CI Capital snags Enppi IPO

It’s MPC day: Expect the central bank’s monetary policy committee to keep interest rates on hold when it meets later today. Nine out of 10 economists surveyed by Reuters expect the bank will hold the overnight deposit rate at 16.75% and the overnight lending and discount rate at 17.75%. Beltone Financial sees a resurgent EGP as keeping downward pressure on inflation, which should continue to rise.

New electricity prices coming today: Electricity Minister Mohamed Shaker is expected to announce new electricity prices in a press conference today, Al Mal reports. The new formula, which will be applied on July bills, is expected to raise prices by 20-40% across the different consumption brackets, which might be trimmed down to four from seven currently. Only customers in the highest consumption tier (consuming 1,000 KW or more) will be paying a higher price than the actual cost of production at EGP 0.97 per KW, Shaker had said last month, explaining that profit generated from the highest-volume customers will be used to partially to cover the subsidy for the lowest consumption bracket. The hike is expected to reduce the state’s electricity subsidy bill in FY2017-18 to c. EGP 50 bn from EGP 82 bn, sources close to the matter tell AMAY.

The House of Representatives is off for its summer recess, which started today. It is left to President Abdel Fattah El Sisi to determine when the next session will commence. We imagine heated debates which could have turned into fist fights in MPs respective households on where to vacation.

The Qatar Smackdown looks set to be renewed for a new season, as the foreign ministers of Egypt, Saudi Arabia, Bahrain and the UAE denounced the regional pariah’s response in a press conference yesterday (watch, runtime 33:07). Qatar “responded in the negative” to its Arab neighbors’ demands, said Foreign Minister Sameh Shoukry without actually stating what its response was to the 13 demands. The quartet will continue their economic and political blockade on Qatar until Doha acquiesces to its neighbors’ demands, Saudi Foreign Minister Adel Al Jubeir said at the press conference. Al Jubeir also said the four countries have the sovereign right to take further actions whenever they see fit, but the ministers stopped short of announcing any such measures yesterday. The Saudi FM also noted that Turkey said it would adopt a neutral position in the rift. Bahraini FM Khalid bin Ahmed Al Khalifa said the Gulf Cooperation Council has yet to discuss suspending Qatar’s membership in the council.

President Abdel Fattah El Sisi and US President Donald Trump also discussed the situation with Qatar during a phone call yesterday, according to a White House statement.

Despite the external pressure, Doha will likely stick to its economic guns. Especially considering that ExxonMobil, Royal Dutch Shell, and France’s Total are all courting the small Gulf state to get a piece of its recently announced LNG production expansion, Reuters reports. “The companies already have large investments in countries on both sides of the dispute, and are keen to remain neutral” in the spat between Qatar and its Arab neighbors, the newswire says.

You can now fly to the US with your laptop on board from Dubai, as Emirates Airways was given the clear by the US Department of Homeland Security, Bloomberg reports. Emirates’ reprieve leaves Qatar Airways behind as the only major airline the ban still applies to, on top of being subjected to airspace bans from its neighboring countries. No word yet on flights from Egypt.

If what we’re hearing is correct, your weekend commutes could get a whole lot worse: Ahram Gate is stating that the Sixth of October bridge will be partially closed every weekend for a month for development work. Work will take place in the direction from Nasr City to Ramsis Square from Thursdays at midnight, till Sundays at 6 am. This runs from today till Friday, 4 August. One lane will be open for traffic.

Supply Minister Ali El Moselhy will be meeting with food producers and distributors next week to negotiate ways to keep shipping and transport costs low. This comes as the Interior Ministry is reportedly leading its own price control initiative to help keep commodity prices low in light of the government’s recent hike in fuel prices, Al Shorouk reports. Members of the Federation of Egyptian Chambers of Commerce met yesterday with the head of the ministry’s Commodities Investigation Unit to discuss ways to hold back inflation.

