AM — EBRD to help Egypt wind down gas-fired power plants

Good morning, friends. We have a brisk, newsy issue for you this morning.

THE BIG STORY HERE AT HOME remains the crisis at Capiter. The new parlor game: Trying to guess which high-profile startup is next.

The story hasn’t moved forward much since yesterday: Interim CEO Majid El Ghazouli told Al Hadath Al Youm (watch, runtime: 4:00) last night that the board of directors hasn’t taken a formal decision to liquidate the company. Dismissing the news of layoffs, he said Capiter is in the process of examining acquisition and investment offers by foreign investors who are still interested in the startup. Asked about the allegations of financial impropriety against the company’s founders, Mahmoud and Ahmed Nouh, he said simply that “the law will take its own course.”

Keep it all in context: Yes, more than a handful of startups are suffering as venture capital funding slows down. Some won’t make it. But that doesn’t mean that all of their founders are crooks. Business failure is a messy thing — and a topic we (as a community) are not used to discussing in public. It’s entirely possible for a business to fail without a founder absconding with funds. In fact, companies routinely fail despite the best efforts of execs and of the boards that are ostensibly in place to keep those execs on the straight and narrow.

EGP WATCH- The EGP continued yesterday its very slow crawl toward a new record low, slipping to EGP 19.39 from EGP 19.36 on Thursday. The currency has now fallen by 22.9% against the USD since the devaluation in March and is closing in on the 19.56 mark set in December 2016, when it overshot against the greenback following that fall’s sharp devaluation.

PSA- Apple’s iOS 16 is out today. You can download it by going to Settings > General > Software Update if you’re on an iPhone 8 or newer device. Among the new features worth checking out are customizable lock screens (you can have more than one — with widgets, if you like), a new notifications experience on your lockscreen, the ability to edit or un-send iMessages (with caveats), and Passkeys (a cross-platform technology that promises to do away with passwords). You can check out iOS 16’s full set of features here.

HAPPENING TODAY-

Our friend Dr. Mahmoud Mohieldin will join the good folks at AmCham for a luncheon from 1-4pm CLT. Dr. Mahmoud will by speaking in his capacity as UN climate change high-level champion for Egypt. The special luncheon meeting at the Nile Ritz Carlton is open to AmCham members and their guests. Non-members can register to watch here.

Consoleya and Cairo Angels are hosting a business meet-up focusing on Nigeria’s tech ecosystem and how it compares with Egypt’s startup scene. Tarek Shahin (CI Capital’s chief investment officer), Biola Alabi Media CEO Biola Alabi, and Ibrahim Sagna (Afreximbank’s global head of advisory and capital markets) and take part in a panel discussion moderated by Aly El Shalakany, CEO of the Cairo Angels Syndicate Fund.

HAPPENING THIS WEEK-

Domty deadline day: Shareholders in cheesemaker Domty have until Wednesday to sell their shares to Expedition Investments, as part of its mandatory tender offer for 34% of the company. Expedition sweetened the deal by upping its offer price by 10% last week, which we cover in more detail in this morning’s news well, below.

B Investments is going to have to make up its mind over TotalEnergies Egypt by Thursday: The private equity player has the right to preempt a bid by Abu Dhabi energy giant Adnoc to acquire a 50% stake in the company, which expires on Thursday.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

THE BIG STORY ABROAD-

Ukraine builds on recent battlefield gains: Ukraine is continuing to push Russian troops back in Kharkiv province, the country’s army chief said yesterday.

And Moscow responds: Russia struck power stations and other civilian infrastructure in response to the Ukrainian counteroffensive.

The latest from Ukraine is on all the front pages this morning: AP | Reuters | WSJ | Bloomberg | FT | NYT | Washington Post.

The Egypt-International Cooperation Forum (Egypt-ICF) wrapped on Friday. The three-day conference saw a slate of news on climate finance to the African continent: International Cooperation Minister Rania Al Mashat launched a guidebook to

COP27 climate finance efforts, the EBRD pledged up to USD 1.3 bn for local clean energy projects, and officials proposed ways to address spiraling green borrowing costs. For the details on everything that happened in the final two days of the conference, catch this morning’s edition of Enterprise Climate.

