Wednesday, 16 November 2022

AM — Egypt goes big on green hydrogen

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, wonderful people. Climate is again the big story of the day, as you might expect with just three days of COP27 left to go.

BUT, BUT, BUT… There’s an outside chance that delegates could be staying in Sharm El Sheikh past Friday in a bid to reach an agreement. That was from COP27 President Sameh Shoukry yesterday, who said that the summit could go on longer than planned if talks drag on. Shoukry expressed optimism that countries would come together and agree on a collective way forward on divisive topics including finance from rich nations for climate-related loss and damage. Enterprise Climate has more on the story.

Today is biodiversity day in Sharm, with sessions focusing on the impact of climate change on oceans, endangered species, and coral reefs.

Highlights from Sharm yesterday:

  • GE, Hassan Allam prove it’s possible to fuel a conventional power plant using a hydrogen-natural gas mix in the latest sign it is possible to decarbonize on-demand power generation, Enterprise Climate notes.
  • The US and China have (kinda-sorta) resumed climate talks after a sitdown between their top climate envoys in Sharm.
  • Natural gas will remain a primary fuel throughout the clean-energy transition, Oil Minister Tarek El Molla told EU energy commissioner Kadri Simson.
  • El Sisi and Brazil’s Lula want to step up cooperation on climate action, according to a statement from Ittihadiya.

ALSO- Egypt will launch its voluntary carbon market through an alliance between the Sovereign Fund of Egypt and the private sector, according to Planning Minister Hala El Said (watch, runtime: 13:54).

BIG CLIMATE NEWS OVERNIGHT- The US and Indonesia have reached the world’s largest-ever agreement on climate finance, with Washington set to provide up to USD 20 bn in funding to help Indonesia curb emissions, Bloomberg reports.

The G20 summit wraps: G20 leaders are in Indonesia for the 2022 summit which wraps up in Bali today. On the agenda: everything from Ukraine and the global economy to ongoing climate talks and food and energy security.

China says it supports giving the AU a seat at the G20: China’s President Xi Jinping told leaders of the world’s top 20 economies that the African Union should be allowed to join the group in a speech, Xinhua reports.


PSA #1- The government has launched its “Sayarat masryeen bel khareg” (Egyptian Cars from Abroad) mobile app, which helps expats apply to the car import scheme. The app automatically calculates the required USD payment for expats based on the car model they choose to import. Get it here: App Store | Google Play.


THE BIG STORIES ABROAD-

Trump 2024: The Donald will run for the Republican nomination for the 2024 presidential election. About an hour before we hit send on this morning’s issue, Trump announced his presidential campaign in a speech to supporters at Mar-A-Lago, pledging to “make America great and glorious again.” Before the rally, aides to the former president submitted paperwork declaring his candidacy. Trump’s early entry into the race comes a week after the Republican Party’s disappointing results in the midterm elections, which saw many MAGA candidates defeated by the Democrats. (Reuters | Bloomberg)

Joe Biden held an emergency meeting of Nato, G7 after a Russian-made missile struck a village in Poland, killing two people. The US leader said it was “unlikely” that it was fired from Russia while Moscow called it a “deliberate provocation aimed at escalation.” Washington has promised to stand by Poland as its investigation continues. (AP | WSJ | NYT | Reuters | Bloomberg).

MARKET WATCH-

An end to jumbo rate hikes in sight? Analysts are penciling in smaller rate hikes from the world’s major central banks over the coming months, as inflation begins to slow in many parts of the world while the risk of recession ramps up, the Financial Times reports. Capital Economics now sees most of the 20 central banks it tracks — including the US Federal Reserve, the European Central Bank and the Bank of England — going for 25-50 bps rate hikes during their next meetings. Fed Vice Chair Lael Brainard has already signaled that the Fed will likely go for a 50 bps hike during its next 13-14 December meeting, following data published last week that showed inflation slowing faster than anticipated. Many central banks have gone for multiple 75 bps rate hikes — their biggest in decades — over the past year in a bid to tame inflation.

