EGP to appreciate 14% this year, EIU says + EFG unit in GBP 470 mn UK solar deal

*** Our first-ever Enterprise CEO Poll runs tomorrow through Thursday, with a dozen of the nation’s top chief executive officers offering their thoughts on what to expect in 2017. The poll runs over four days, with at least three CEOs per day and will replace our industry news section for the rest of this week.

Making us feel proud this morning is 26 year-old Hany Rashwan, who is featured in Forbes’ 30 Under 30: Enterprise Tech list for 2017. Rashwan, a Cairo native now living in San Francisco, “built the first in-stream social commerce ‘buy buttons’ on Twitter and Facebook through his startup Ribbon in 2012. He later left Columbia University to found his second startup Payout.com, whose payouts, disbursements and compliance API are used by top online lenders, such as LendUp and Prosper.”

Look for cold temperatures and winds nationwide, with overnight lows tonight in the single digits — dropping as far as 3-4°C in Assiut and Sohag, according to Ahram Online. The ports of Dekheila and Alexandria were both shut yesterday due to high waves and winds.

Ismail to meet investors caught upside down by float: Prime Minister Sherif Ismail is set to meet with a delegation from the Egyptian Union of Investor Associations sometime this week to discuss fallout from the float of the EGP, Ahram Gate reports.

Health Ministry to unveil pricing strategy on Thursday: The Health Ministry plans to announce new med pricing guidelines at a press conference on Thursday, AMAY reports. The increase in prices will only apply to meds produced after the decision comes into effect in February; violations of that clause will be referred to the Prosecutor General’s Office.

Pharmacists planning to one-day strike next week? The House of Representatives’ health committee holding a sit-down between the Health Ministry, pharma manufacturers and the Pharmacists’ Syndicate as a “last attempt” to resolve disagreements over price controls ahead of a one-day strike pharmacists are planning on 15 January, according to Al Borsa.

The Egypt-Jordan Business Council will meet in Cairo on 15 January and will feature 14 firms in renewable energy, contracting, real estate investment, tourism, automobiles, and export industries, Al Masry Al Youm reported.

Talk show hosts had religion on the brain last night. Lamees El Hadidy started off last night’s episode of Hona Al Assema with President Abdel Fattah El Sisi’s announcement last Friday that the new Administrative Capital will be home to the largest church and mosque in the country around this time next year. Members of the House of Representatives launched a campaign to collect funds for the project after the announcement, according to El Hadidy. “But this isn’t only about building churches and mosques. We have a much larger issue here… we have to pay special attention to education, culture, and religious rhetoric,” she said (watch, runtime 4:02), setting up a discussion with Culture Minister Helmy El Namnam about his ministry’s role in eliminating extremism (watch, runtime 7:19).

El Hadidy also dove into the controversy surrounding the new Egyptian film Mawlana (title used to address sheikhs and clerics), which surveys the lives of Muslim preachers in Egypt. MP Shoukry El Gendy, a member of the House of Representatives’ religious affairs committee, told El Hadidy that the film should have been approved by Al Azhar prior to its release. Director Magdy Ahmed Ali told the host during a phone-in though that the movie did in fact obtain all the necessary approvals from all relevant entities (watch, runtime 14:13).

The Endowments Ministry has a five-year plan for Friday sermons? Over on ONTV, Amr Adib lambasted the Endowments Ministry for saying it would be presenting the presidency with a list containing the topics and themes for Friday prayer sermons for the next five years. “That’s excessive… We don’t have five-year visibility on anything at all in this country,” he scoffed. “And do they really think the president is going to sit down and read five years’ worth of sermons?” (watch, runtime 2:22).

Women won’t be conscripted: Social Solidarity Minister Ghada Wali told Lamees last night that there are no plans to conscript female university graduates. Wali explained that the rumors arose from a misunderstanding over a procedural announcement calling on graduates looking for government jobs to apply. “It’s a standard procedure that happens every year,” Wali said.

Child abuse at orphanage? El Hadidy also spoke to Wali about an alleged child abuse case at a Dar Al Orman orphanage in New Cairo, after a video emerged of a screaming child being forced into a freezing cold bath circulated the internet on Saturday. Wali said that the woman seemingly responsible was being investigated and that some of the children were transferred to other facilities (watch, runtime 9:33).

Reconciliation for building on agricultural land gets nod: Amr Adib commended the House of Representatives for giving the initial nod to a bill that would allow reconciliation in cases in which agricultural land had been illegally built-on (watch, runtime 3:09).

