Monday, 17 November 2014

KSA • UAE make up with Qatar • EGP weakens on parallel market • oil could hit USD 50/barrel • Israeli gas threatened by domestic tensions • ACWA eyes coal-fired power plant • unemployment eases 0.2 ppts to 13.1% • elections law to be approved Wednesday

FX WATCH

The USD was trading on the parallel market yesterday at EGP 7.64, a 4-piaster weakening overnight on traders’ fears that currency would become scarce ahead of the planned return to Qatar of USD 2.5 bn by month’s end. The official rate remains steady at c. EGP 7.165.

[Editor’s Note: As we sort out how to make tables display beautifully on all mobile devices, we’ll be introducing this and a handful of other data-centric features to Enterprise Morning Meeting over the next week or so.]

WHAT WE’RE TRACKING TODAY

Can we, too, be friends with Qatar once again? Saudi Arabia, the UAE and Bahrain have all agreed to send their ambassadors back to Qatar, it was announced late yesterday after an extraordinary summit of GCC leaders in Riyadh.

The drumbeat of preparations for the March 2015 Sharm El-Sheikh investment summit continues, with the Ministry of Investment saying yesterday it would tap EFG Hermes and up to eight other institutions to help market projects. Meanwhile, Ittihadiya issued a statement confirming President Abdelfattah El-Sisi had met with senior officials for a review of the New Suez Canal and related Suez Canal Development Zone projects, all with a view to having a comprehensive book of business to present to investors at Sharm.

The next People’s Assembly will have 420 members elected as individuals and a further 120 chosen from party lists, said Minister of Transitional Justice Ibrahim El-Heneidy yesterday. El-Heneidy, who also holds the post of minister responsible for parliamentary affairs (Kamal El-Shazly’s old gig), said he expects Cabinet to approve the draft parliamentary elections law on Wednesday, according to a widely reported interview with Al-Ahram. The draft law will also create new electoral districts, including ones for the first time for Shalateen and Halayeb (Egyptian territories claimed by Sudan), the Red Sea and Nubia. The redistricting, based on the government’s views on population densities, would also see changes to representation of some new urban communities.

We would expect some overlap in thinking between the new electoral districts and the government’s ongoing program to reshuffle the administrative boundaries of the nation’s 27 governorates. Presidential spokesman Alaa Youssef also issued an overnight release about El-Sisi’s meeting yesterday with PM Ibrahim Mehleb and Minister of Local Development Adel Labib to chew over the governorates issue. The Red Sea area — and, reading between the lines, how it can fuel development in Upper Egypt — was at center stage of the meeting.

Today is International Students’ Day, setting up the chance of small conflicts between students and security forces near universities. The news comes after a report yesterday that a civilian criminal court had transferred five students to the military judicial system to face trial on charges of rioting, arson and membership in a terrorist organization after they allegedly tried to set fire to part of Al-Azhar University.

The 30 June 2013 Fact Finding Committee mandated by former president Adly Mansour announced yesterday that it had extended its work until this coming Thursday after receiving new information about the dispersal of Ikhwan protest camps in Rabaa last summer. Any report from the committee is likely to trigger a round of international headlines.

LAST NIGHT’S TALK SHOWS

A number of talk show hosts including OnTV’s Youssef El Houssieny andIbrahim Eissa questioned last night whether the government is doing everything it can to combat terrorism, with the former openly calling for a new purge.

El Houssieny cites the UAE’s recent list of 83 terrorist organizations as a positive example for others to follow: “Their brave, no nonsense approach to the matter is very admirable. Without serious actions and regional cooperation, we will not succeed. Even though we have classified the Muslim Brotherhood as a terrorist organization, we are still allowing their card-carrying members to be employed in our ministries and our public universities and some of their businesses continue to operate,” said El Houssieny.

“Egypt needs a producer to manage the war on terror,” said Eissa, referring to what he said was the the government’s failure to effectively use the media, social media and technology to fight terrorism. “The enemy is much better at getting their messages across than we are. Their use of social media and the internet is definitely better than ours,” he added.

Eissa also interviewed Mohamed El-Sewedy, Head of the Federation of Egyptian Industries, about the problems that investors continue to face.

“Why do I need 16 different licenses to operate a factory — and why are most of these licenses valid for only one year?” asked El-Sewedy.