Good news for global grain prices: Odds are Russia will greenlight the extension of the UN- and Turkey-brokered pact to allow the export Ukrainian grain through the Black Sea amid the Russia-Ukraine war, Bloomberg reports, citing four sources it says are close to the matter. The agreement — which was briefly halted by Russia earlier this month following a drone attack on its Black Sea fleet — is set to expire on Saturday, 19 November. Chicago wheat futures fell as much as 2.1% during yesterday’s trading on the news.

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** TAP HERE OR CLICK THE IMAGE ABOVE to learn more about the Enterprise Climate X Forum, our 6 December event at the Grand Egyptian Museum. Interested in attending? Drop us an email at climatexrsvp@enterprisemea.com.

🗓 CIRCLE YOUR CALENDAR-

PSA #2- If you’re self-employed, you have to register in the Tax Authority’s e-invoice system by 15 December. This includes self-employed doctors, engineers, lawyers, and artists, the Egyptian Tax Authority said in a statement. Only e-invoices will be considered for VAT deduction or refunds as of 1 April, 2023.

What e-invoicing system? In late 2020, the Tax Authority launched a pilot program for B2B e-invoicing with 134 companies, before expanding the system to all large taxpayers in July 2021. All B2B and B2C invoices across the country should be fully automated by December. We have a primer on the system, its purpose, the timeline of implementation along with a list of phase one companies here.

PSA #3 Good news for Upper Egypt startups: Applications for a Uplift4UpperEgypt — startup program run by Orascom’s Gemini Enterprises Africa, in partnership with the Sawiris Foundation, aimed at businesses in Upper Egypt, will open on 17 November, according to Al Mal.

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

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2CELLOS — LIVE AT SOMABAY on 18 November, 2022: Mark your calendars — world-renowned and wildly popular cellist duo, 2CELLOS will be performing at Somabay on 18 November, 2022. Having racked up a bn-plus audio streams, countless sold-out concerts, and mns of fans across the globe in their 10 years together as 2CELLOS, the Croatian duo of Luka Šulić and HAUSER will be visiting Egypt in their long-awaited 2022 Dedicated World Tour. Book your ticket now: https://www.ticketsmarche.com/tickets/buy-tickets-2-cellos.html. Call us 16390.

ENERGY

Egypt signs framework agreements for green hydrogen + ammonia plants worth USD 83 bn

Another step forward to becoming a green energy hub: Egypt has signed framework agreements with international power companies to construct nine green hydrogen and ammonia facilities in the Suez Canal Economic Zone,  a series of government statements (here, here and here) yesterday. The facilities would collectively produce up to 7.6 mn tons of green ammonia and 2.7 mn tons of hydrogen a year when fully operational, putting Egypt on the road to becoming a regional hub for green hydrogen.

Caveat: These aren’t final agreements. The documents signed yesterday are framework agreements and are not binding commitments. The companies will continue to study the projects before coming to a final investment decision in the coming months.

If they all go ahead, a lot of money is heading our way: As much as USD 83 bn could be invested across the nine projects, cabinet said.

The players lining up to get involved in Egypt’s green hydrogen plans:

#1- ReNew Power and El Sewedy Electric signed an agreement for an USD 8 bn project that will produce 220k tons of green hydrogen and 1.1 mn tons of ammonia a year, ReNew and cabinet said. The company said it will undertake further studies and will make a final investment decision in the next 12-16 months. If it goes ahead, it expects to begin commissioning the pilot phase in 2026.

#2- UK power producer Globeleq inked an agreement to build a 2 mn-ton green hydrogen facility. The Africa-focused company had signed an early agreement in August for the plant.

#3- Saudi company Alfanar signed one for its 500k-ton green ammonia facility. Alfanar earlier this year signed a USD 3.5 bn MoU with several Egyptian organizations to build the facility that will produce ammonia from 100k tons of green hydrogen every year.

#4- Masdar, Hassan Allam, and Infinity inked an agreement to establish a facility to produce up to 480k tons of green hydrogen a year.

#5- Australian energy producer Fortescue Future Industries signed an agreement to set up a green ammonia production facility with an annual production capacity of some 2 mn tons.

#6- Norway’s Scatec, Fertiglobe, Orascom Construction, and the SFE inked an agreement for the consortium’s 100 MW green hydrogen facility in Ain Sokhna. The companies last week began commissioning of the first phase of the plant. Once fully developed, it will produce up to 15k tons of green hydrogen as feedstock for as much as 3 mn tons of ammonia per year.