On a related note, the government will not be raising med prices again this year, Health Minister Ahmed Rady tells Al Borsa. It’s unclear whether the minister is referring to the fiscal year or calendar year of 2017. Pharma companies have been haggling for a sitdown with Rady to discuss further hikes to med prices, following the 30-50% increase instituted in January, under which they had been promised a second hike in August, says Gamal El Leithy, a member of the Federation of Egyptian Industries’ pharma division.

The Qatari saga was front row and center on the airwaves last night.

Qatar’s response to the Arab nations’ demands was “passive and devoid of content,” showing no indication the country is willing to concede, Foreign Affairs Minister Sameh Shoukry told Amr Adib on last night’s Kol Youm. Shoukry stressed that the Arab states are not willing to compromise on their demands (watch, runtime: 20:27).

People were expecting a more action-driven response from Qatar, Emirati political analyst Jassim Khalfan told Masaa DMC’s Osama Kamal. The four Arab states’ comeback, however, was “wise” and shows that they have the best interests of the Qatari people at heart, as made evident by the fact that there was no escalation yesterday, he added (watch, runtime: 5:07).

Kuwait is now stuck between a rock and a hard place and might find itself having to retreat from its mediatory role to join the Qatari ban, Emirati political science professor Abdul Khaleq Abdullah told Dina Zahra, who is filling in for Lamees Al Hadidi on CBC’s Hona Al Asema (watch, runtime: 11:04).

On Yahduth fi Misr, political analyst Mostafa El Fekki told host Sherif Amer that he expects the crisis to ease soon before any escalatory measures are taken.

Amer then moved on to talk to Electricity Ministry spokesperson Ayman Hamza about the new prices that will be announced today. Hamza also told Amer that the government has a five-year plan to convert all electricity meters to prepaid ones.

IPO WATCH – CI Capital-led consortium snags Enppi IPO: A consortium led by CI Capital was tapped by the government as lead managers and bookrunners of the listing of energy company Enppi — the first IPO of a state-owned company in 12 years. The consortium also includes Jefferies International Limited and Emirates NBD Capital Limited, according to a statement from the Investment and International Cooperation Ministry. Investment and International Cooperation Minister Sahar Nasr told Reuters that shares in Enppi would be traded in 4Q17. The government hopes to raise up to USD 150 mn from the listing of up to 24% of the company, which will pilot the government’s IPO program of state-owned enterprises in which it aims to raise around EGP 5-7 bn this fiscal year. The program will take place over the next three to five years. The story is also receiving detailed coverage on Bloomberg.

“Proceeds of the sale will be used to bolster investments and expansions in the state energy sector,” said Oil Minister Tarek El Molla, adding the Enppi was the most ideal energy company to lead the IPO program.

Among other assets slated for sale is Banque Du Caire, the third-biggest state-owned lender. The government has yet to decide on how much of the bank to put on offer in the IPO, which will be managed by EFG Hermes and HSBC. But there were previous reports that it was considering an international offer to institutional investors of 29% and a domestic offer to retail investors on the EGX of 15%, while 5% of the company’s shares would trade as global depositary receipts on the London Stock Exchange. The Middle East Oil Refinery (MIDOR), has also been slated for an IPO.

In other CI Capital-related news, CIB announced the sale of 9.99% of CI Capital in a regulatory filing on Wednesday. CIB will retain a minority stake of 13.46% of CI Capital for the time being. CIB had sold a 74.75% stake in the investment bank to a group of investors which included Arafa Group’s Alaa Arafa and CI Capital’s management team.

Egypt’s net FX reserves grew a measly USD 180 mn to USD 31.3 bn in June, up from USD 31.1 bn in May, the CBE said in a statement. The growth was one of the smallest month-on-month gains in net FX reserves since the CBE floated the EGP back in November.

…On the flipside, CBE Governor Tarek Amer confirmed in an exclusive to Enterprise that Tuesday saw FX inflows hit a single-day record of USD 704 mn. We had noted reports yesterday that the figure amounted to USD 618 mn. Other CBE sources tell Al Masry Al Youm that Monday’s inflows had reached USD 420 mn, for a total of USD 1.1 bn over those two days. A report by MENA news agency citing CBE officials on Monday had noted that inflows since the EGP devaluation had hit USD 54 bn. It would appear that these record numbers had been behind the rally in the EGP which began on Monday. A spike in demand for the EGP had seen Banque Misr draw in its own single-day high of USD 75 mn, said bank chairman Mohamed El Etreby, according to Al Ahram.