ICYMI-

Missed this week’s Inside Industry? In our weekly vertical exploring all things industry and manufacturing, we looked at how industrial stocks have been performing on the EGX.

*** 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 how education stocks have been performing on the EGX.

More details on EBRD clean energy funding: The European Bank for Reconstruction and Development (EBRD) will provide USD 300 mn in funding to Egypt to help it decommission 5 GW of gas-fired power plants from 2023, Heike Harmgart, the bank’s managing director for the Southern and Eastern Mediterranean, told Reuters. The money will be spent on stabilizing the country’s electricity grid, adding battery storage, upgrading local supply chains for renewables, and retraining workers, she said.

This is part of the bank’s USD 1.3 bn funding pledge announced last week, which includes USD 1 bn in financing for renewable energy projects. This would account for roughly one tenth of the private funding Egypt needs to add 10 GW of renewables capacity by 2028, Harmgart said.

ALSO FROM THE EBRD-

Money for EVs in Egypt: The EBRD is also providing a EUR 10 mn loan to our friends at Abou Ghaly Motors to fund the purchase of 250 electric vehicles for its taxi fleet, it said in a separate statement. Around EUR 3 mn of that funding will come from the UK’s Foreign, Commonwealth and Development Office. The company will use the money to electrify its London Cab fleet, which are used to provide taxi services as well as airport transfers in Cairo, Sharm El Sheikh and Hurghada.

AND- Banque Misr green on-lending loan confirmed: The lender confirmed last week that it would go ahead with the USD 100 mn loan to Egyptian state bank Banque Misr approved in January. The financing will be on-lent to local SMEs looking to invest in climate mitigation and adaptation technologies and services, the bank said.

e-Finance announces big share buyback program: EGX-listed fintech operator e-Finance will buy back 5% of its shares over the next nine months in a bid to support its share price and boost investor confidence, the company said in an EGX disclosure (pdf) posted on trading screens yesterday. The program could see the company purchase as many as 92.4 mn shares, costing it some EGP 1.46 bn at the current share price, according to our math.

e-Finance’s shares have slid this year even as it delivers solid operational results: The company’s share price has fallen 23.7% YTD, and has shed 14.2% over the past five weeks. The company’s net income doubled y-o-y to EGP 279.3 mn in 2Q 2022 while its revenues rose 59% in the same period.

Traders cheered the buyback program: Shares rose as much as 3.4% during trading yesterday, before paring some gains to close at EGP 15.41, up 2.8% for the day.

The rationale: “The company’s shares are currently trading at a level that does not reflect its real value, after the market suffered hits from the EGP devaluation and other global economic crises,” a company official told Enterprise.

e-Finance could use the buyback program to bring in another long-term shareholder: The company will likely resell the shares in a block transaction to an investor within a year of completing the buyback program to avoid any negative impact on its share price, the official said.

The move comes a month after the Saudi wealth fund became the company’s largest shareholder: The Public Investment Fund purchased last month a 25% stake in the state-owned company in an EGP 7.5 bn transaction, becoming its single-biggest shareholder. State-owned enterprises collectively own 49.1% of the company’s shares while the remainder are freefloat.

The EGX has seen tough times since the company made its EGP 5.8 bn market debut in November 2021: Inflationary pressure, rising interest rates in western economies, and a downturn in global markets have all contributed to a steep decline in the EGX 30 this year as investors have exited stage right in a risk-off. The benchmark index fell to its lowest level since November 2016 earlier this year, before paring losses in a recent rally. It is currently down 14.1% YTD.

e-Finance isn’t the only company to repurchase shares: Edita also last month announced plans to repurchase 5% of its shares in August and September to shore up its share price, which is now up 14% YTD and 19.7% since the buyback announcement.

AMOC responds to PIF rumors: Alexandria Mineral Oil Company (AMOC) has not received any information on the Saudi sovereign wealth fund’s reported intention to acquire a minority stake in the company, it said in a disclosure (pdf) yesterday in response to reports in the local press. Al Shorouk reported on Saturday that the Public Investment Fund (PIF) is interested in acquiring stakes in several leading EGX-listed petrochemical companies, including AMOC, under its pledge earlier this year to invest USD 10 bn in the country.