#7- Al Nowais subsidiary AMEA Power’s put pen to paper for a 390k-ton per-year green ammonia plant and could be up and running by the end of 2025 at its 500 MW green hydrogen plant in Ain Sokhna.

#8- French energy producer TotalEren and SME investor Enara Capital signed an agreement for a 300k-ton green ammonia facility in Ain Sokhna. TotalEren and Enara first signed an MoU with Egypt back in May that stipulated the facility would initially produce 300k tons of ammonia each year.

#9- EDF Renewables and Egyptian firm ZeroWaste inked an agreement with the SCZone for a USD 3 bn facility that is slated to produce some 350k tons of green ammonia for ships. Construction of the plant is expected to begin in 2024, with operations slated to begin in 2026.

Becoming a green hydrogen hub doesn’t happen overnight: It’s going to take until the middle of the next decade until all these facilities are fully operational, according to Planning Minister Hala El Said (watch, runtime: 13:54).

Egypt wants to be a key player in the global hydrogen market: A host of companies have been conducting feasibility studies for green hydrogen and ammonia projects this year after signing MoUs worth bns of USD. The biggest project was an agreement with Maersk to work on a huge USD 15 bn facility capable of producing 3 mn tons of fuel a year, which the two sides are expected to finalize at COP27.

EBRD LENDS A HAND ON H2-

The European Bank for Reconstruction and Development will provide a USD 80 mn loan to the Fertiglobe-Scatec-OC-SFE ammonia plant, which will be the country’s first integrated green hydrogen plant, it said in a statement. The loan comes nearly a week after the companies began commissioning the first phase of the 100 MW green hydrogen plant.

Where the funds are going: It will be used to acquire and build a 100 MW electrolyser facility powered by renewable energy. Upon completion, the facility will deliver up to 15k tons of green hydrogen annually.

Correction: 16 November, 2022

A previous version of this story incorrectly said Norway’s Scatec, Fertiglobe, and Orascom Construction signed the final agreements for their 100 MW Ain Sokhna facility.

ENERGY

The SFE could acquire 10% of ACWA, Hassan Allam wind farm

SFE could invest in 1.1 GW wind farm being developed by ACWA, Hassan Allam: The Sovereign Fund of Egypt (SFE) could acquire a minority stake in ACWA Power’s planned 1.1-GW wind farm in the Gulf of Suez. The wealth fund is considering making an investment in the facility under the terms of an MoU signed with the Saudi renewables developer yesterday, which could see it “potentially acquire up to 10%” of the USD 1.5 bn project, the SFE said in a statement (pdf). That would see the fund invest up to USD 150 mn in the project, according to our math. A final agreement will be announced “soon,” three sources familiar with the matter told Bloomberg Asharq yesterday.

The second sovereign fund to the party: News of the SFE’s potential buy-in comes a week after the Oman Investment Authority inked an MoU with ACWA to acquire a 10% stake in the wind farm. The SFE would also buy its stake from ACWA, which currently owns 75% of the project, while Hassan Allam Holding is set to retain its 25% stake, according to Asharq.

More finance in the pipeline? The European Bank for Reconstruction and Development (EBRD) is eyeing a potential investment in the Suez farm, Harry Boyd-Carpenter, the EBRD’s managing director for climate strategy and delivery, told Enterprise earlier this week. Some 70-75% of the wind farm will be financed through loans, while the remainder will be self-financed, Asharq quotes its sources as saying. The project is expected to reach financial close by 4Q 2024.

REFRESHER- ACWA and Hassan Allam Holding signed a 25-year power purchase agreement (PPA) with the Egyptian Electricity Transmission Company (EETC) in June to develop the project under a build-own-operate framework. The project is expected to begin commercial operations by the end of 2026.

AND ANOTHER WIND FARM IN THE GULF OF SUEZ-

GE could work on 1.5-GW Suez wind farm: General Electric, the Egyptian Natural Gas Holding Company (EGAS), and subsea robotics firm Seasplit Technologies will do feasibility studies on a 1.5-GW offshore wind farm in the Gulf of Suez under an MoU signed earlier this week, according to a joint statement. The farm will be used to power offshore oil and gas facilities, with excess power sent to the national grid.

