21-23 October in the first phase of voting while the remaining governorates will vote on 4-6 November. Voters abroad will need to register via the National Election Authority’s (NEC) website to cast a ballot. Check out our calendar below for a reminder on which governorates vote when.

The election authority released a preliminary list of candidates in the early hours of this morning. Those who have failed to make the list have three days to appeal, before the Administrative Court deliberates for another three days. The final list of candidates will be announced on 5 October.

EFG Hermes’ virtual investor conference is in its final stretch: The conference, where more than 650 institutional investors with aggregate AUM north of USD 17 tn with top listed companies are chewing over the prospects for frontier and emerging markets, is set to wrap this Thursday, 1 October. You can visit the conference website here.

The Health Ministry reported 104 new covid-19 infections yesterday, down from 111 the day before. Egypt has now disclosed a total of 102,840 confirmed cases of covid-19. The ministry also reported 14 new deaths, bringing the country’s total death toll to 5,883. We now have a total of 102,840 confirmed cases that have fully recovered.

EgyptAir will resume direct flights from Cairo to Oman, Jordan, Rwanda, South Africa and Uganda next month, Sky News Arabia reports. A source at the national flag carrier said that it would start 2x weekly flights to Muscat on 1 October, 2x weekly flights to Amman from 4 October, one weekly flight to Kigali from 8 October, as well as two to Johannesburg and one to Entebbe from 9 October. There will also be three weekly flights between Alexandria and Dubai as of 9 October.

The Czech Republic intends to restart direct flights to Egypt from 1 October, the country’s ambassador to Egypt told Tourism Minister Khaled El Enany.

Americans will likely have to wait until 3Q2021 for any covid-19 vaccine to make a serious impact on the course of the pandemic, even if companies begin disbursing vaccines before the end of the year, the US’ top virus expert Anthony Fauci said, according to Bloomberg.

Meanwhile, China has already begun administering three unproven covid-19 vaccines to government officials and those it considers to be essential workers, in spite of potential risks and unknown side-effects, the New York Times reports.

Europe’s offices and schools are inching back to business as usual — but entertainment services still lag behind: Public transport use is on the rise across Europe as schools are reopening, allowing more parents to head back into offices more frequently. But footfall to leisure venues like movie theaters, bars, and hotels have taken yet another hit as covid-19 case numbers go up, putting a damper on earlier signs of a recovery in these industries, the Financial Times reports.

Emerging-market investors are on edge as volatility rises: Developing-nation stocks, currencies and bonds come out of their worst week since the height of the pandemic in March, amid concerns over renewed lockdown measures and delays to further U.S. fiscal stimulus, Bloomberg reports. With investors braced for higher price swings around the US election in November, Deutsche Bank is taking a “defensive stance” on EM debt amid a potential selloff in risky assets.

Goldman Sachs has a favorite EM currency for the post-covid carry trade — and it’s not the EGP. The Mexican peso is the emerging-market currency to count on as the most attractive for the carry trade “once the dust settles” from the pandemic, Goldman Sachs analysts wrote in a research note picked by CNBC. “The South African ZAR and Russian RUB were also named by the investment bank as EM currencies to watch.

NMC enters administration in the UAE: Troubled Emirati healthcare firm NMC has been placed in administration, allowing it to meet September salaries by securing an additional USD 325 mn in funding, the Financial Times reports. The UAE’s largest private healthcare provider was brought to the edge of collapse earlier this year after an internal investigation revealed evidence of fraudulent accounting involving USD 4-5 bn in undisclosed debt.

Trump’s TikTok ban blocked by US court — for now: A US judge has blocked the Trump administration’s move to ban TikTok downloads from app stores, the Wall Street Journal reports. The ruling gives Chinese parent ByteDance a few more weeks to secure approval from US regulators for its agreement with Oracle and Walmart that would see the two US companies take shares in a separate US-based entity.

US ELECTION WATCH- The New York Times is out with a carefully-timed info dump on Trump’s secret tax affairs: Less than 48 hours before the first presidential debate, the New York Times has finally given the world a glimpse into what King Cheeto (Cheato?) has steadfastly refused to disclose: his tax affairs. Among the key takeaways: He paid zero taxes in 11 of 18 years examined; in 2016 and 2017 he paid only USD 750 (no, we’re not missing a few zeros there); large losses in some of his signature businesses, notably his golf courses, have helped him lower his taxes; he enjoys tax deductions on what most would consider personal expenses – including residences, aircraft and over USD 70k in TV hairstyling – while enjoying a lavish lifestyle.

