ECHEM inks agreement with Bechtel for USD 6.7 bn petchem, refinery complex

We officially became a nation of 100 mn people crammed in like sardines at around noon yesterday, according to CAPMAS’ digital counter, Reuters and the local press report. Baby girl Yasmine Rabie, who was born in Minya, became the 100 mnth Egyptian, Masrawy notes, quoting a source from the state’s statistics bureau. We reached 99 mn citizens last July, and 99.8 mn at the start of this year. The story is dominating the narrative on Egypt this morning in the international press.

It’s really time we started emphasizing family planning, as our population may nearly double to 192 mn by 2052, estimates CAPMAS head Khairat Barakat, who estimates that a “successful” population campaign would limit growth to 143 mn by the same year. Prime Minister Moustafa Madbouly called on ministers last Thursday to devise new strategies to curb Egypt’s accelerating population. The Social Solidarity Ministry launched in 2018 the EGP 100 mn “Two is Enough” family planning program to curtail the country’s birth rate.

It’s day two of the Egypt Petroleum Show: The first day of the exhibition yielded one major agreement — a USD 6.7 bn contract Bechtel signed to set up a petrochem plant in the Suez Canal Economic Zone. The full story is in this morning’s Speed Round, below, and we’ll be keeping our eyes open for more news coming out of the gathering today.

The (hopefully) last round of GERD talks get underway in Washington today as Egyptian, Ethiopian, and Sudanese ministers work toward common ground on a timetable for filling and operating the Grand Ethiopian Renaissance Dam. Foreign Minister Sameh Shoukry and Irrigation Minister Mohamed Abdel Ati met yesterday with Egypt’s technical team, which has been in the US capital for the past two weeks to hammer out the details of a final agreement on the dam, according to a Foreign Ministry statement.

Elsewedy Industrial Development and Elswedy Electric are on a European roadshow this week to promote Egypt as an investment destination. Company officials have met with French industry leaders and will head to several German cities over the next few days.

Key dates coming up this month:

• Global VC group Kauffman Fellows kicks off its three-day visit to the capital tomorrow.
• The Central Bank of Egypt will meet to review interest rates a week from tomorrow.

Big Global Story of the Day #1- The US Fed is “closely monitoring” the risk presented by the Wuhan coronavirus (which the WHO now insists is called COVID-19), chairman Jay Powell told Congress yesterday, noting, “we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.” It’s too early to predict what, exactly, the impact might be, he added. The FT and Reuters have the Powell story, while CNBC notes that another 97 infected people died yesterday (bringing the death toll to 1,115) as total cases now top 44k.

Big Global Story of the Day #2- Bernie Sanders, Pete Buttigieg, and Amy Klobuchar are clustered together in the top three as early results from the Democratic primary in New Hampshire trickle in, with each commanding 20-26% of the counted vote as we hit “send” on this morning’s edition. Elizabeth Warren was a distant fourth at dispatch time, while Joe Biden (who left early for South Carolina, where he has consistently said he had a better chance of winning) was in fifth place. Entrepreneur Andrew Yang, who we genuinely loved for his open discussion of the dangers of our Future Robot Overlords, has dropped out of the race for the nomination.

Want to follow the results as they come in? Head over to the New York Times, Politico, or Reuters, as you prefer.

Ethical investments are starting to catch on in the bond market: Increasing awareness of sustainable investments and greater regulatory clarity will produce strong growth in the sustainable finance market this year, Moody’s Investors Service said. Issuances of green, social and sustainability bonds will rise 24% to USD 400 bn this year, with green bonds alone accounting for USD 300 bn. Around USD 75 bn in sustainability bonds and

USD 25 bn in social bonds will be offered to investors.

Toyota this week became the first company to issue green bonds in the US market this year with a USD 750 mn offering of 10-year bonds to finance its clean car business, Bloomberg reports. The company sold USD 5.3 bn-worth of the environmentally-friendly securities last year.

Environmental, social and governance issues are of increasing importance in investment decisions and credit quality assessments, potentially placing carbon-intensive sectors at risk, Moody's said in a separate report. Climate change and transition to a low-carbon economy are increasingly relevant for global credit markets, with both resource and risk management under scrutiny by investors ever more aware of their financial implications.

And in a rare piece of hopeful climate news: Global carbon dioxide emissions may have peaked last year, according to International Energy Agency head Fatih Birol. Carbon emissions from energy have plateaued after the use of coal in advanced economies fell by 15-25% last year, and an acceleration in the use of cleaner energy sources has Birol hopeful that emissions will actually begin to decline in the coming years. The FT has more.