That’s almost 30-GW of wind power: Egypt has lined up 29.5 GW of wind projects in recent days, equivalent to half of the country’s total installed power generation capacity. It’s almost nine times the country’s renewable power generation capacity, which stood at 3.4 GW at the end of 2021. Among the new projects on the horizon are two 10-GW wind farms, which will be two of the biggest in the world when running at full capacity.

CLIMATE CEO POLL

The Enterprise Climate CEO Poll: Joel Van Dusen, head of corporate and investment banking at Mashreq

Enterprise Climate CEO Poll- Joel Van Dusen: With just a few days to go until COP27 winds down in Sharm El Sheikh, we continue our inaugural Climate CEO Poll in EnterpriseAm and Enterprise PM. Our series of interviews with top C-suite execs and business leaders covers key issues being raised at the summit, including climate finance, regulation, and the green economy.

Joel Van Dusen (LinkedIn) is group head of corporate and investment banking at Mashreq, the oldest privately owned bank in the UAE. Listed on the Dubai stock exchange, Mashreq has a full-service arm in Egypt and offices around the world, including major financial centers in Europe, Asia, Africa and the United States. Joel spoke with us from Dubai, just hours after returning from COP27 in Sharm El Sheikh. Edited excerpts of our conversation:

JOEL VAN DUSEN: Sustainable finance is a very broad category, from project finance for renewable energy to transition, adaptation and sustainability-linked financing. What we’re seeing now across the business is growing appetite for sustainability-linked finance, which links the cost of financing to a company’s progress on both the sustainable development goals (SGDs) that are most relevant to them as well as to their business goals.

The thing I like most about sustainability-linked finance is that it’s not just about energy. It’s creating broad awareness among manufacturers, retailers, and businesses in the service industry, to name but a few.

We’ve done about USD 13.5 bn in sustainability-linked and green finance in the past two years, including transactions on which we were the sustainability coordinator. That’s when we bring in an outside consultant to work with us and the company to think through both business and sustainability goals so that they can get a handle on the progress to which they should be committing. Because when they commit, it is public. They benefit from pricing if they hit their targets, of course, but this is playing out in the public eye, which is an additional factor for them to consider.

Our biggest transaction was with Noga Holding out of Bahrain, which manages the kingdom’s oil and gas assets. As part of a USD 2.2 bn facility, they set out social targets, but the big emphasis was on emission reduction in increments through to 2030. In the first few years, they’ll address low-hanging fruit in their supply chain and other efficiencies, but in the medium term, they’ll need to invest in technology and really rethink core aspects of their business model.

Not everything has to be project financing for renewables. Sustainability-linked finance speaks to companies across sectors that’s getting educated about the issue, where management is having its first conversations with the board about setting goals. Get 1k companies talking about cutting emissions and the impact is just as good as a big solar transaction.

ENTERPRISE: Let’s unpack adaptation finance for a moment.

JVD: I’m really passionate about this segment. The push by the governments of Egypt, the UAE and Saudi Arabia have driven a lot of activity in finance for renewables. We’re seeing strong emerging demand for sustainability-linked finance. And as a part of the world that’s dominant in the oil and gas industry, we’re seeing a lot of emphasis on transition financing.

But I hope we see more on the adaptation front. Water and drought are going to be huge topics across Africa and the Middle East. We’ve worked on adaptation finance worth about USD 1.35 bn with a big emphasis on water projects in Egypt, Bahrain, Qatar and the UAE, where we’re supporting contractors building those facilities. It’s going to be a fast-growing segment in the years to come.

E: Is appetite for climate finance growing among businesses and investors?

JVD: Investor appetite is very strong. We had demand for well over USD 4 bn on Noga Holding, for example — for more than twice what we were offering. And we’re seeing growing awareness among our corporate clients.