The worst is now probably over for Egypt, with Egypt’s economy looking set to accelerate in FY2018-19, according to a report on MENA economies by Capital Economics (pdf) which came out on Wednesday. The research firm forecasts GDP growth in 2019 to reach 5.3%, up from 4.3% in 2018 and 2.5% in 2017. The inflows which flooded into Egypt since the EGP growth had been the primary driver of this growth in the economy, which will be coupled with further fiscal tightening to rein in the large budget deficit and bring down the public debt-to-GDP ratio. A rise in the value-added tax (VAT) rate and further subsidy cuts will play a role in this recovery.

As for inflation, Capital Economics expects this to drop over the next 11-12 months, with consumer inflation falling to 29% in 2017, and to 12.5% in 2018, before dropping below the 10% mark in 2019 to 8.5%.

The firm’s outlook on the region is also positive, saying that the slowdown in MENA should bottom out in the second half of the year, with growth averaging 2.5% for the year. A notable exception would be Saudi Arabia, whose economic contraction is expected to continue. Morocco is likely to be the region’s top-performing economy, according to the report.

Separately, the EGP float had also contributed to Egypt being the third biggest market for contract awards in the MENA region in 2016, despite recording a 23% drop in the value of main contract awards, a report by Middle East Business Intelligence (MEED) said on Wednesday. Egypt signed USD 18.4 bn worth of contracts during the year, beating ou GCC countries like Qatar and Kuwait with only the UAE and Saudi Arabia signing more. Top contracts for last year were the Zohr field, the Dairut power project, and the Cairo Metro. MEED anticipates that the biggest growth in new contracts this year is likely to come from construction, with USD 129.4 bn of projects in the pipeline. The next biggest sectors are power, with USD 117.4 bn, and transport, with USD 57.4 bn.

The House of Representatives has finally approved the long-awaited Natural Gas Act without any amendments, Al Shorouk reports. The 53-article legislation would deregulate the natural gas market and leave the state to play the role of regulator. The law — which will allow the private sector to trade gas using the state’s infrastructure and pipeline network and establish a new authority to regulate and monitor the market — had been gathering dust since 2015, with a number of companies already having applied to import natural gas and had been waiting on the law. This should be welcome news for everybody.

MPs also signed off on the new Mineral Resources Act, according to Ahram Gate. Under the new act, we should be seeing reduced fees and royalties on quarries and mines, unified license procedures and fees, reducing the time it takes to obtain permits for mining in Sinai, according to earlier reports. Very little by way of detail on the law has emerged.

The House also approved amendments to the Police Act that reduce the minimum age of joining the force to 19 from 23 years currently and make it easier for women to join. Additionally, MPs also sanctioned a number of international agreements, including:

• A EUR 345 mn agreement for the Gulf of Suez wind farm with the European Investment Bank, Germany’s KfW, the French Agency for Development, and the EU;
• A KWD 18.5 mn agreement with the Kuwaiti Fund for Development for the Port Said water desalination plant;
• A USD 560k grant from the African Bank for Development for slum rehabilitation;
• An EUR 800k grant from Italy to renovate Cairo’s museum of Islamic art;
• An economic cooperation agreement with Djibouti.

House’s talks on Investment Act regs postponed indefinitely: With that busy schedule, the House’s Economics Committee was left with no time to discuss the the Investment Act’s executive regulations before adjourning their session for the summer. Luckily though, the government is not obliged to wait for MPs to return before issuing the regulations, which should be out in August, according to Prime Minister Sherif Ismail’s earlier statements. Surprisingly, the House’s committee on housing has decided to postpone its break a little while longer to discuss the new building code and a legislation for building code violations. Bon Voyage MPs

Ride-hailing Apps bill misses the whole point of the share economy: It looks like the share economy model for ride-hailing apps is effectively dead under the Ride-hailing Apps Act, as the legislation appears to turn freelance drivers who pick their own hours and buy their own cars into paid employees with benefits. The law — which was approved by the Ismail cabinet in April — limits working hours for drivers to seven hours a day, unnamed government officials tell Al Borsa. Drivers will also have to obtain professional permits and badges for their vehicles. The law will also seek to set a standard base fare for all rides. Previous reports had stated that the law may include provisions for on-demand group transport on micro-buses. No word has yet been said about reports on ride-sharing companies having to divulge user data to the government.