Mehwar’s Mohamed Sherdy interviewed Minister of Trade and IndustryMounir Fakhry Abdel Nour, who spoke about a variety of topics including free trade agreements, Egyptian cotton, and SMEs.
“There are many problems concerning Egyptian cotton — from the varieties that we are currently growing to the harvesting and packaging. The entire process needs to be revisited if we want to be competitive internationally,” said the minister.

“75% of all the new jobs created in Egypt come from SMEs. Looking into the needs of this sector is a national priority,” noted Abdel Nour.

Al Hayat’s Moataz El Demerdash tackled the taboo topic of atheism amongst Egyptian youth. The issue was dealt with in a very naive manner on both sides of the spectrum: The atheist was inarticulate and the Islamic preacher treated him as if he were mentally deranged, reciting verses of the Qur’an to prove him wrong.

SPEED ROUND

The EGX30 closed down 0.3% yesterday at 9,230 points, with turnover at an anemic EGP 450 million, about 36% below the 90-day average. Saudi’s Tadawul was down 1.3%, the Kuwaiti exchange was off 1.0%, and DFM lost 1.2%. Qatar (up 0.1%) and ADX (rising 0.2%) bucked the regional trend yesterday.

Asian markets were in the red as they opened for the first day of trading this week, dragged down by a slow close for US stocks on Friday and news that Japan’s economy contracted faster than expected in the third quarter.

Will Israel’s development of offshore gas finds including the Leviathan field be choked by tension between that country’s business community and regulators? That’s the question the FT raises this morning, quoting an industry insider as warning that the Leviathan field is potentially the last project that will move forward “for some time.” The “senior energy industry executive” tells the daily that “Leviathan . . . will be developed, but with the regulatory challenges they have put in the last three to four years, they have killed the industry.” The piece also quotes BG Group COO Sami Iskander as saying there are no “insurmountable” issues to the company’s US$ 30 bn Leviathan deal, adding, “I absolutely hope we will reach a commercial agreement between BG and the Leviathan partnership by the end of the year.” Read more in the FT.

Are we looking at USD 50 / barrel oil? That’s the conclusion of one industry analyst in a piece published late yesterday evening by CNBC. Oil watcher John Kilduf from commodities specialist Again Capital suggests that oversupply stemming from America’s quest for energy self-sufficiency and KSA’s decision to target market share (rather than better prices) will see oil hitting fresh lows by next March, after the high-demand winter season. Business Insider, meanwhile, summarizes a Goldman Sachs research note in a story headlined “Everybody in Texas is resigned to low oil prices.” BI quotes Goldman’s chief US equity strategist as writing: “Although still stunned by the ferocity of the selloff, everyone we met was resigned to the idea that crude prices would remain low for several years. Although we met many Longhorn alumni, we met no Energy bulls.” (Read the CNBC piece or Business Insider on Goldman’s take)

Food for thought: Is global private equity looking at a credit bubble?That’s the prediction of the head of Sweden’s largest PE firm. EQT‘s Thomas von Koch tells the FT in a video interview that there’s too much “cheap” and “risky” debt in the system and “we all know how this ends — in tears. If you look at what happened in ‘06 or ‘07, you at least had real growth in the economy. … This is a supply and demand of capital-driven issue [not a case of growth-driven demand]. I’ve been preaching: Sell.” Moreover, he says, the more than USD 1 tn in uninvested PE funds committed is a bad sign. “If you look at previous booms and busts, when industrial buyers come in, they always enter at the very peak. They’re cash-rich, they don’t have growth in their business, they face shareholder pressure … I’m quite bearish. There’s a little bit of a perfect storm coming.” (Watch. Von Koch shifts from Swedish politics to PE at about 3:00)

The UAE’s designation of 83 groups as terrorist organizations — including the Muslim Brotherhood, as we reported yesterday — looks like a story that could have legs in the media after viral news site Buzzfeed (which is trying to beef-up its reporting credentials) picked up the case of the Council on American-Islamic Relations (CAIR). The advocacy group, which is well-known among US reporters covering Islam, Islamism and regional affairs, is apparently planning to ask the Obama administration to intercede on its behalf. (Read)

EGYPT IN THE NEWS

Remember the detention last week of Le Monde Diplomatique editor Alain Gresh and two Egyptian journalists with whom he was having coffee?Public repercussions from the story continue, with the New York Times carrying this morning an op-ed contribution headlined “Egypt’s New Police State” penned by Sara Khorshid, one of the journalists detained with the Cairo-born Gresh. The kicker: “One can assume that whoever called them [the police] from the government feared a scandal going viral in international media about a French editor being held and interrogated for no reason. This is probably why Mr. Gresh was later contacted by the Interior Ministry and asked to go meet the ministry’s top human rights official, who apologized to him for what happened. After all, the Sisi government is savvy about wanting to keep foreign press reasonably onside, while chilling domestic reporting.” (Read)

