Alcazar Energy could offload Egypt, Jordan assets for USD 500 mn

El Sisi, ministers in London for Africa investment summit: Planning and Economic Development Minister Hala El Said, Trade Minister Nevine Gamea and International Cooperation Minister Rania El Mashat will join President Abdel Fattah El Sisi in London for today’s UK-Africa Investment Summit, according to Youm7. The event will bring together businesses, governments, and institutions to promote investment in Africa, and will be live-streamed here later today.

The World Economic Forum kicks off in Davos tomorrow: Setting the tone for this year’s event — themed “Stakeholders for a Cohesive and Sustainable World” — is a new WEF/PwC report (pdf) warning that more than half of the global economy (around USD 44 tn) is “moderately or highly dependent on nature…and is exposed to nature loss.”

Technical and legal committees from Egypt, Sudan, and Ethiopia will be in Khartoum this Wednesday to hammer out a draft agreement on the filling and operating timetable for the Grand Ethiopian Renaissance Dam (GERD) ahead of meetings at the end of the month, Ahram Online reports, citing a statement by Sudan’s irrigation ministry. The final round of US and World Bank-sponsored talks in Washington last week ended without resolving key points of disagreement. The sides will return to Washington on 28-29 January to finalize an agreement.

Saturday is a day off for any private-sector companies for whom it would normally be a workday in official observance of Police Day, which is also the anniversary of the 25 January revolution.

Our friends at AmCham will host US Ambassador John Cohen for its monthly luncheon on Tuesday, 28 January. Cohen will discuss prospects for commercial ties between Egypt and the US. Members can register for the event here.

CI Capital’s annual MENA Investors Conference gets underway on Tuesday, 28 January at the Four Seasons Nile Plaza. The three-day event will wrap on Thursday, 30 January.

Egypt ranks 58 Most Innovative Nation: Egypt is ranked 58 out of 60 countries in the 2020 Bloomberg Innovative Index; Egypt is one of four countries to make their debuts on the list this year. The annual report ranks countries based on metrics including their research and development spending, manufacturing capability and concentration of high-tech public companies. Germany snapped the top rank as the world’s most innovative nation, breaking South Korea’s six-year run.

Roula Khalaf took over from Lionel Barber as the Financial Times’ editor on Friday, making her the first woman and the first person of Middle Eastern origin to hold the position. Khalaf, who has been at the salmon-colored paper since 1995, has been deputy editor for the past four years, according to her bio.

***Did you miss our annual reader poll? We’re giving you one last chance to tell us what you think will happen in 2020 and maybe get an Enterprise mug and our very own coffee. Every year we ask you, our readers, to weigh in on what you expect for the year ahead: Are you investing? Do you plan to hire new staff in 2020? How do you think the EGP will perform? What’s your take on interest rates? Tell us, and we’ll share the results with the entire community in early January to help you shape your view of the year. The survey is quick, we promise.

You can take the Enterprise Reader Poll here.

As a token of our thanks, we’re going to send up to 50 readers their very own Enterprise mug and a bag of our special coffee blend, produced in association with our friends at 30 North. Want a chance to get a mug of your own? Make sure you give us your name and complete contact information at the bottom of the survey.

Passive fund managers would actually quite like a recession: A growing number of ETF providers believe that a recession could scare investors into pulling bns of USD from mutual funds and pile into low-cost ETFs, Bloomberg reports. It sounds strange, given that ETFs would almost certainly take a hit in the event of a market correction. But the theory is that a recession would over the long-term cause investors to dump their active funds in favor of their cheaper cousins. This is what happened in 2007-2008, which Rich Powers, head of ETF product management at Vanguard, argues was “one of the great catalysts” for the growth of the now-USD 4.5 tn industry.

(Remember: As we’ve noted before, nobody’s entirely sure will happen in a massive selloff, and ETFs are part of the problem. JPMorgan estimated in late 2018 that as much as USD 7.4 tn in assets “could be subject to forced selling by passive funds during the next downturn.” Deutsche Bank said at the same time that it saw an algo-led selloff as the biggest risk of 2019. As it is, the Wall Street Journal estimates that roughly 85% of all trading is on autopilot — controlled by machines, models or passive investing approaches.)