The law comes as the industry is expected to see more growth. A new ride-hailing app for white taxis, Professional Taxi, is also set to launch this month on iOS and Android, the company’s CEO Mahmoud Ahmed says, Al Borsa reports. Meanwhile, Careem is looking to double its number of drivers in Egypt to 100k by year’s end, the company’s co-founder and CEO Mudassir Sheikha tells Al Mal.

Prime Minister Sherif Ismail formed yesterday a committee to review amendments to the Traffic Law that would incorporate tuk tuks into the official system and regulate their operations, Ahram Gate reports. As we had noted yesterday, Oil Ministry officials are blaming the delayed roll-out of fuel smartcards on issues with regulating tuk tuks.

Investment and International Cooperation Minister Sahar Nasr has finished laying out Egypt’s investment roadmap, Al Ahram reports. The plan will be updated regularly as new opportunities become available, Nasr said, but currently includes 600 new projects across different sectors that the government intends to pitch to local and foreign investors. New Valley got the lion’s share with 150 investment opportunities, followed by Fayoum with 40, and Qena with 24.

Nasr had also signed yesterday a USD 200 mn agreement with the Arab Bank for Economic Development in Africa to support Egyptian investments in Africa (BADEA), according to a ministry statement (pdf). Nasr signed the agreement with BADEA Chairman Youssef Albassam, who lauded Egypt’s economic reform program and recent improvements to its business climate. Separately, the SME Development Authority (which replaced the Social Fund for Development) is set to secure a USD 50 mn loan from the Arab Fund for Economic and Social Development within days, the authority’s executive director Nevine Gamea tells Al Mal.

Egypt is planning to cut down on yellow corn imports during FY2017-18 to 7 mn tonnes, down from 8.5 mn tonnes during the previous year as local production rises, Agriculture Minister Abdel Moneim El Banna said, Reuters reports. The government will purchase each tonne of corn for EGP 3,400 this fiscal year, up from EGP 1,700, which is expected to increase the total area of land used to cultivate corn, El Banna said. However, local farmers say the new price is unfair and is not reflective of the increased costs they have incurred over the past year, Al Mal reports. Farmers will hold a meeting with the House’s Agricultural Committee to force the government to purchase the corn for EGP 4,000 per tonne, head of the Farmers and Agricultural Producers Syndicate Farid Wasel said.

M&A WATCH- Akwan for Real Estate Development is looking to make a mandatory tender offer for Alexandria National Company for Financial Investment, a subsidiary of Abu Dhabi Islamic Bank. Akwan has sent a request for a fair value report, according to a filing with the EGX.

Did Medical Union Pharma make an acquisition offer for United Pharma IV? We’re hearing conflicting statements on whether Medical Union Pharma made an official offer to acquire United Pharma IV. United Pharma IV Chairman Abdallah Mahfouz denied yesterday news that Medical Union had formally presented an offer for the company worth EGP 280 mn. Medical Union’s Managing Director Ahmed El Kelany and Health Minister Ahmed Rady, however, both confirmed the news on Wednesday, according to Al Borsa. The company is still waiting for an official offer from Medical Union and studying the offers it received last month, Mahfouz said. US investment fund Lincoln Investment, ACDIMA, and a Compass Capital fund are going head-to-head in a race to acquire United Pharma IV Solutions

Zombie project Alex Port multipurpose platform project brought back to life again? The agreement with China Harbour over the undead and phantom multiplatform facility at the Alexandria Port is still on and being revised by “sovereign entities”, the port’s deputy head Mohammed El Dakkak said on Wednesday, according to Al Mal. The agreement had been scrapped and resurrected at least twice since it was signed by China Harbour at the EEDC in March 2015. Egypt is planning to hire international consultants to give a final ruling on the matter.