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Onera Systems to partner with seven institutions to build USD 90 million solar power plant 
Al Borsa | 16 Nov, 2014
New and renewable energy company Onera Systems, whose interest in building renewable energy facilities in Egypt we noted back at the end of September, will submit their bid on a tender issued by the Ministry of Electricity and Energy which aims to establish a USD 90 million solar power station in Egypt with a total capacity of 50 MW. Onera Chairman Wael El Nashar says the company will submit its offer to the ministry on 26 November, the final date bids may be submitted as noted in the calendar section of this report. The project will be implemented in partnership with four local and international institutions and three Egyptian banks will provide the project financing. According to the company’s studies, the new government announcement of the renewable energy tariff will help save about 32 bcf (billion cubic feet) of natural gas used to operate electric power stations every year. (Read in Arabic)

ACWA Power offers to build coal power plant
Al Mal | 16 Nov 2014
Saudi Arabia’s ACWA Power has offered to build a 2,500 megawatt coal-fueled power plant with investments totaling USD 3.5 billion, according a senior source with Egypt’s ministry of electricity. The source explained that the offer was made a couple of months ago and is currently being reviewed by the Cabinet.
OIL & GAS

Arab Misr Insurance Group renews USD 200 mn policy for East Gas Company
Al Borsa  | 15 Nov 2014
The Egypt based East Gas Company had its USD 200 mn insurance policy from the Arab Misr Insurance Group (GIG) renewed. Adel Hegazy, the general manager of the Oil & Gas Insurance unit at GIG, was quoted by Al Borsa detailing a laundry-list of risks against which East Gas continues to be insured. East Gas was established in 2001 with the aim of trading surplus natural gas production via onshore and offshore pipelines in Egypt and abroad, in addition to the construction of LNG plants. (Read in Arabic)

BASIC MATERIALS & COMMODITIES

Egypt’s Sidi Kerir 9-month profits rise to EGP 726.4 mln
Company Statement | 16 Nov 2014
Egypt’s Sidi Kerir Petrochemicals saw its nine-month net profits rise to EGP 726.4 million Egyptian pounds (USD 102 million), up from EGP 616.6 million a year earlier, the company said in a statement. The company reported sales of EGP 2.12 billion pounds, down from EGP 2.23 billion a year earlier. (Read)

REAL ESTATE

Government decreases final settlement for Majid Al-Futtaim to EGP 214 mn
Daily News Egypt | 16 Nov 2014
A ministerial committee approved the settlement of an investment dispute on Wednesday following New Urban Communities Authority (NUCA) approval on Tuesday for the final settlement for UAE-based company Majid Al-Futtaim. The settlement is worth EGP 214m and will be fully paid fully by NUCA, said Majid Al-Futtaim Legal Adviser Hani Sarie-Eldin. Sarie-Eldin said the agreement on the final settlement is currently under review by the State Lawsuits Authority. The Egyptian constitution requires that the government refer all dispute agreements to the State Lawsuit Authority for review. Sarie-Eldin expects that the SLA will approve the settlement. Sarie-Eldin said: “It was agreed to extend project implementation for five years, beginning once the SLA completes its review of the settlement.” The process of obtaining licences for the group has been delayed since 2009 Sarie-Eldin said, “costing Egypt between EGP10-11bn in investments”. Al-Futtaim invested EGP 7 bn into Egypt under a pre-2009 licence between 2011 and 2014, out of  EGP22 bn in investments that were planned to be supplied by the end of 2015. (Read)

[Editor’s Note: The original article refers to ‘Al Futtaim Group’ although what is meant is ‘Majid Al Futtaim,’ as Al Futtaim is a separate and unrelated UAE-based entity]

SODIC to develop a residential community on 301 feddans of land 
Al Masry Al Youm | 15 Nov 2014
SODIC and the Ministry of Housing signed a contract to officially hand over to the company some 301 feddans of land in New Cairo. Sodic is currently planning to launch the first phase of their new project “Villette” on the 301 feddan area in partnership with “SWA,” an international landscape architecture, planning and urban design firm. The project will be an integrated community of c. 2,000 units including apartments, standalone villas and a downtown area. The project’s total investment value is more than EGP 7 billion and is expected to create more than 20,000 jobs, AMAY reports. SODIC MD Ahmed Badrawi and NUCA VP Magdy Farahat inked the final agreement at an event held at the company’s Sheikh Zayed Sales Center in the presence of Housing Minister Moustafa Madbouly, the paper noted. (Read in Arabic)