Two things are driving appetite among corporations. First, many of our clients are very large, so they have, in some cases, foreign investors as well as local sophisticated investors who are helping drive the conversation. Management teams are responding to that interest and increasingly addressing sustainability goals at the board level. And secondly, we see a lot of progress on the regulatory front, whether that’s in the GCC or in Africa. Government regulation is driving demand for the awareness, goal setting and the resultant financing demand. I’m confident enough in the expansion of demand that we’re growing the team on the ground.

Banks have a fundamental role to play in creating demand for sustainability financing. We’ve got the connectivity to clients, we understand their businesses and strategies, we can help educate them, help them think through their goals and codify them. Just as we help them think about how to grow their business and optimize their capital structures, optimizing operations, we can discuss their ESG goals. Relationship managers need to do more than have conversations about commercial and investment banking products — they need to talk about climate and ESG and embed this in the dialogue.

E: What products do you see in other markets that are still not here in MENA?

JVD: An active carbon trading market, for sure. You saw the EGX announce a voluntary carbon market at COP27, and that’s a great step in the right direction. I think we’re looking for something that’s not necessarily siloed by country, but that’s collective and coordinated among several large countries.

E: What do we need to see for carbon trading to become mainstream?

JVD: It goes back to what I was saying earlier about regulation. Having multiple exchanges interested — in KSA, the UAE, Egypt — is important, but the big thing is rules and regulations about how the credits work. And this is critical — to get to net zero, we need to see robust markets for carbon credits. And remember: A lot of the talk about carbon credits centers on the buyers, but it’s also about who is selling; proceeds from the sale can become a form of climate finance in itself.

E: What will make COP27 a success in your view?

JVD: If you think about COP26, it was the first year that we saw finance come to the fore as a major component of the dialogue. That was the first year people really asked, “How do we pay for it?” That has really matured at COP27 in Egypt, where we’ve seen some really good conversations on finance.

But what I really hope to see come out of COP27 and COP28 next year in the UAE are good conversations about rules and regulations for sustainable finance. The International Sustainability Standards Board will be key. Look at what IFRS did for capital flows: Capital flows better when there’s a level playing field, when everyone is speaking in the same terms about the same thing. It allows comparable analysis. The same thing can happen with climate finance when there are consistent rules and regulations in place — that will drive capital to the projects that need it.

Having common standards for disclosures and how you count everything that needs to be counted will also tamp down the discussion about greenwashing. How do we verify and validate all of these promises that are made? These measurements that are given?

E: So we’re looking at the audit and assurance firms?

JVD: Them and the consulting firms. They are going to play a fundamental role in validating and verifying all the KPIs that companies sign up for in their sustainable financing. There needs to be a credible third party that says a company did or didn’t meet its emission reduction target. This should be no different than anything else in the world that gets counted and verified.

Otherwise, I think the big thing to look for between COP27 and COP28 — it really is a two-year process — is the coming together of consistent reporting rules, dialogue on

carbon trading platforms and, in parallel, more discussion of adaptation finance.

ECONOMY

Unemployment rate ticks up in 3Q 2022

Egypt’s unemployment rate rose marginally to 7.4% in 3Q 2022, up 0.2 percentage point from last quarter, according to data (pdf) from statistics agency Capmas out yesterday. The jobless rate is down 0.1 percentage points in comparison with the same quarter last year.

REMEMBER- The official unemployment rate only includes people who are looking for work. The labor force participation rate — which counts everyone aged 15-64 either in work or actively looking for work — recorded 42.7%, up 0.1 percentage points on last quarter. The figure is down from 43.7% in the same quarter of 2021.

Youth unemployment rises: Jobless 15-29 year-olds accounted for 61.9% of all jobless people, up from 61.3% in 2Q. Youth unemployment’s most recent peak was 64.3% in 4Q 2021.

Joblessness rose faster among women: The jobless rate among women was up 1.6 percentage points q-o-q to 19.1%, while the rate among men rose 0.2 percentage points to 5.2%. The unemployment rate is consistently recorded as much higher among women than men.

INFRASTRUCTURE

Maersk’s SCCT inks contract for USD 500 mn East Port Said port expansion

It’s official: AP Moller-Maersk will embark on a major USD 500 mn expansion of East Port Said port that is expected to raise its capacity by 40%. The Suez Canal Container Terminal (SCCT) — majority-owned by Maersk’s APM Terminals — yesterday signed a contract with the Suez Canal Economic Zone (SCZone) that will put it in charge of building and operating a second container terminal at the port, the SCZone said in a statement. It will also be responsible for securing financing, it said, without disclosing details about project funding.