Market reax: AMOC was up 1.67% to EGP 4.30 at market close.

The PIF has been linked to many companies — but the fund has been tight-lipped: Anonymously sourced press reports have also linked Egyptalum and Egyptian Media Production City (EMPC) to the PIF in recent weeks though none have been publicly confirmed by the parties involved, with the target companies either being tight-lipped, unclear or disregarding the news altogether.

Two transactions we are sure about: Sources have told us in recent weeks that the PIF is interested in purchasing shares in Vodafone Egypt and is in talks with the central bank to take over United Bank.

The PIF has already made a handful of acquisitions: The fund acquired in August minority stakes in four EGX-listed companies for USD 1.3 bn through its newly established Egypt investment arm. The shares it took in e-Finance, Mopco, Abu Qir, and Alex Containers are the first of USD 10 bn pledged by the fund earlier this year as part of Saudi efforts to support Egypt’s external position, which has been rocked by soaring commodity prices as well as outflows from our debt market, and a weaker EGP. Abu Dhabi wealth fund ADQ led with similar moves, purchasing state-owned stakes in five companies for around USD 1.8 bn in April. There’s talk that the Qatari sovereign fund is poised to follow suit.

The government’s latest tourism targets are ambitious: The government wants to more than triple annual tourism revenues over the next three years, Prime Minister Moustafa Madbouly said in a televised statement yesterday (watch, runtime: 1:48). Speaking during a tour of the COP27 venue in Sharm El Sheikh, the prime minister said the government is aiming to increase revenues to USD 30 bn a year, up from almost USD 9 bn last year (and USD 11-12 bn currently, he said), as it tries to help the sector recover from years of disruption.

Tourism is gradually recovering from its annus horribilis: Tourism — a vital source of foreign currency for Egypt — brought in USD 8.9 bn in revenues in 2021, according to central bank figures. This is more than double that of 2020 when the covid-19 pandemic caused revenues to plunge almost 70%, but still well below the record high of USD 13 bn in 2019.

Crisis? What crisis? The ambitious target suggests that the government doesn’t see current (read: Russian-Ukrainian crisis) or future geopolitical crises having a huge impact on the sector. The Finance Ministry earlier this year came out with an optimistic forecast for the first half of 2022 that suggested the market would move quickly past the loss of Ukrainian and Russian visitors, which before the war accounted for more than 30% of all tourist arrivals. Recent balance of payments figures showed that revenues fell 21% q-o-q in 1Q 2022, with the central bank saying that the sector had been negatively impacted by the crisis.

The response: Egypt has been working overtime to attract visitors from other European markets to drive inbound traffic, with efforts also including luring tourists from little-tapped markets in Latin America and other markets, including the Gulf. In response to the war, the government launched an international promotional campaign — dubbed #FollowTheSun — in mid-March to better exploit profitable tourist markets in Europe and the US. It also widened the number of people eligible to obtain a visa on arrival or a pre-arrival electronic visa under efforts to back the key sector.

The private sector is key: Madbouly stressed the importance of the private sector and the necessity of an implementation plan that includes the sectors’ demands and targets to help achieve the USD 30 bn figure. He said he met earlier yesterday with several tourism investors, where he affirmed that the government would continue to support the sector like it had in the past years in light of multiple crises pressing the sector.

Preparations for November’s COP27 summit got attention across the airwaves last night after Prime Minister Moustafa Madbouly paid a two-day visit to Sharm El Sheikh to inspect the venues.

Sharm will soon be COP-ready: Most of the preparations for the summit will be finished by the end of this month, cabinet spokesman Nader Saad said on Al Hayah Al Youm (watch, runtime: 4:18). That includes the upgrades to the city’s airport, which will now be able to handle larger passenger volumes, Sharm Governor Khaled Fouda told Ala Mas’ouleety (watch, runtime: 18:49). Meanwhile, the 18 EV charging stations being installed by our friends at Infinity will be up and running by the end of September, company spokesperson Hesham El Gamal told Kelma Akhira (watch, runtime: 2:56).