The Housing Ministry is in talks with several international and private schools to set up new branches in the first residential phase of the New Administrative Capital, Al Borsa reports. Representatives from the International School of Choueifat, the Canadian International School in Egypt, Misr Language School, Saint Joseph School, and the Modern School group were reportedly among those who met with Housing Minister Mostafa Madbouly. The first residential phase of the new capital has eight plots of varying sizes set aside for private schools, Madbouly said, calling on school owners to submit requests for land allocations as soon as possible.

MOVES- Bahrain’s Gulf Air appointed Wael Mattar as new country manager for Egypt, according to a press release.

Steel magnate Ahmed Ezz was released from prison on EGP 250k bail and placed on a no-fly list. Ezz faces charges of illegally obtaining a steel production license “depriving the state of EGP 660 mn,” Al Masry Al Youm reports. Ezz and former Industrial Development Authority Chairman Amr Assal, a co-defendant in the case, were arrested in March. The two were previously handed down 10-year prison sentences for the case, but were granted a retrial on appeal in 2012.

A handful of international stories worth a skim this morning:

• Libya’s eastern commander Khalifa Haftar’s forces recaptured Benghazi from Islamist militants and other armed groups, Reuters reports.
• Volvo is joining in on the auto industry’s recent shift towards electric vehicles, announcing yesterday it will “offer only hybrid or full-electric motors on every new model launched in 2019 or later,” according to Bloomberg.
• American payment processing company Vantiv is set to purchase Britain’s Worldpay in a USD 10 bn merger, pushing up Worldpay’s shares by nearly 28%, Reuters reports.

How can Batman save lives when fuel prices are this high? Who needs to read lame opinion pieces and listen to talking heads rail against the fuel subsidy cuts when you have gems like this.

Topping coverage of Egypt in the international press this morning are wire pickups on Egypt’s warming ties with Hamas and the murder of two retired officers and an on-duty soldier at the hands of a militant. (We have more details on each story below).

Cutting down on fuel and energy subsidies is just what the doctor ordered for Egypt and its poorest citizens, Patrick Werr writes in his latest piece for The National. “The move to reduce energy subsidies is long overdue,” Werr says, arguing that it’s the wealthy rather than the poor who were the main beneficiaries of the subsidies and “the main victims of these price increases,” since they consume the bulk of Egypt’s energy output. The subsidy system is not only plagued by endless corruption, but the state’s monstrous subsidy bill has also been holding back growth and sucking up funds that would be far better spent on education, health and infrastructure for the poor. So fret not, Werr says, because “the economy should soar” once Egypt gets its finances in order. In the meantime though, “it’s the rich who will have to make painful lifestyle adjustments.”

The United States’ consistent aid to Egypt since the 1970s has failed to reap any success in terms of creating a democratic society, and this limit of American power in the Middle East is not lost on President Donald Trump, Steven A. Cook says in a piece for Politico. For all his other missteps, The Donald seems to grasp the fact that efforts from previous US governments to “civilize” the region by promoting openness and democracy have all but failed, and that it is wiser for him to focus his Middle East policy on Washington’s core interests in the region.

Other stories making the rounds this morning:

• Media company Mindshare will be presenting Egypt in new light to “drown out the perception that [it] is an unsafe destination,” says Cream Global.
• “Strict release conditions need to continue” for an Egyptian in Toronto with alleged ties to terror,NanaimoNewsNOW reports.
• Egypt reportedly blocked a US proposal to add a Saudi branch of Daesh to a UN terror list, Olivia Alabaster writes for Middle East Eye.
• Socioeconomic conditions are worse in Egypt four years after Mohammed Morsi’soverthrow,Ken Hanly writes for Digital Journal.
• Egypt has been moving from an authoritarianism to chaos, Mohamed Nosseir writes for Arab News.