The vast number of unclaimed junked cars littering Cairo’s streets seems set to become Adib’s new hobbyhorse. He suggested that “someone should start a company, rally a few young people, give them a winch and tell them that their job is to collect all of the junked cars in Egypt and sell them and make a few pounds.” He said that many factories would be happy to buy the hulls and recycle them (watch, runtime 2:07).

The host also aired a report on the Egyptian pension system (watch, runtime 2:40) and then spoke to MP Mohamed Abu Hamed about a new law proposal the government is preparing to amend the social security and pensions systems. The law will oblige the private sector to cover employees’ social security and “will also impose sanctions on companies that fail to comply,” Abu Hamed said (watch, runtime 1:03).

Sherif Amer was off last night.

International pharma producers have reportedly refused the government’s proposal to only increase prices medications for non-chronic diseases, Al Mal reported. International producers have reportedly submitted the government a list of all their products, expecting their prices to increase by 20% across the board, regardless of whether or not they are for chronic diseases. There were reports last week of a dispute over how to define chronic diseases, after the Health Ministry said it will not allow any price increases for medications treating them. If the government insists on freezing the prices of chronic disease treatments, international pharma producers will halt all negotiations with the government and possibly freeze production in Egypt, a source said. The government’s classification makes “no sense,” as “90%” of all medications on the market are for chronic diseases, the source added.

What’s the government offering? The last agreement reached between the government reportedly allowed for increasing the prices of 15% of domestically-produced medications in tiers ranging from 50% for those selling for EGP1-50, to 40% for those selling for EGP 50-100, and by 30% for those that are more expensive than EGP 100. It also allowed for increasing prices of 20% of imported medications raising those selling for under EGP 50 by 50% and by 40% for more expensive ones.

The Health Ministry could budge? Sources tell Al Borsa that the health ministry might be allowing price increases for some of the medications used to treat chronic diseases after all. The committee concerned with studying the price hike will be making the decision after conducting separate reviews of each of the lists submitted by companies to the ministry last week. The story gives no sense of timeline.

The Central Bank of Egypt had reserves totaling USD 24.3 bn at the end of 2016, after adding USD 1.2 bn to the balance recorded in November and registering the highest balance since August 2011. Last week we speculated the central bank would manage to surpass Governor Tarek Amer’s verbal target of USD 25 bn and CI Capital economist Hany Farahat says it is basically there. “The rise is strong and noticeable and would cover imports for more than five months … The rise in reserves will restore confidence in the central bank’s ability to restore stability in the foreign exchange market," Farahat told Reuters. Governor Tarek Amer took a victory lap, telling Al Shorouk he was sure the “correct reform decisions taken” were going to make the central bank hit its target.

The EGP is among 12 currencies expected to appreciate against the USD in 2017, Economist Intelligence Unit chief economist Simon Baptist writes. “Our most bullish call is for the EGP; we think that the markets have overshot after the welcome float of late 2016 and expect a 14% appreciation this year,” he added.

Current account deficit to narrow: The EIU has also taken note of a sharp month-on-month increase in remittances to Egypt from expats working abroad. “The increase in remittances [to USD 1.7 bn in November from USD 1.3 bn the month before] is likely to reflect the impact of the sharp devaluation of the EGP. … Remittances have been declining since early 2015, partly because the overvalued exchange rate prompted Egyptians working abroad to use unofficial channels rather than the banking system to send money home.” The EIU notes that “the upturn in remittances in November reinforces our forecast that the current-account deficit will narrow in 2017, to US USD 13.8 bn from an estimated USD 16.4 bn in 2016, as the weaker EGP renders imports more expensive and simultaneously boosts the competitiveness of exports.”

Egypt is one of five global emerging / frontier markets Citi’s clients think will do well this year, the Wall Street Journal notes in its This Week on the Frontiers column. Citi frontier markets analyst Andrew Howell says investors the bank surveyed in December “are enthusiastic about the prospects for a handful of markets” including Egypt, Pakistan, Vietnam, Sri Lanka and Romania.” Nigeria is out of favour (“beset by currency weakness, capital controls and poor economic growth”). Lebanon, Argentina, Kuwait and possibly Nigeria could emerge “from recession this year, although it might be too late to restore investor interest in [Nigeria].

Egypt’s eurobond issuance faces competition. Quoth the Financial Times: “Patrick Esteruelas, head of research at EMSO Asset Management in New York, pointed out that there was likely to be a flurry of issuance from emerging markets in January, with Brazil, Honduras, Nigeria, Egypt, Saudi Arabia and the Philippines all sounding out investors.” The piece focuses on Argentina, which it notes has made a strategic decision to go to markets even before Donald Trump assumes the US presidency on 20 January: “The election of Mr Trump in November sparked hefty selling across emerging markets, with sentiment rattled by his talk of trade protectionism. A stronger US dollar and higher bond yields also sapped appetite for EM.” Trump and the US Fed, the FT had noted in December, are the primary threats to EM performance this year.