The success of passive fund management is “built on a fallacy” that they guard against human error, which is simply not the case, Jonathan Guthrie writes for the Financial Times. Funds tracking bonds and stocks don’t actually eliminate human errors because they essentially track the bonds and stocks selected by — you guessed it — humans. Passive fund management largely owes its success to the relatively minuscule fees they charge, which have put them on course to control over 25% of S&P 500 equity within the next eight years.

Investors look for inflation hedges as Powell eyes higher inflation: Money managers are channeling funds into safer Treasury inflation-protected securities (Tips), commodity-linked funds and gold to hedge against Federal Reserve chair Jay Powell’s push for higher inflation, the FT reports.

China will start talks with American companies to increase its imports of US-made goods after the two countries struck a “phase one” agreement that will see Beijing commit to buying USD 200 bn-worth of US goods over the coming two years, reports Reuters.

Feeling optimistic about how the US-China detente will improve 2020 investment prospects? Here’s a dose of scepticism to balance that out: The preliminary agreement between Washington and Beijing has pushed the global stock market to new records, but financial markets may be getting ahead of themselves, argues the Financial Times’ Michael Mackenzie. Optimistic investors, Mackenzie argues, aren’t giving enough consideration to future snags, including the fact that the phase one agreement won’t remove all of the US’ tariffs on China for another couple of years. Meanwhile, the RMB rally against the USD may be great news for those of us in emerging markets, but is more on the bad side for S&P 500 companies.

It’s kicking off again in Beirut: More than 100 people have been injured during clashes in Beirut as security forces fired tear gas, water cannon and rubber bullets at hundreds of anti-government protesters outside parliament, AP reports. Protests against government corruption and economic mismanagement began last October and led to the resignation of Prime Minister Saad Hariri and his cabinet at the beginning of November. Violence broke out again last week amid building frustration with politicians’ inability to form a new government and tackle the country’s economic crisis, the AP said.

World’s U15 table tennis champ gets corporate backing: Continuing with the theme of “Egyptians kick [redacted] at racquet sports other than tennis” (see: squash), we are delighted to note that the world under-15 table tennis champion is 12-year-old Hana Gouda, who recently signed up EFG Hermes’ consumer finance app ValU as her official sponsor.

*** 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: We look at reactions to the Education Ministry’s decision to provide an avenue for exemption to its 20% ownership limit on private and international K-12 schools.

Business and econ finally got a brief look-in on the airwaves last night after more than a week of pure politics.

President Abdel Fattah El Sisi is in London today for the UK-Africa Investment Summit, Al Hayah Al Youm’s Lobna Assal said (watch, runtime: 1:59). Min Masr’s Amr Khalil interviewed Michael Osu, the co-founder of Capital Markets in Africa, who said that the conference will bring together experts from across the world to discuss investment prospects (watch, runtime: 11:41). El Hekaya’s Amr Adib also took note of the event (watch, runtime: 2:06).

The EGP’s recent appreciation against the greenback got some love from El Hekaya’s Amr Adib, who phoned National Bank of Egypt VP Yahya Aboul Fotouh, who said the EGP is strengthening on the back of foreign inflows into Egyptian portfolio investments (watch, runtime: 3:21).

Other than that, politics again took center stage: Al Kahera Alaan’s Lamees El Hadidi covered yesterday’s Libya peace conference in Berlin, which saw agreement among world powers to abide by the UN arms embargo, ban weapons shipments and end foreign interference in the country’s civil war (watch, runtime: 2:48). El Hadidi phoned a Berlin-based Al Hadath reporter who said that the parties agreed to disarm the militant groups and monitor the ceasefire, but that there is yet to be any detailed plan (watch, runtime: 6:12). We have more on the conference in this morning’s Speed Round, below.