TELECOMS

Orascom reports Q3 net loss of EGP 72.6 mln
Reuters and EGX | 16 Nov 2014
Egypt’s Orascom Telecom reported a net loss of EGP 72.6 million Egyptian pounds (USD 10.2 million) in the third quarter, compared with a loss of EGP 248.3 million a year ago, the company said on Sunday. Orascom saw revenues of 792.8 million pounds in the quarter, up from EGP 739.2 million a year ago, the company said. (Read)
OTMT eyes new investments in energy and transportation
Al-Masry Al-Youm | 16 Nov 2014
Orascom Telecom Media and Technology Holding issued a disclosure to EGX announcing its intention to establish new companies, and acquire others, in a number of strategic sectors. Projects of interest will include network operations for communication towers, power generation and transportation & logistics. (Read in Arabic)

BANKING & FINANCE

9 local investment banks mandated by Egypt’s government to promote projects in the upcoming investment summit
Al-Masry Al-Youm | 16 Nov 2014
Egypt’s government has reached an agreement with 9 local investment banks to promote projects during the upcoming investment summit, the date of which is yet to be defined. Ashraf Salman, Minister of Investment, said that these banks, which include HC and EFG Hermes, are willing to offer their investment banking services free of charge, but will be compensated through commissions for projects on which they succeed in selling to the global investors. (Read in Arabic)

EGX to apply arbitration rules in capital market disputes
Al-Masry Al-Youm | 16 Nov 2014
The board of EGX has approved today a new regulation to adopt arbitration rules in settling capital market disputes. The move aims to fast track settlements through the application of these rules, conditional to the consent of both parties involved in a dispute. Dr. Naguib Mostafa, Vice President of EGX said that this new decision will offer an optional mechanism to dispute settlement while helping clear the plate for the Egyptian judiciary system. (Read in Arabic)

Central Bank of Egypt to issue EGP 6 billion in treasury bills on Sunday
Amwal Al Ghad | 15 Nov 2014
The central Bank of Egypt on behalf of the ministry of finance will issue treasury bill worth of EGP 6 billion by tomorrow, the value of the first T.B. issuance will be EGP 2.5 billion for 91 days, while the value of the second one will be EGP 3.5 billion for 273 days. (Read in Arabic from the CBE or on Amwal Al Ghad)

OTHER BUSINESS NEWS OF NOTE

USD jumps by 4 piasters against the EGP in the black market
Al Borsa | 16 Nov 2014
The USD exchange rate against the Egyptian pound jumped by 4 piasters on the black market in a single day. The USD reached EGP 7.62-7.64 on the black market, up from EGP 7.58-7.60 yesterday. Currency exchange companies said the jump was caused by repayment of the Qatari deposits as well as higher demand for the US currency. Meanwhile, the greenback’s official rate at banks is EGP 7.1472-7.1768. (Read in Arabic)

Khadamaty targets three thousand sales outlets
Al Mal | 16 Nov 2014
Khadamaty, an e-services provider, says the company plans to increase its outlets from 1,350 to 1,500 outlets by year end and 3,000 outlets by 2015, according to managing director Karim Khairy. Khairy says Khadamaty will soon issue subsidized bread cards, and exclusively provides payment services for various Egyptian government agencies, such as metro passes, electricity bills and water bills. Khairy also cited a recent agreement with the Traffic Authority to help citizens in Nasr City and Nozha renew their drivers licenses. He also explained that Khadamaty holds a 38.7% market share compared to its nearest competitor Fawry, adding that the company executes 6 million payment transactions annually. (Read in Arabic)

EGYPT POLITICS + ECONOMICS

Egypt’s unemployment rate eases 0.2 ppts to 13.1% in Q3 2014: CAPMAS
Ahram Online | 16 Nov 2014
Egypt’s unemployment rate shrank slightly in the third quarter (Q3) of 2014 by 0.2 ppts to close at 13.1%, state-run statistics body CAPMAS announced Saturday. The reduction in unemployment, however, remains well above the 8.9% registered in the period ending 30 September in 2010 preceding the 2011 uprising that toppled President Hosni Mubarak. According to CAPMAS, there are 3.6 million unemployed Egyptians nationwide. The country’s labour force totals 27.6 million people. More than 64% of unemployed people are aged between 15 and 29 and at least three quarters of the unemployed hold diplomas or university degrees. (Read)

Interview: Maersk talks with Egypt government on Suez Canal expansion
Ahram Online | 16 Nov 2014
The Suez Canal Container Terminal (SCCT), of which Maersk is the major shareholder, needs public infrastructure enhancements to expand, something the government is not enthusiastic about at the moment, the commercial chief executive (CCE) of the terminal told a group of Egyptian journalists in Copenhagen.