The EGX30 hit another all-time high on Thursday, rising 1.71% to 12,824.32. We have more in By the Numbers, below.

M&A UPDATE- EFG Hermes unit in GBP 470 mn solar acquisition in United Kingdom. Vortex, EFG Hermes’ European renewable energy platform, has inked a sale and purchase agreement to acquire 24 solar parks from TerraForm power with a combined 365 MW in generation capacity. “This landmark acquisition caps a two-year period in which our private equity team has built Vortex from a newcomer into a platform managing 822 MW in net capacity across the United Kingdom, France, Spain, Belgium and Portugal, making it one of the largest renewable energy focused investment managers in Europe,” said EFG Hermes Group Chief Executive Officer Karim Awad. The transaction will see Vortex assume about GBP 300 mn in debt that it will look to refinance.

A company statement (pdf) notes that 50% of the equity value of the transaction will be covered by an investment from leading Asian renewable player Tenga Nasional Berhad out of Malaysia, with “the remaining 50% initially underwritten by EFG Hermes with a final targeted hold of 5% of the equity, consistent with the previous transactions undertaken by Vortex.” Vortex’s advisors on the transaction included Watson Farley and Williams, Davis Polk, and Shearman & Sterling (legal), Deloitte (financial, tax and accounting), Enertis (technical), Willis (insurance), Baringa (market), Operis (model audit) and Global Capital Finance (financial advisor). The transaction is getting wide pickup in the financial and renewable industry press.

M&A UPDATE- Qalaa confirms it is in talks to sell RVR. Qalaa Holdings confirmed on Thursday “that preliminary negotiations are ongoing with several prospective local and international investors for the sale of its stake in Rift Valley Railways (RVR), the national railway of Kenya and Uganda. No official agreement or offer has been reached as of yet,” according to an emailed statement. The company said its decision to divest from RVR after it came to conclusion that “additional capital is required to complete the company’s transformation program.” Kenyan media began speculating last week about the potential sale.

We’re getting some of that delicious Irish beef: Authorities have reached an agreement with the Republic of Ireland to reopen the Egyptian market to exports of Irish beef, Ireland’s confirmed. The agreement provides for the approval of five Irish plants to commence exports to Egypt once the necessary technical arrangements are in place, and also includes approvals approval for beef offals and a limited approval for particular types of sheepmeat products. Egypt banned imports of EU beef in November 2000, according to RTE, over mad cow disease fears and Minister Michael Creed says, prior to the ban “we know … it was one of the largest markets for Irish beef at the time.” Prior to this agreement, Ireland had been cleared to export live cattle to Egypt in February 2016, after an inspection visit to Ireland by the Egyptian Ministry of Agriculture. The US had lifted its own 15-year ban on importing Irish beef in January 2015.

More than 130 car models went up in price this month, including Mercedes, BMW, Opel, VW, Hyundai, Kia, Chevrolet, Jeep, Mitsubishi, and Toyota, Al Borsa reported. The biggest price increase was the BMW 3,000 cc 6 Series 640i, which jumped a whopping EGP 450,000 from EGP 2.7 mn to EGP 3.15 mn. The most expensive car remains the 7 Series 740Li, which will set you back EGP 3.75 mn.

US intelligence officials claim Vladimir Putin personally “directed a vast cyberattack aimed at denying Hillary Clinton the presidency and installing Donald J. Trump in the Oval Office,” the New York Times reports. Trump was briefed on the news (you can see a declassified version of the briefing document here in pdf) and Russia is openly mocking the claim.

Financial Times isn’t entirely bearish on EM in 2017. In its look at “Five reasons why investors are buckling up for 2017” as the investment industry “positions itself for seismic change this year,” the FT notes downside potential from EM from a Trump presidency and as many as US Fed rate hikes this year. That said, EM could still do well, two analysts say. The head of EM at Deutsche Asset Management says, “For the year as a whole we are looking for reasonable upside in emerging markets, both from the extra yield that emerging market sovereign USD bonds give and especially from emerging market equities.” A Franklin Templeton bond investor notes, “We see a number of compelling opportunities across specific emerging markets that give us optimism for the upcoming year,” while BlackRock global chief investment strategist Richard Turnhill “also likes emerging market stocks, due to improving profitability and low valuations of companies, and structural reforms in emerging market countries.”