Lebanon might need to seek IMF assistance to pull itself out of economic turmoil, House Speaker Nabil Berri said yesterday, according to Reuters. The fund could be brought in to restructure Beirut’s debts and offer its technical advice on whether to pay or default on its eurobond maturing next month, Berri said. Protests flared up again in the capital city yesterday after the newly-formed government earned a vote of confidence from parliament with a policy statement that “calls for moves including cutting interest rates and seeking foreign help,” the newswire says.

Samsung is hoping a flip phone will help you forget about the corruption: The Korean tech giant yesterday unveiled its new smartphone range as its vice chairman faces a re-trial having spent a year behind bars for bribing former South Korean President Park Geun-hye. The FT has the corruption case, The Verge has the rundown on the handsets, including the Galaxy S20 and the Galaxy Z Flip.

It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, urban development and even social infrastructure such as health and education.

In today’s issue: We break down Egypt’s long-called for railway upgrade and rehabilitation plan. We look at its size and scope and wonder how it might be made achievable.

The Egypt Petroleum Show (EGYPS) was the topic du jour on the airwaves last night. The three-day event has already seen the Egyptian General Petroleum Corporation (EGPC) sign an agreement with US-based construction firm Bechtel to establish a USD 6.7 bn petroleum refinery, which we recap in full in this morning’s Speed Round below. Al Hayah Al Youm’s Hossam Hadad and Lobna Assal (watch, runtime: 3:38) and Min Masr’s Amr Khalil (watch, runtime: 3:33) took note of President Abdel Fattah El Sisi’s inauguration of the expo.

Local and international oil companies’ investments in Egypt’s oil and gas industry have hit EGP 1 tn, USD 35 bn (c. EGP 550 bn) of which were invested under the current administration, Oil Minister Tarek El Molla said (watch, runtime: 1:19).

Egypt hosting an oil and gas event of this magnitude is evidence of our emergence as a regional gas hub, Mohamed Saad El Din, head of the Federation of Egyptian Industries’ energy division, told Min Masr’s Reham Ibrahim (watch, runtime: 8:53).

The coronavirus also got some airtime with talk show hosts — including Yahduth Fi Misr’s Sherif Amer, who phoned Health Minister Hala Zayed — giving us the daily dose of assurance that Egypt is still safe from the epidemic (watch, runtime: 5:21).

ECHEM inks agreement with Bechtel for USD 6.7 bn petchem, refinery complex: The Egyptian Petrochemicals Holding Company (ECHEM) yesterday signed an agreement with Bechtel to establish a USD 6.7 bn petrochemical plant and refinery in the Suez Canal Economic Zone, according to an official statement (pdf). The agreement, signed on the opening day of the Egypt Petroleum Show, will see the US company manage the construction of the complex and secure the funding from international financial institutions. Under the agreement, ECHEM will begin conducting feasibility studies with an international consultancy. Bechtel, Technip and Saipem have already assisted ECHEM in carrying out preliminary studies for the project, the statement said.

BP signs MoU for youth training in Egypt: Oil Minister Tarek El Molla also signed an MoU with BP to support young workers looking to enter the oil and gas industry by providing training programs and workshops, according to a ministry statement (pdf).

Schlumberger and BP inked a separate MoU to cooperate on digitizing the companies’ oil and gas exploration and production process in the Mediterranean Sea, a separate statement (pdf) said.

El Sisi meets CEOs on forum’s sidelines: President Abdel Fattah El Sisi lauded all of the three companies’ activity in Egypt in talks with each of BP CEO Bernard Looney, Schlumberger CEO Olivier Le Peuch, and Bechtel chairman and CEO Brendan Bechtel.

Correction (12/02/2020): A previous version of this article incorrectly stated that the Egyptian General Petroleum Corporation (EGPC) had signed the agreement with Bechtel.

Egypt to launch international gold exploration tender by the beginning of March: The government will launch an international gold exploration and mining tender for areas in the Eastern Desert by the end of this month or early March, Al Mal reports, citing an unnamed source. This will be the first mining tender since the Mineral Resources Act was amended last year and the first for gold exploration since 2017.

A litmus test for the Mineral Resources Act: Egypt’s last mining tender three years ago was met by lackluster investor appetite due to its uncompetitive commercial terms. Gold mines now will get more favorable terms under the executive regulations to the amended Mineral Resources Act, which will see mine owners paying the minimum 5% royalty on their annual production. The amendments have so far received praise from investors but the demand for concessions in the upcoming tender will be a better measure of the government’s reform efforts.

The industry as it currently stands: Centamin is currently the only company producing gold in Egypt from its Sukari mine, while Aton Resources and Thani Stratex Resources are still exploring concession areas but are yet to strike gold. Centamin achieved an 8% bump in production in 2019 (pdf) and plans to increase this figure by at least another 6% to 510k oz this year.

New mining exhibition in the pipeline: Separately, the sources said that the government is preparing for a new conference and exhibition with companies and investors in the mining sector to announce the bid and unveil the most recent developments in the sector before the end of the month. The government will also take part in a similar exhibition in Canada in March.