Ticket prices for the Pyramids aren’t getting more expensive — yet: Entry prices for the Giza Pyramids Plateau will remain unchanged until next 1 May, Secretary-General of the Supreme Council for Antiquities Mostafa Waziri told Kelma Akhira (watch, runtime: 4:39). Ticket prices are currently set at EGP 200 for foreign visitors, and EGP 60 for nationals, with exemptions for some, he said.

On the subject of tourism: Madbouly’s ambitious tourism revenue targets got coverage, with Deputy Tourism Minister Ghada Shalaby phoning in to El Hekaya to discuss the announcement (watch, runtime: 7:53). More on this in this morning’s news well, above.

The National Dialogue remained one of the most talked about topics last night after the board finished appointing rapporteurs to the committees on Saturday. Al Hadath Al Youm (watch, runtime: 7:37), Al Hayah Al Youm (watch, runtime: 2:18) and Ala Mas’ouleety (watch, runtime: 5:10) all had coverage.

International journos are taking a day off Egypt: Check back tomorrow.

Belgium has returned two artifacts to Egypt that were smuggled illegally out of the country, the Tourism Ministry said in a statement yesterday. The two statues, one of a wooden ushabti and another from the Old Kingdom period, were seized by Belgian authorities in 2016 from a gallery after its owner failed to provide documentation on its provenance.

FinMin wants to expedite tax appeals: The Finance Ministry will establish “integrated” tax appeal committees responsible for settling disputes between the Tax Authority and medium and large taxpayers, according to a cabinet statement. The committees will expedite settlements related to income tax, VAT, stamp duties, and development fees.

El Sewedy on board for Toshka reclamation: El Sewedy Electric for Trading and Distribution has been awarded EGP 2.2 bn worth of contracts as part of the project to reclaim land for wheat farming in Toshka, it said in an EGX disclosure (pdf). The project includes the reclamation of 375k feddans and is set to be completed within a six-month period.

Foreign Minister Sameh Shoukry called for an agreement on the Grand Ethiopian Renaissance Dam (GERD) as soon as possible during talks with UN envoy for the Horn of Africa Hanna Tetteh. (Foreign Ministry)

Egypt-India talks: Shoukry also discussed bilateral ties and India’s participation in the upcoming COP27 summit with his Indian counterpart, Subrahmanyam Jaishankar. (Foreign Ministry)

Defense Minister, Centcom chief meet: Defense Minister General Mohammed Zaki held talks with US Central Command General Michael Kurilla in Cairo. (Armed Forces)

There’s good news and bad news on the global food crisis this morning:

The bad news first: Is Erdogan having second thoughts on the Ukraine grain pact he brokered? Turkish President Recep Tayyip Erdogan backed Russian counterpart Vladimir Putin’s criticism of the landmark grain agreement that Turkey brokered with the UN in July, the Financial Times reported Thursday. Erdogan said that Putin was “right” in saying that shipments of Ukrainian grain were mostly going to rich countries rather than poorer ones in greater need amid a global crisis in food supply.

Yes, but… As of 8 September, less than half of shipments have gone to high-income nations, according to UN data cited by the salmon-colored paper. Some 28% of shipments were sent to lower-middle income nations, including Egypt, India, Iran and Sudan, Turkey and China had received 21% and 7% respectively, and 44% went to richer countries.

Market reax: Wheat futures spiked to their highest level since 12 July on Wednesday on fears that Putin could undo the agreement and block exports of Ukrainian grains.

The good news: France and Romania will sign an agreement today to increase exports of Ukrainian wheat to developing countries in the Mediterranean, Reuters reported, citing statements by French Transport Minister Clement Beaune to France Inter radio. A draft agreement seen by the newswire sees France working to increase efficiency and capacity at several Romanian Black Sea ports, helping it to up its wheat exports.

Is Egypt on the list? The two countries have not named target countries though we think it’s likely Egypt will be one of the beneficiaries of the agreement. It’s in the area of interest, it’s a food insecure country, and it’s the world’s biggest importer of wheat. Ukraine is also one of Egypt’s most important suppliers and — together with Russia — accounted for about 80% of our wheat before the war.