Maersk is asking the Egyptian government to fulfil its prior commitment to finance and execute any required deepening of the path leading from the northern main entrance of the Suez Canal to the terminal, Lars Koch-Soelyst, the CCE of SCCT, told Ahram Online. He is also worried about possible negative impacts from the ongoing expansion of the Suez Canal.

According to Koch-Soelyst, in order for SCCT to grow, the company needs to build a bigger terminal and install bigger cranes, to be able to receive bigger ships, or “we will lose the competition.” But also, SCCT is requesting a deeper draft, as modern vessels of customers, including Maersk Line, need a draft of 16 meters, “while we can only receive ships that could go 15.5 meters under the water.

The original agreement between SCCT and the Egyptian government, back in 1998, was that the latter would invest and execute any deepening needed for the SCCT by 2004. The additional draft would cost some USD 80-100 million, a sum that the government could retrieve over three years, because the terminal would be able to handle 1,000-1,500 more containers than its current capacity. (Read)

INTERNATIONAL

Arabtec reported a 32% drop in third-quarter net profit to AED 68.7 million dirhams (USD 18.7 million) in the three months to 30 September.The firm’s quarterly revenue was AED 2.4 billion dirhams, up from AED 1.94 billion a year earlier, but whose gains were erased due to an increase in general and administrative expenses of 89% to AED 241.6 million dirhams over the same period. (Read in Reuters)

ON YOUR WAY OUT

Two alleged terrorist financiers are living in Doha and are free to come and go as they please. “There are US- and UN-designated terrorist financiers in Qatar that have not been acted against under Qatari law. There’s Khalifa al-Subaiy — and more recently, Abd al-Nuaymi, who we designated last December, the UN designated in August,” according to David Cohen, the US Treasury under-secretary for terrorism and financial intelligence, as reported by The Telegraph (Read)

The White House has confirmed a video released by Daesh that shows the beheading of hostage and American aid worker Peter Kassig is authentic, NPR reports. The video “differs from previous filmed deaths of American hostages,” NPR’s Alice Fordham says. “It also features gruesome beheadings of Syrian soldiers, a history of the group and the U.S.-led invasion of Iraq and a meditation on the nature of Baghdad as a Sunni city.” In a statement released after the video was confirmed as real, Peter Kassig’s parents said they were “heartbroken to learn that our son, Abdul-Rahman Peter Kassig, has lost his life as a result of his love for the Syrian people and his desire to ease their suffering. We are incredibly proud of our son for living his life according to his humanitarian calling. We will work every day to keep his legacy alive as best we can,” they said. (Read on NPR)

GAFI has inked an MoU to explore possible cooperation with the UAE’s Ajman Free ZoneGulf News reports.

The Ministry of Tourism will not be issuing new tourism-company licenses before the industry’s current malaise begins to resolve, Tourism Minister Hisham Zaazou told participants at the Arab Tourism and Umrah Forum. Of the nation’s 2,400 tourism companies, the minister noted, 2,200 engage in one form of religious-based tourism or another, the Daily Newsquoted Zaazou as saying.

A verdict is expected on 27 December in a retrial of the “homosexual wedding” case that has made headlines of late, according to Reuters-backed news site Aswat Masriya. Expect negative headlines no matter which way the verdict goes.

Airbus’ “flying doughnut” patent application may change how you fly, and in the meantime it’s proving highly entertaining to UK business writers including the FT, which notes that the patent filing envisions an aircraft “more like something from a 1950s sci-fi comic” or a “UFO”. Apparently, the doughnut-shaped aircraft could make for a lighter, more fuel-efficient structure. The aircraft isn’t presently in development, the FT quotes Airbus as saying. (We’ll be seeing this one on Bloomberg and CNBC Europe by morning, if not earlier, so keep your eyes out for schematics and artists’ renderings, aviation buffs.) (Read in the FT or a summary in the Irish Times)

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