Egypt’s post-loan IMF structural reform agreement will tackle bureaucracy, says Amer: Egypt is still in talks with the IMF over a post-loan structural reform agreement, which could focus on eliminating bureaucracy to clear a significant hurdle in attracting private sector investment, Central Bank of Egypt (CBE) Governor Tarek Amer said at the Egypt Petroleum Show yesterday, according to Bloomberg. Driving home the point that private sector development is a top priority for the government moving forward, Amer said that the CBE has provided a stable FX market with a lower risk premium than in previous years in a bid to attract foreign capital. Reuters also had the story.

When should we expect to see an IMF agreement signed? There’s no clarity yet on that front. Amer said talks are ongoing, but did not indicate a targeted timeline. Finance Minister Mohamed Maait had previously said Egypt and the fund had agreed on aiming to wrap up discussions on the agreement, the duration of which will likely be set at two years, by March. The minister had initially said that the government was aiming to agree on the program by last October, but that plan was swiftly put down by the fund, which declined to enter talks until the end of Egypt’s Extended Fund Facility.

What we know about the potential program so far: The IMF’s Middle East and Central Asia Director Jihad Azour said previously that any future engagement would likely focus on developing the private sector, strengthening welfare provisions, and increasing the transparency of state organizations. Bank of America also suggested back in October that talks could produce a non-loan agreement with a mandatory reserve tranche.

M&A WATCH- Raya receives a bid for 31% stake in its transport arm: Raya Holding has received a EGP 133 mn non-binding offer from British Virgin Islands-based Paradigm Logistics to acquire a 31% stake of its Ostool Shipping Company, according to a regulatory filing (pdf). Raya currently holds a 62.3% stake in Ostool, which was founded in 2010 by Raya Corp and Qalaa Holdings and provides a range of transportation and logistics services. The company’s board of directors will meet today to review the offer.

IPO WATCH- Evergrow For Speciality Fertilizers is planning to sell a 30% stake in an IPO on the EGX by no later than 2022, Chairman Mohamed El Kheshen told the local press. El Kheshen did not specify how much Evergrow is looking to raise from the sale. The company will begin the process of hiring an investment bank to quarterback the transaction soon, he said.

Meanwhile, Evergrow is working on two fertilizers factories expected to cost up to EGP 19 bn, El Kheshen separately said. The first project is expected to cost EGP 9 bn, and will see Evergrow setting up a 50-50 JV with Belgium-based Ecophos. The second will see the company partner with unnamed Egyptian businessmen to set up a EGP 10 bn factory with a capacity to produce 700 tonnes of nitric acid and 1k tonnes of ammonium chloride a day. The company is in talks with several EU- and Gulf-based banks to borrow USD 562 mn (EGP 9 bn) to finance part of the cost, with the remainder coming through its partners or potentially from IPO proceeds. We noted in December that the company had reached an agreement with four local banks for a USD 150 mn loan to restructure its debts, having borrowed USD 200 mn from the National Bank of Egypt, Banque Misr, and the Arab African International Bank to set up a fertilizer factory in 2017, but has only repaid USD 50 mn.

LEGISLATION WATCH- House mulls tax breaks for companies owned by Sovereign Fund of Egypt: The House Planning and Budget Committee approved yesterday proposed amendments to the Sovereign Fund of Egypt (SFE) law that would provide VAT refunds to any company that is more than 50% owned by the SFE and its sub-funds, Al Mal reports. The government plans to set up sub-funds for the SFE to set up to attract investment into the logistics, renewables and manufacturing sectors.

Limiting legal action against the fund also approved: The amendments, which the Madbouly Cabinet had approved in December, would also limit the scope of legal action that can be taken against the fund and would shield contracts the fund has signed from third-party legal challenge. Presidential decrees to transfer public assets to the fund can also only be appealed by the entity which directly owns those assets or by the fund’s management team. Don’t assume the move is state encroachment: There’s a long track record of self-appointed (and very media-hungry) guardians of the public interest challenging privatization decisions taken in the open by cabinet and / or government officials.

The amendments will now make their way to the House general assembly for a final review and vote.

In other SFE news, the sovereign wealth fund will only hold minority stakes in military-owned companies under a recent agreement that will see the fund market army companies to prospective investors, said Planning and Economic Development Minister Hala El Said, according to Al Mal. The cooperation agreement, signed last week between the SFE and military-affiliated National Service Products Organization (NSPO), allows the private sector to obtain stakes of up to 100% in the companies, and paves the way for the companies to sell stakes on the EGX. Its signing came after President Abdel Fattah El Sisi twice said we could soon see army-owned companies and assets on sale as part of the state privatization program.