The president’s meeting with Pompeo got a mention: Al Hayah Al Youm’s Lobna Assal mentioned President Abdel Fattah El Sisi's meeting with US Secretary of State Mike Pompeo on the sidelines of the conference (watch, runtime: 3:20). Assal said the two discussed ways to solve the Libyan conflict, but made no mention of Pompeo’s comments on the death of US citizen Mostafa Kassem (more on that in this morning’s Egypt in the News, below).

Our gas hub is bigger than your gas hub: El Hadidi phoned head of the Egyptian Center for Strategic Studies Khaled Okasha, who took offence to a tweet posted by Israeli PM Benjamin Netanyahu which claimed Israel was now a “world power exporter.” Okasha suggested that Netanyahu was implicitly claiming regional gas hub status as an electioneering strategy and insisted that he was exaggerating Israel’s power as an energy exporter (watch, runtime: 9:03).

M&A WATCH- Dubai’s Alcazar Energy is considering offloading its Egypt and Jordan assets in a sale that could reel in at least USD 500 mn, Bloomberg reports, citing sources familiar with the matter. The renewable energy firm is currently in talks with banks over the potential transaction, which will likely receive interest from MENA-focused PE firms and energy companies, the sources said. No final decision has been made as of yet, and Alcazar could ultimately decide to scrap the plan, the business information service said.

Background: The company completed last year four solar power plants in Aswan’s Benban park with a combined production capacity of 200 MW, and was previously reported to be eyeing USD 500 mn-worth of wind projects in Egypt.

M&A WATCH- AfricInvest, MDP enter into ‘partnership’: Egyptian payment company Masria Digital Payments (MDP) last week signed a partnership agreement with regional private equity outfit AfricInvest to help it launch end-to-end payment processing, EFG Hermes said in a press release (pdf). The announcement by the investment bank, which acted as the financial advisor to MDP, comes less than a week after local press reports claimed that AfricInvest had acquired a 40% stake in MDP and that the transaction would be completed through a capital increase by the fund and the sale of a stake from businessman Ahmed Nafea’s 100% share. A source close to the transaction told Enterprise that the specifics of the domestic press report were “inaccurate,” but declined to disclose further details beyond confirming that AfricInvest had acquired a stake. Neither party has disclosed the terms or value of the sale.

Advisors: EFG Hermes acted as the financial advisor to MDP, while Al Tamimi & Company served as legal counsel. PwC acted as the financial advisor to AfricInvest and White & Case provided legal counsel

AfricInvest also plans to launch a new USD 250 mn fund by the end of June, fund partner Ismail Talbi told the local press, adding that the fund is targeting an eventual close at the USD 500 mn mark.

Background: AfricInvest is a Tunisia-based private equity firm which has recently entered Egypt after acquiring a stake in Carbon Holdings. MDP, meanwhile, was a Nilex-listed company until it decided to voluntarily delist its shares in 2015. When it last made a bourse filing in that year, it had EGP 10.8 mn in capital and c.EGP 10.5 mn in half-yearly earnings, Al Mal said last month.

M&A WATCH- Pioneers Holding requests 30-day extension for MTO deadline to appoint new financial advisor: Pioneers Holding has submitted a request to the Financial Regulatory Authority (FRA) for a 30-day extension to submit its mandatory tender offer (MTO) for five of its subsidiaries to appoint a new independent financial advisor to conduct fair value assessments , according to an EGX disclosure (pdf). Pioneers had appointed Fincorp for the assessment, but the FRA suspended last week Fincorp from carrying out valuation studies for three months over an unrelated fair value report for the Egyptian International Tourism Projects Company (Americana Egypt).

Background: Pioneers Holding had already submitted its MTO for a 90% stake in five of its subsidiaries last week after having had their deadline for MTO pushed back in late December while Fincorp conducted its financial evaluation. Pioneers Holdings’ board of directors had agreed to make non-cash mandatory tender offers in early October.

REGULATION WATCH- FRA committee suggests closing auction mechanism for EGX share pricing: A proposal tabled by the Financial Regulatory Authority’s stock exchange advisory committee could see the EGX start conducting auctions to determine the closing price of shares, industry sources told Al Mal. As it stands, closing prices are calculated as the total value of transactions made on a given share divided by the absolute number of transactions made over the course of a day, or a weighted average.