True to character, Trump blasted the report as “totally fake news” during a presser, Bloomberg reports.

*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: As an increasing number of Egyptians look to foreign universities, can Egypt’s internationalization strategy persuade them to take another look at local institutions?

The grand opening of the Egyptian Refinery Company’s Mostorod petrochemical complex yesterday was the top story on the talk shows last night. Consumer protection, school fees and the auto market also got a look-in on a night that was otherwise dominated by the refinery.

Qalaa Holdings Chairman Ahmed Heikal took a victory lap last night as he celebrated keeping the USD 4.3 bn ERC on track through the global financial crisis, the 2011 revolution and the Morsi interregnum. Heikal spoke with Al Hayah Al Youm’s Lobna Assal (watch, runtime: 15:43), Masaa DMC’s Eman El Hosary (watch: runtime: 8:19), El Hekaya’s Amr Adib (watch, runtime: 3:20), and Salet Al-Tahrir’s Azza Moustafa (watch, runtime: 3:18) about the inauguration of the complex by President Abdel Fattah El Sisi. Among the takeaways:

• A fair price for gas: Heikal called for a reduction of gas prices to USD 3.8-4 mmBtu for industry and said the inauguration of the refinery makes it clear there is a place in the economy for the private sector.
• Heikal praised the Sisi administration’s response to covid 19, singling out programs to cushion the economic and human impact of the pandemic by cutting interest rates, allocating EGP 100 bn to support the economy, and disbursing emergency payments to day laborers.
• Qalaa scholarships: Heikal said that in addition to a large-scale program that sends students abroad for graduate degrees, Qalaa has 30 scholarships for outstanding high school students from Mostorod (the area in which ERC is based), sending them to universities such as the American University in Cairo, Nile University and Zewail City of Science and Technology.

A step toward energy independence: Assal also spoke with Medhat Youssef, the former deputy head of the state-run Egyptian General Petroleum Corporation, who noted that ERC will help Egypt sharply reduce its imports of refine petroleum products — and said there are plans to establish other refineries in areas similar Mostorod, which was home to an existing refinery that ships feedstock to ERC. He added that Egypt intends to reach self-sufficiency in diesel and be in a position to export gasoline and jet fuel by 2023 (watch, runtime: 9:31).

Demand slump continues in car industry: Adib phoned Khaled Saad, the secretary general of the Automobile Association, who said that the car prices this year would be “different” because of covid-19, without elaborating (watch, runtime: 2:34). Saad stressed that there is currently low demand for new vehicles — but a pickup in demand for used cars (watch, runtime: 1:16).

Another person who popped up in several places yesterday was Consumer Protection Agency head Ahmed Samir Farag, who appeared on Al Hayah Al Youm (watch, runtime: 21:11) and El Hekaya (watch, runtime: 3:03) to discuss the agency’s work (watch, runtime: 3:39) and the ongoing dispute over school fees. The agency will investigate parents’ complaints over school fees at international and private schools in light of covid-related closures and amendments to curriculums, Farag said, adding that 75% of schools have so far refunded bus fees.

Egyptian Refinery Company’s Mostorod petrochem refinery is inaugurated: Qalaa Holdings subsidiary Egyptian Refining Company’s (ERC) USD 4.3 bn facility in Mostorod was inaugurated yesterday by President Abdel Fattah El Sisi. As the largest private sector project of its kind in Africa, the refinery will produce each year some 2.3 mn tonnes of diesel fuel and 860k tonnes of high octane fuel as well as jet fuel and butane, Qalaa Chairman Ahmed Heikal said at the inauguration (watch, runtime: 11:03). The facility is expected to result in a USD 600 mn-1 bn reduction to Egypt’s annual import bill that had previously been earmarked for petroleum products that ERC is now producing, Heikal said. ERC became fully operational in September 2019 and, by using modern technologies, will help substantially lower Egypt’s carbon and sulfur dioxide emissions.

You really should take a tour of ERC with Heikal — we had that pleasure just as the refinery was nearing completion, and the place is staggering. You can watch a video Heikal produced (runtime: 6:52) with great drone footage in which he explains that the idea is to take “low value products produced by the Cairo Oil Refining Company and turn them into high value distillates that the market currently needs.”

Speaking at the inauguration, El Sisi lauded Qalaa and ERC for the project’s contribution to the economy, stressing the importance of private sector involvement in large-scale projects that spur growth.

El Sisi used the occasion to promise he would extend an emergency stipend for day labourers. The EGP 500 monthly stipend will run through the end of the year, El Sisi said (watch, runtime: 2:46). The government had first said in March it would dish out a one-time EGP 500 payment to seasonal workers as compensation for lost income from the pandemic, before deciding in April to continue disbursing these payments for three months.