Project profile: The SCCT will build a 1k-meter container berth which will have an annual capacity of 2 mn TEU. This will significantly boost the port’s current capacity, which stands at 5.4 mn TEU a year. The port handled 3.8 mn TEUs in 2021, up 3% from 2020.

Uh, Enterprise? What’s a TEU? It’s the standard unit for a shipping container — the corrugated metal things you’ve seen being hauled on highways, stacked in ports, and carried on the deck of vessels. It stands for a twenty-foot equivalent unit.

Powered by clean energy: The new berth will operate on clear and renewable energy through fully equipped electrical equipment to achieve the SCCT’s strategy on decarbonization and an increased reliance on green fuel completely by 2040, SCCT’s Chairman and Managing Director, Steven Yoogalingam said.

We’ve known about this for a while: The plans first circulated over the summer, with company representatives confirming to Enterprise in July its intention to expand the port’s capacity.

About SCCT: SCCT operates the East Port Said port, located at the mouth of the Suez Canal on the Mediterranean. The company was set up in 2004 as a joint venture with APM Terminals as the majority shareholder. The Maersk subsidiary currently owns 55% of the company, with the balance held by shareholders including Hong Kong-based shipping line Cosco Pacific, the Suez Canal Authority, the National Bank of Egypt, and Egyptian private sector companies.

EARNINGS WATCH

So. Many. Earnings.

More robust results as we go down to the wire on earnings season: Yesterday saw another flurry of earnings releases land in our inbox, with contractors, tech, and pharma firms all posting strong results. Here’s the rundown:

ELSEWEDY ELECTRIC-

Elsewedy Electric’s revenues rose 53% to EGP 62.6 bn in 9M 2022, according to the company’s earnings release (pdf). The company’s net income after minority interest rose 35% to EGP 3.1 bn in the nine-month period. 3Q also saw strong growth, with revenues up 59% y-o-y to EGP 23.6 bn in 3Q 2022 and net income rising 71% to EGP 1.2 bn.

Wire and cables and turnkey segments drove growth: Revenues from Elsewedy’s wires and cables segment grew 52% y-o-y to reach EGP 11.3 bn during 3Q 2022. The company attributed the rise in revenues to an overall improvement in performance, coupled with price hikes and favorable FX movements. Turnkey project revenues rose 63% y-o-y to reach EGP 9.9 bn, driven by an increase in projects in Tanzania and Egypt. The two segments together contributed 90% of the company’s revenues.

Elsewedy’s contingency stockpiling efforts are in full swing: Inventory rose almost 50% to EGP 19.9 bn during the first nine months of 2022, as the company continues to build up its stock of raw materials to safeguard against global supply-chain disruptions. Elsewedy more than doubled its net debt to almost EGP 14.8 bn as of 30 September, from EGP 6.1 bn at the end of 2021, in large part due to the company’s future-proofing strategy.

FAWRY-

E-payments giant Fawry’s adjusted net income rose 25% y-o-y to EGP 179.8 mn in 9M 2022, according to the company’s earnings release (pdf). Revenues were up 37% y-o-y to EGP 1.6 bn. Revenue growth was underpinned by the strong performance of the company’s banking services segment. In 3Q 2022, Fawry’s adjusted net income rose 75% y-o-y to EGP 95.8 mn, with revenues up 37% to EGP 613.7 mn.

Fawry’s banking services drove growth: Banking services revenues were up 89% to EGP 524.4 mn in 9M 2022, with both payments acceptance and agent banking revenues nearly doubling. The acceptance business accounted for more than 22% of consolidated revenue growth for the nine-month period, “cementing its place as a major driver of Fawry’s diversification efforts,” the company said.

RAMEDA PHARMA-

Tenth of Ramadan for Pharma Industries and Diagnostic Reagents (Rameda) reported a 82% y-o-y jump in its 9M 2022 net income after minority interest to EGP 194.9 mn, according to its latest earnings release (pdf). Rameda’s top line for the nine-month period rose 28% y-o-y to almost EGP 1.1 bn on the back of strong performance in its private sales and exports.