The auction mechanism: If the proposed mechanism is adopted, the EGX would conduct a closing auction toward the end of the session in which it would receive buy and sell orders. The price set by the auction would override the weighted average calculated from the latest session price. At least five brokerages would need to place buy orders, and five sell, for the auction price to be accepted. If this condition isn’t met, the weighted average would become the closing price.

Background: Officials have been discussing changes to how closing share prices are calculated since 2018. There are several other scenarios that could include using the average price during the last hour of the trading day or only using the volume of trade, EGX boss Mohamed Farid said then.

STARTUP WATCH- Swvl co-founder and former COO Mahmoud Nouh has launched a fintech startup called Capiter, months after leaving Swvl to “pursue new personal goals,” Menabytes reports. Nouh is listed as Capiter’s co-founder and CEO, working alongside co-founder and COO Ahmed Nouh. According to its website, Capiter reads like a tech-enabled provider of factoring services, writing that the company “pays suppliers immediately” when they sell to a client and then “collects the payments from [the clients] on flexible payment plans.” Capiter is currently in conversation with different investors in the region, Menabytes claims, to raise money to support its growth.

Egypt to directly award West Med oil and gas exploration rights: Egypt will directly award contracts for oil and gas exploration blocks in the western Mediterranean to companies equipped to drill in deep water, Oil Minister Tarek El Molla told CNBC Arabia (watch runtime: 3:20). The government plans to offer some concessions through bid rounds, but the priority is to select companies with advanced technology to drill in the area, the minister said, adding that legislation for this will be announced this year. Egypt’s west Mediterranean coast has up until now remained unexplored for hydrocarbons.

A change of plan: State-owned gas firm EGAS was originally expected to put 11 gas exploration blocks up for auction this quarter.

The announcement comes less than a month after a successful Red Sea bid round, which saw three exploration blocks covering 10k sqkm awarded to Chevron, Shell and Mubadala at the end of December.

It has been an eventful week for the gas sector, which has seen Israel finally begin exporting gas to Egyptian shores, the formalizing of the seven-member East Med Gas Forum, and the near-completion of Eni’s Zohr field.

Egypt to stop importing railcars by October 2020? The government will no longer need to import railcars from abroad after completing the development of the Arab Organization for Industrialization’s (AOI) Semaf railway factory in October 2020, Prime Minister Moustafa Madbouly said during a visit to the factory, according to a cabinet statement.

What does this mean for Egypt’s current contracts? Madbouly said that the government will stop importing railcars and begin buying the factory’s entire production but did not clarify what this means for the contracts Egypt has already signed with foreign companies. Egypt is still scheduled to receive 90 locomotives from GE under its USD 575 mn contract, having only received the first batch of 10 in December. The Egyptian National Railways Authority was also poised to issue a tender for 100 locomotives towards the end of last year, in which Siemens and Bombardier showed interest. And only two months ago the government signed a new USD 466.3 mn contract with US firm PRL to purchase 50 new locomotives.

World powers pledge to end interference in Libya: Egypt, Russia, Turkey and nine other countries yesterday pledged to wind down the escalating proxy conflict in Libya and end interference in the country’s years’ long civil war, Reuters reports. Countries that have been actively supporting either the UN-recognized Government of National Accord (GNA) or eastern military commander Khalifa Haftar have said they will respect an existing UN arms embargo and stop sending weapons into the country. Those found in breach of the embargo will face UN sanctions, according to a draft communique obtained by CNN.

Haftar, GNA agree to further ceasefire talks: Haftar and GNA Prime Minister Fayez Al Serraj have nominated five military figures to join a committee to conduct further ceasefire talks, German Chancellor Angela Merkel told reporters after the conference, according to the Associated Press. Haftar’s forces — backed by Egypt, Russia, the UAE and France — have tried in recent weeks to rapidly seize control of Tripoli, but an uneasy ceasefire agreed last week seems to be holding, although Libyan officials reported shelling in the capital yesterday ahead of the conference.