International media coverage of Egypt focused this weekend on the status of the nation’s Christian minority heading into Coptic Christmas, with offerings from the Washington Post, Los Angeles Times and AFP typical.

The top business story of the weekend is bankruptcy, with Asma Alsharif’s piece for Reuters getting wide pickup. The CBE’s decision to float the EGP without first covering importer backlogs has left many importers facing bankruptcy, she writes. Importers took out credit lines from their banks, depositing collateral of about 120% at the official rate of EGP 8.8 per USD, assuming the CBE would first cover backlog if it decided to float the EGP, like it did when it devalued the EGP in March 2016. The piece comes as the House of Representatives is discussing a draft bankruptcy and restructuring law recently approved by the Cabinet that would scrap what amounts to debtor’s prison for bankruptcy cases.

We need to invest our way out of our current economic challenges, and making it easier to do business in Egypt wouldn’t hurt. Spending on infrastructure and building a new administrative capital is all good and well, but nothing will push our growth rate except investment, says Al Masry Al Youm chief Abdel Moneim Said. The AMAY boss points to the incoming Trump administration in the US, which is prioritizing improving business conditions to attract investment, despite the US already being ranked eighth worldwide in the Doing Business Index.

The market is being manipulated through the creation of false shortages that drive up demand and allow suppliers to boost prices, with consumers forced to accept the markups simply because they’re thankful the given commodity is even available, Mahmoud Khalil writes in a column penned for El Watan. In that setup, the government, which should be responsible for supplying citizens with commodities, is instead overrun with corruption or carelessness, Khalil says.

Islam’s influence on Rumi’s poetry was lost (or erased) in translation: All those spiritual Rumi quotes that show up on your Facebook newsfeed are likely missing a central feature of the Persian poet’s works: “The Rumi that people love is very beautiful in English, and the price you pay is to cut the culture and religion,” a scholar of Sufism tells The New Yorker’s Rozana Ali. Before you start lambasting pop culture figures like Madonna or Coldplay’s Chris Martin, both of whom relied on Rumi’s work for their personal spiritual journeys, the true culprits are translators and theologians from the Victorian period, who “could not reconcile their ideas about a ‘desert religion,’ with its unusual moral and legal codes, and the work of poets like Rumi and Hafez.”

How normal glass can stand up to a hammer — and shatter a bullet. Attention, science geeks: We have a two-parter for you this morning. Can you imagine a piece of glass that will stand up to a whack with a hammer — but shatter if even nicked elsewhere? It’s Prince Rupert’s Drop — at 130,000 frames per second and undoubtedly one of the coolest science-y things we’ve seen on the internet in ages.

Watch part one (The Mystery of Prince Rupert’s Drop at 130,000 fps) and then move on to part two: What happens when said drop meets a bullet fired at point-blank range. Hint: The bullet loses.

Foreign Affairs Minister Sameh Shoukry met with a group of foreign correspondents in Egypt, according to a ministry statement. The meeting centered on having Shoukry explain the situation in Egypt and to help correct the “mistaken view” of the country that is sometimes propagated in international media, as per the statement.

The International Cooperation Ministry is looking to sign agreements to secure USD 1.65 bn in funding for social housing and sanitation projects in its development plans for next year, Youm7 reports. Minister Sahar Nasr will reportedly be signing a USD 1 bn agreement with China to connect 264 villages to the country’s sanitation network. The ministry is also hoping to sign a USD 56 mn agreement with the French Development Agency to fix problems at the Alexandria water treatment plant. Other prospective agreements include a USD 370 mn facility from the European Investment Bank to fund sanitation works in Fayoum and a USD 116 mn agreement with the Kuwait Development Fund for a desalination station in Port Said. The African Development Bank has also pledged nearly USD 160 mn to the development of slums in Greater Cairo.

The Egyptian Electricity Transmission Company has invited six international and Arab companies to build four transformer stations with an investment value of USD 250 mn, sources at the Electricity Ministry told Al Borsa. The companies include General Electric, Siemens, EGEMAC, Hyundai Power Transformers, Hyosung, and ABB, the sources added. The stations will be located in the Administrative Capital, Kafr El Sheikh, Qena, and Zagazig.

Italy’s Edison signed an agreement with EGAS for E&P operations and drilling two new wells in the Northeast Hapi offshore concession, Al Shorouk reported. The agreement is for a minimum investment of USD 86 mn and includes a USD 1.5 mn signing bonus. Oil Minister Tarek El Molla said EGAS will issue a new E&P bidding round this year.