Also from the president’s speech yesterday:

• El Sisi warned of a potential covid-19 second wave, urging citizens to remain vigilant and avoid falling into a false sense of security.
• He briefly took note of limited demonstrations last week and reiterated his call to citizens not to heed “false claims” (watch, runtime 2:12)
• The president called on the government to resolve settlements of building code violations, end its six-month construction ban, and announce new building criteria as quickly as possible.

Egypt will soon go to market with its first maiden sovereign green bond, Finance Minister Mohamed Maait said yesterday, saying the ministry was “preparing to launch” the offering. Maait stopped short of offering guidance on timing, but had said in July that the USD 500 mn offering was in “advanced stages.” The Madbouly government has positioned the bond as the first sovereign green issuance in the region.

What’s a green bond? Funds raised from green bonds are typically used to finance green and environmentally friendly projects. Egypt currently has a portfolio of USD 1.9 bn-worth of green projects in the pipeline, including pollution reduction initiatives, renewable energy projects, low carbon transport, and sustainable water management systems. Bloomberg also had the story.

The planned issuance comes as part of the government’s broader debt diversification strategy that will see the government offer green bonds, sukuk, eurobonds, and potentially zero-coupon bonds to capture a wider investor base and shift the government’s budget financing towards longer-term borrowing. The strategy is meant to reduce our reliance on short-term debt instruments to plug fiscal deficits and help reduce the annual debt servicing bill to 20% of GDP and raise long-term debt to constitute some 52% of borrowing by June 2022.

And it’s not just sovereign green bonds that are in the making: CIB is expected to issue the country’s first corporate green bond issuance next month. The USD 65 mn offering will see the International Finance Corporation snap up the first tranche of the five-year bonds.

M&A WATCH- Is Orascom Financial eyeing the United Bank of Egypt? Orascom Financial Holding (OFH) could look at acquiring a controlling stake in the United Bank of Egypt in what could be the newly formed company’s first acquisition and foray into the country’s banking system, Orasom Investment Holding (OIH) Chairman Naguib Sawiris told Hapi Journal. Sawiris didn’t explicitly say he was going ahead with a bid, noting just that United Bank would within OFH’s price range more than the Lebanese banks currently up for sale — Blom Bank and Bank Audi — which will likely cost somewhere between USD 600-900 mn. Naguib’s son Onsi — who will play a leading role in OFH — had told Enterprise last week that the company has yet to make any decisions on its investment plans and is still working on a strategy that it will announce by the end of the year. OFH was created through a demerger earlier this month (OFH) to manage Orascom’s financial investments.

Naguib has for more been looking for a way into the nation’s banking industry, but has been rebuffed by successive central bank governors. Sawiris confirmed in 2017 that he had been rebuffed in his quest for a banking license, saying that “if the governor of the Central Bank of Egypt gives me a license for a bank, I’ll open it tomorrow.” Naguib has since said he would like a license to open an SME-focused lender and has pushed ahead since 2015 with a foray into non-bank financial services that has seen companies he controls acquire significant stakes in investment bank Beltone and consumer and structured finance player Sarwa.

Separately, OIH is looking at other new ventures in the transport and logistics industries, including multipurpose transport projects on offer from the Transport Ministry, Naguib told Hapi Journal. OIH is waiting on these projects to be opened up to the private sector, he said, without providing further details.

Background: The sale of United Bank — which is 99% owned by the Central Bank of Egypt (CBE) — was reportedly put on hold earlier this year as the pandemic delayed the completion of the due diligence. CBE Governor Tarek Amer had said last year that the sale was moving forward, after tapping EFG Hermes and New York-based Evercore to act as advisors. The CBE had first announced in 2017 its intention to sell the bank to a strategic investor.

M&A WATCH- Turki Al Shikh, state-owned Estadat and an unnamed Gulf buyer are competing for MCDR’s stake in Makkasa Sport: Saudi investor Turki Al Sheikh, Estadat Holding and an unnamed Gulf buyer are all in the running to acquire Misr for Central Clearing, Depository and Registry’s (MCDR) 71% stake in Misr Lel Makkasa SC owner Makkasa Sport, Al Mal reports, citing unnamed sources close to the matter. Al Shikh, the former owner of Pyramids FC, could make an offer in the coming days, according to the sources. State-owned Estadat — which was founded last December and owns a 51% stake in Presentation Sports — is also a contender in the acquisition as it looks to expand its portfolio with the purchase of a sporting club.