Haftar turns the screw on country’s oil production: Forces allied to Haftar yesterday shut down the pipeline linking the country’s largest oil field to the coast, exacerbating production problems caused on Saturday when the general blocked oil ports in the east and center of the country, Bloomberg reports. A spokesperson for the country’s National Oil Company said that the country will now only be able to export 72k bbl/d, down from its normal 1.2 mn bbl/d capacity, depriving the GNA of a vital source of revenue.

Egypt so far silent: Ittihadiya and the Foreign Ministry are yet to issue official statements on yesterday’s agreement, with the ministry noting only minister Sameh Shoukry’s meeting with senior EU officials and the Italian foreign minister on the sidelines of the conference.

Egypt ranked #36 in Best Countries 2020 report: Egypt has been named the 36th best country (just that — best country — we swear) in an annual ranking published by US News (pdf), putting us dead in the middle of the list of 73 nations surveyed. The report measures the global perception of a country across a number of categories through conducting interviews with more than 25k participants across 36 countries. Egypt ranked highly in the heritage category coming in at #13, but for economics and social metrics the country performed poorly. We’re ranked near the bottom pile at #69 for being open for business, #52 for entrepreneurship, and #54 for quality of life.

The CEO of Edita teaches us a few lessons in finding inspiration and pursuing dreams: Edita was always the dream for Hani Berzi, the CEO and founder of the food manufacturing brand. Berzi played football, studied engineering, and went into trading for a while, but nothing called to him. Not until he had a packed croissant and decided that he would create the “second generation of snack foods” for the Egyptian public. It goes to show that inspiration can come from the most simple places. And come it did. Fast forward over two decades later and the company has become a household name here in Egypt.

You can listen to the episode (runtime: 36:11) on: Our website | Apple Podcast | Google Podcast

The lock of hair that was stolen from an Egyptian Queen and placed in the stars: The constellation shown above is called Berenice’s Hair and it’s the only modern constellation to be named in honor of a real person from history. Queen Berenice II of Egypt was born in 280 BC and married King Ptolemy III. She’s known for ruling the country while her husband led a war against Antiochus III the Great. On another note, she’s also known for having beautiful hair, and the myth foretells that she sacrificed a lock to the Goddess Aphrodite as an offering to ensure her husband's safe return from battle. It was that same lock that was stolen and placed among the stars, creating the constellation we see centuries later.

President Abdel Fattah El Sisi’s meeting yesterday with US Secretary of State Mike Pompeo in Berlin is getting a lot of attention in the foreign press. Pompeo “expressed outrage” to the Egyptian president over the death of US citizen Mostafa Kassem in Egyptian custody, a State Department spokesperson said. The secretary of state brought up the subject during a meeting on the sidelines of the Libyan peace conference in Berlin yesterday. Kassem’s death after a hunger strike has caused tensions with the US, with several senators calling for sanctions on Egypt and Washington’s top Middle East diplomat describing his death as “needless, tragic and avoidable” (AP | AFP | Reuters | CNN). Meanwhile, another opinion piece in the Washington Post argues that Kassem’s death proves the ineffectiveness of hunger strikes to pressure some governments.

Egypt’s human rights record came under scrutiny in Human Rights Watch’s annual World Report 2020, which criticized last year’s constitutional amendments that extended presidential terms to six years, among other things. The report also pointed to rights violations by Daesh in North Sinai, saying some of them “amount to war crimes.”

Why is the S&P 500 gaining amid the macro headwinds? The S&P 500 seems almost invincible these days, standing strong in the face of a slowing economy, weaker earnings, high valuations, a trade war, and rising Middle East tensions. Why are investors still bullish through all these obstacles? The Financial Times (watch, runtime: 04:00) gives a three-letter explanation: Fed. The US Federal Reserve maintained a slack monetary policy and low rates through the entirety of the previous decade, and this makes investors optimistic that the stock market will continue to go up.

International Organization for Migration Director General Antonio Vitorino lauded Egypt for curbing illegal migration via the Mediterranean Sea in a Saturday meeting with Prime Minister Moustafa Madly and Immigration Minister Nabila Makram, according to a cabinet statement.