The SFE is also in talks with several unnamed multinationals to get them to invest in the health and education sectors, El Said told reporters yesterday.

M&A WATCH- Vodafone taps UK-based Linklaters as legal counsel in STC acquisition: Vodafone Group has appointed law firm Linklaters to act as legal counsel in its planned sale of a major stake in Vodafone Egypt to Saudi Telecom Company (STC), the local press reports, citing anonymous sources. Vodafone Egypt has already appointed law firm Zaki Hashem & Partners to act as local legal counsel.

Financial advisors: Vodafone Group tapped Goldman Sachs earlier this week to advise on the transaction, which would see STC acquire its entire 55% stake in the Egypt arm. Goldman will likely bring PricewaterhouseCoopers’ Egypt office on board to act as a local financial advisor, the sources said yesterday.

Background: According to a non-binding acquisition agreement signed between STC and Vodafone Group, the former is moving ahead with due diligence to acquire the 55% stake in a USD 2.39 bn all-cash transaction. STC is required to submit a mandatory tender offer for the remaining 45%, which is almost entirely held by state-owned Telecom Egypt, and could end up acquiring 100% of the company and directly control over 40% of Egypt’s telecoms market.

DEBT WATCH- CIAF to submit prospectus for USD 50 mn sukuk issuance to market regulator within two weeks: Aircraft leasing company CIAF will be ready to submit a prospectus for its USD 50 mn sukuk issuance to the Financial Regulatory Authority (FRA) within two weeks, the local press reports, citing sources familiar with the matter. The company is in the process of amending the prospectus after putting the issuance on hold following shareholder concerns over dividend payments and changes in the board’s structure.

Where does the proposal currently stand? Al Tamimi & Company is currently ironing out the final changes before a CIAF general assembly is held to approve the prospectus and submit it to the FRA.

Background: News of the first sharia-compliant corporate bond offering in Egypt came in December 2019 when CIAF announced plans for a USD 50 mn issuance. The offering will be sold in two tranches: USD 7 mn in 3-year sukuk will be offered locally, and a larger USD 43 mn tranche of 5-8-year bonds will be open to both local and foreign investors.

LEGISLATION WATCH- The Supply Ministry has drafted a unified law to regulate internal trade, Minister Ali El Moselhy said at a press conference yesterday. El Moselhy was scant on details on what the law entails, noting only that a bill is expected to make its way to the House of Representatives by early 2021.

STARTUP WATCH- Vezeeta raises USD 40 mn in series D funding from Gulf Capital and STV: Healthcare app Vezeeta, which has decamped from our beloved city to Dubai, has secured USD 40 mn in a series D round funding led by asset manager Gulf Capital with the participation of Saudi Telecom’s investment arm Saudi Technology Ventures (STV), it said in a statement (pdf) without disclosing how much the investors had contributed. STV had led Vezeeta’s USD 12 mn series C funding round in 2018 which helped the healthcare startup’s expansion to Saudi Arabia. The company, which provides a platform that connects patients with doctors, is now active in 50 cities across Egypt, Saudi Arabia, Jordan and Lebanon and has raised USD 63 mn since its founding in 2012.

EARNINGS WATCH- Americana Egypt profits halve in 2019: Americana Egypt’s net profit plunged 48.4% in 2019 to EGP 15.1 mn down from EGP 29.3 mn in 2018, according to the company’s consolidated earnings statement (pdf). The drop in profits come despite the company seeing revenues rise 11.7% to EGP 4 bn during the year.

MOVES- SODIC board approves Hussein Shoukry’s resignation: HC Securities Chairman Hussein Shoukry’s resignation from the SODIC board was approved effective 31 January, the company said in a bourse disclosure (pdf). Shoukry had submitted his resignation last month.

Egypt’s population hitting the 100 mn mark is leading coverage in the foreign press this morning. The New York Times’ Declan Walsh says that the milestone is “an uneasy moment” as Egypt continues to grapple with population density and poverty, while family planning projects struggle to have a lasting effect on curbing the rising birth rate. The Associated Press also had the story.

Other headlines to skim this morning:

• Improving macroeconomic indicators have yet to translate into better living conditions for the majority of Egyptians, pundit Timothy Kaldas writes for Bloomberg Opinion.
• Egypt’s doctors rally against FGM: Egyptian doctors have started a campaign to raise awareness of the dangers of FGM after the death of a 12-year-old girl in Assiut, reports Reuters.
• Cairo’s loss of green space: At least 390k sqm of green space has been razed in four months as six new highways worth some EGP 7.5 bn are being built between Heliopolis and the New Administrative Capital, AFP reports.
• Not a bird, not a plane — just a donkey on a passenger train: A man has been ordered to pay a fine of EGP 500 after boarding a Qena to Luxor train with his donkey, in violation of rules, Gulf News reports.