Egypt has reportedly agreed to open the Rafah border crossing in September,Ynetnews reports. Cairo and Hamas have been growing closer lately, with Egypt reportedly supplying Gaza with 22 fuel shipments last Friday and rumors flying that Cairo will also be providing the strip with security equipment. While these developments have improved conditions for Gazans, they pose a threat to the dominance of the Palestinian Authority, Reuters’ Nidal al-Mughrabi says.

President Abdel Fattah El Sisi talked security on Wednesday with a Congressional delegation headed by Republican Congressman Jeff Denham, according to an Ittihadiya statement.

SDX Energy sees reserves on phase one of its South Disouq concession reach 180 bcf of gas reserves and around 8.73 mn bbl of condensates, the company confirmed according to Proactive Investors. SDX Energy expects to produce around 45 mcf/d once phase one is online, Country Manager Ahmed Moaz tells Al Mal.

The Holding Company for Maritime and Land Transport completed feasibility studies for a USD 765 mn container terminal at the port in East Port Said, Chairman Mohamed Youssef tells Al Borsa. Egypt’s bumpy negotiations with Singapore’s PSA International over the terminal seem to have once again fallen through, as the Port Said Container and Cargo Handling Company is still looking for an international development partner. France’s Shipping Group CMA CGM is reportedly in talks over the management of the terminal, which should take about 36 months to build, according to the feasibility study.

The General Authority for Supply Commodities (GASC) will be buying 20k tonnes of soybean oil from a local manufacturer for the first time this August, Ahram Gate reports. A tonne will cost GASC around EGP 281 mn — a price much lower than what international firms offered, according to Supply Ministry adviser Mohamed Seweid. Egypt reportedly also purchased 410k tonnes of wheat from Russia and Romania, “shunning US supplies” whose prices have risen as much as 52% as a result of widespread drought in the High Plains, Bloomberg reports.

Sweden’s Oriflame is looking to increase its outlets in Egypt to 200 from 114 by end of the year, Egypt’s General Manager Badr Abdel Aziz tells Al Mal. The company’s growing sales could also push it to consider a factory in Egypt, he adds.

Edita will start selling wafer biscuits from its new Polaris Al Zamil production line next week, IR and Business Development Manager Menna Shams El Din tells Al Borsa. A new cake product will also hit the market in August. Edita is also exploring opportunities for expansion in the region, she added.

The Military Production Ministry is in talks with an unnamed Finnish company over an ambulance assembly plant, Minister Mohamed El Assar tells Al Borsa. The company is currently conducting feasibility studies for the project, which should go up the value chain from assembly into manufacturing within a few years.

Korea’s IMG is planning to build a medical tourism resort in Siwa, Al Mal reports. No details were provided on the timeline or expected investment value. The company is also reassessing the cost of three sewage treatment plants in Marsa Matrouh, which it had announced last year, in light of the EGP float, according to Matrouh Governor Alaa Abou Zeid.

The Antiquities Ministry officially launched the USD 100 CairoPass that will admit tourists into various attractions and sites for a five-day period, Al Borsa reports. The ministry will offer students a discounted pass at USD 50.

The Administrative Court referred Beltone Financial’s lawsuit against the bourse and Egyptian Financial Supervisory Authority (EFSA) to the State Commissioners’ Authority for their legal opinion, Al Borsa reports. Beltone had filed the lawsuit last year against the heads of the EGX and EFSA for the repeated suspension and reversal of trades in its stocks.

Egypt’s Ka-52K shipboard helicopter order from Russia is likely to be split up over two separate contracts, state arms exporter Rosoboronexport Director General Alexander Mikheev tells Sputnik. Cairo will need to secure the necessary funding before the Russian side can set a date for the signing the contracts.

A militant killed two retired officers and a soldier at a toll station in Al Ayyat in Giza, Egypt’s military spokesperson said in a statement. Investigations are ongoing.

IFC to invest USD 1 mn in Palestinian Ibtikar fund: The International Finance Corporation (IFC) is investing USD 1 mn in Palestinian VC fund Ibtikar, according to an IFC press release. The investment will allow Ibtikar, which focuses on accelerator-based investments in ICT startups, to close the USD 10.45 mn it needed to support some 25 startups over the next five years.