Merlon International JV PetroSilah are aiming to drill six wells in 2H2016-17 to increase production to 12k bbl/d from 8.7k bbl/d from its El Fayum concession, PetroSilah Chairman Taher Abdel Rahim told Al Borsa. We had previously reported Merlon International is allocating USD 54 mn in FY2017-18 towards its El Fayum concession in the Western Desert.

The Egyptian Electricity Holding Company (EEHC) has taken an EGP 20 bn loan from the National Bank of Egypt to dues owed to EGPC, Al Borsa reports.

Pharco Pharma will begin work on its EGP 1 bn oncologicals plant this week, Al Borsa reports. The new venture, the Egyptian National Company for Medical Products (We Can), will build Egypt’s first oncology medicine factory at a total cost of EGP 500 mn, of which 50% will be covered by banks. The project is part of a cooperation agreement that Pharco had signed with the Health and Military Production Ministries and domestic vaccine producer Vacsera back in August. The factory will be built at Vacsera’s industrial complex in 6 October over 61k sqm and is expected to manufacture 93 different types of meds once it’s operational in two years’ time, according to Pharco’s CEO Shereen Helmy. We reported last week that the Egyptian Arab Land Bank was arranging financing for the facility.

Budget airliner Fly Egypt has launched a route between Borg El Arab airport in Alexandria and Abu Dhabi in the UAE, Al Borsa reported. The company has also re-launched flights between Germany and the Sharm El Sheikh and Hurghada airports, which have received at least seven charter flights from five German cities every week since December, as part of a one-year long agreement with German tour operator FTI. Fly Egypt’s Commercial Director Kareem Baki said that the company intends to add more trips to its European flight routes by April and also begin operating flights to and from the Marsa Alam airport.

Pickalbatros Hotels have purchased a 50k sqm land plot in New Cairo to build a hotel that includes an aqua park, Chairman Kamel Abou Ali told Al Borsa. The company will complete the necessary studies this quarter, and aims to begin building by 2Q2017, he added. Pickalbatros are set to complete the EGP 400 mn Beach Albatros Marsa Alam hotel this quarter, said Abou Ali.

The Transport Ministry requested that shipping chambers submit a note outlining their grievances regarding the executive regulations of maritime shipping law number 800/2016, Al Mal reports. We noted last week that the chambers had objected to the regulations as being bad for business, and pointed to article 41 in specific as regressing to “the era of nationalization.”

The Holding Company for Metallurgical Industries has officially decided restart operations at El Nasr Automotive Co, Youm7 reported. We noted last month that the government was in talks with potential Chinese partners to secure USD 20 mn in funding needed to revive El Nasr.

A 13% increase in dairy producer Domty’s local sales in FY2016 has offset the decline in exports to regional markets best by conflict, Managing Director Mohamed El Damaty told Al Borsa. The company maintained its market share and position as the country’s largest producer of white cheese for the fifth consecutive year, he claimed, despite the challenges that 2016 presented domestically and around the region. Domty’s expansion plans for 2017 include new production lines, increased distribution capacity, and new equipment for around EGP 200 mn in investments.

The state-controlled Tahya Misr fund says it has received nearly EGP 7 bn in contributions between July and December 2016, Director Mohamed El Ashmawy tells Al Borsa. Over the same period of time, the fund helped finance EGP 3 bn in projects. Tahya Misr’s plans for 2017 include a project to build 100 new schools around Egypt and another to build seven new factories for med production in partnership with pharma manufacturers, such as Pharco and Vacsera.

Reports Ahram Online: “Cairo International Airport is set to receive biometric equipment on 12 January to better track airport staff,” citing a report in the state-run MENA news agency. The German-provided equipment “will be installed immediately at staff gates in the airport’s newly inaugurated Terminal 2.” Terminal 2 has been designated to handle flights from Russia, and the installation of biometric security features has been said to be a top Russian condition for the resumption of flights.

Employees at the Central Bank of Egypt are receiving a 5% pay increase, a source told Al Masry Al Youm. The central received legal approval for the raises, the source said. Not part of this pay rise is Governor Tarek Amer himself, whose position’s salary is determined by Prime Minister Sherif Ismail. Salary caps on government wages have not been set aside for CBE employees as rumored.

Activist Ahmed Maher was reportedly freed last Wednesday evening after completing his sentence, BBC reported. Maher’s lawyer said he would remain under judicial supervision. Maher, the founder of the April 6 Youth Movement, was arrested in 2013 while protesting against a new law banning unauthorized public gatherings.

New Capital church, mosque costs: The initial cost of a mosque and church currently being built by the Armed Forces’ Engineering Authority in the Administrative Capital stands at EGP 400 mn, unnamed government sources tell Al Borsa.