Background: MCDR has already rejected a USD 2 mn offer from a Gulf investor, valuing the company instead at more than USD 2.5 mn, the sources said. MCDR abandoned its plans to IPO Makkasa Sport earlier this year in a bid to focus its strategy.

The cement industry is calling for gov’t intervention to save crippled sector, saying it is time for the state to explore “radical” solutions, Al Shorouk reports. The call came during a meeting of the Cement Division of the Federation of Egyptian Industries, during which division head Medhat Stephanos claimed that the sector is facing a 40 mn-tonne shortfall in demand this year. Demand is likely to come in at around 43 mn tonnes this year, compared to 83 mn tonnes of supply, he said. This is only a slightly grimmer prospect than the one offered by Arabian Cement earlier this month, which forecast demand to fall to 45 mn tonnes this year from 49 mn tonnes in 2019.

Background: Things have gone from bad to worse for the cement industry since a supply glut began in 2016. The inauguration of a large state-owned cement factory in 2018 intensified preexisting supply issues, quickly leading to several companies suspending operations, some temporarily but others permanently. Now, with demand taking a further hit thanks to the covid-19 pandemic and the government’s six-month ban on construction permits, six more producers are apparently on the verge of collapse. You can read our deep dive into the cement industry from earlier this year, when prospects for the sector already looked bleak.

MOVES- Kamal Negm is staying on as the head of the Customs Authority until his legal retirement age or a suitable replacement is found, according to a decision from Finance Minister Mohamed Maait carried by Al Mal. Negm has been serving as head of the Customs Authority since 2018.

Who knew solar parks could be so visually attractive? CNN is out with a photo gallery of the world’s biggest solar projects — including Egypt’s massive Benban park (pictured above).

There’s not much going on in the pages of the foreign press this morning: The Associated Press reports that Egyptians have been pushing ahead with their wedding plans despite the covid-19 ban.

Gold’s relationship with the stock market is changing: Historically, gold prices and the performance of the US stock market have an inverse relationship — investors pile into the safe haven asset when markets decline, while a stock rally typically drives down the price of the metal. This traditional wisdom hasn’t quite held true over the past few months, which have seen the stock market jump and fall without resulting in significant price shifts in gold. According to Bloomberg’s QuickTake, gold needs more impetus to see its price rise, such as lasting inflation or a declining USD (watch, runtime: 01:03).

Leading diplomatic coverage this morning: Egypt will host a Libyan peace conference in the first half of October that will bring together political figures and tribal representatives, El Mogaz reports, citing Hassan Mabrouk, a member of the conference’s organization committee. Mabrouk called for the release of detainees from the former government of Muammar Al Gaddafi, including his son Seif, so that they are able to participate in the inclusive discussions. The report did not specify whether representatives from the Tripoli-based Government of National Accord — which opposes the Egypt-backed eastern commander Khalifa Haftar — will attend the event. Egypt has been one of the countries leading efforts to end the conflict, launching a parallel initiative to the UN-backed talks in June dubbed the ‘Cairo Declaration’ that would see foreign mercenaries put down their weapons and leave the country.

Shoukry talks Libya, Palestine with Pompeo: Foreign Minister Sameh Shoukry discussed efforts to end the conflict in Libya and developments in Palestine with US Secretary of State Mike Pompeo during a phone call yesterday, the ministry said in a statement, without giving much away.

There’s export news aplenty: The General Organization for Import and Export Control is considering reducing fees for customs certificates, as well as easing the procedures to obtain permits, following a call by a group of exporters last week, the local press reports. The agency is planning to meet again in a week’s time to discuss the proposals, the report adds.

The government will pay out before the end of the year overdue subsidies owed until the end of September in a single lump sum, rather than spacing out the payments over four to five years, a Finance Ministry statement said on Sunday. Exporters last week agreed to take a 15% haircut on their arrears as a condition of receiving the payouts this year. Exporters who choose to receive the full amount will be paid out under the original timeline.

Also worth noting this morning:

• The World Bank is out with an update on its USD 500 mn Sustainable Rural Sanitation Services project in the Nile Delta launched in 2015, which has helped one of the six local companies implementing the project increase its share of wastewater plants to 55% from 9% by improving maintenance management, according to a press release. In the coming period, the program will focus on implementing contracts to build household sanitation connections.
• The US Department of Energy is allocating USD 1 mn to the International Atomic Energy Agency to improve radiation therapy used to treat Egyptian cancer patients, the State Department said (pdf) said on Wednesday.