Private sales + exports continue to underpin strong performance: Private sales — meds sold to domestic distributors to stock local pharmacies — rose 31% y-o-y, accounting for 62% of total sales volume and 74% of revenues in the first nine months of the year. Exports also registered strong growth, with sales volumes rising 161% and revenues up 28% to EGP 75.8 mn. The pharma company launched five new products during 9M 2022 — three of them in the third quarter — and is on track to launch 8-10 products for 2022 overall.

Rameda is hiking prices thanks to inflation, the deval: “In anticipation of rising inflationary pressures and the devaluation of the EGP, management was swift to respond and successfully received approvals for price hikes between c. 25-40% across products representing 65% of Rameda’s sales. These price hikes allowed us to continue delivering strong profitability margins and we will remain focused on applying for further price increases across Rameda’s portfolio to hedge against the impact of the devaluation of the EGP going forward.” CEO Amr Morsy said.

HDB-

Housing and Development Bank’s (HDB) net income rose by 27% y-o-y to EGP 549 mn in 3Q, the bank said in its earnings release (pdf). The increase was driven by a 57% growth in the bank’s interest income.

HDB’s gross loan book grew by 27% in the first nine months of the year to EGP 34.3 bn on the back of an expansion in the bank’s commercial banking activities. Deposits rose by 39% in the period to EGP 87.2 bn driven by a 47% increase in corporate deposits which accounted for most of the bank’s deposits.

What they said: “The past nine months have seen turbulent market conditions hamper the Egyptian economy, from rising inflationary pressures, global supply chain constraints, to the floatation of the EGP. However, despite a suboptimal economic backdrop, HDBK has been able to deliver on its three-pronged strategy and book growth across various fronts, thanks to its modernized business model, enhanced visibility, and focus on digitalized technology,” Chairman and Managing Director Hassan Ghanem said.

CONTACT FINANCIAL HOLDING-

Contact Financial Holding’s net income inched up to EGP 336.2 mn in 9M 2022 from EGP 330.3 mn last year, according to the company’s earnings release (pdf). Net income from the company’s financing operations rose 2% to EGP 303.5 mn on the back of a 26% rise in interest income and a 24% increase in revenues from portfolio transfer. Contact saw a 62% rise in new financing to EGP 8.3 bn. This was driven by the group’s consumer finance, commercial trucks, and mortgage products, with new lending for passenger cars also expanding despite tough market conditions. Total gross premiums written at the company’s ins. division almost doubled to EGP 724 mn on the back of new product launches and growing cross-selling.

What they said: “The impressive performance, which comes in the midst of a challenging macroeconomic environment both at home and around the world, demonstrates both our business’ resilience and our proven ability to successfully implement long-term strategies aimed at driving sustainable growth across our full product offering,” Contact’s management said.

EASTERN COMPANY-

Eastern Company’s net income dropped 12% y-o-y to EGP 1.4 bn in 1Q FY 2022-2023 (July-September 2022), the company said in its earnings release (pdf). The company’s top line rose 7% y-o-y to EGP 4.6 bn on the back of a 13% y-o-y increase in revenues from local cigarette sales.

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LAST NIGHT’S TALK SHOWS

Green hydrogen dominated the airwaves last night after the government signed framework agreements for nine hydrogen and ammonia facilities that could be worth up to USD 83 bn (more on this in this morning’s news well, above).

Kelma Akhira’s Lamis El Hadidi focused on the signed agreements with global firms, with SCZone head Walid Gamal El Din telling El Hadidi that Egypt aims to become a hub for green fuel and its exports, which he said the “world would need over the upcoming 50-100 years” as it transitions away from fossil fuels (watch, runtime: 10:16). Output from the first phase of production can be delivered to Europe via ship, he said, expecting the fuel to be transported later in the next 10 to 15 years through pipelines to Europe through Greece or Cyprus. Plots are offered to investors under the scheme through the usufruct system or having the SCZone and other entities as partners in return for revenues, he said.

The news is also getting coverage from Masaa DMC (watch, runtime: 9:37) and (watch, runtime: 5:23) and Ala Mas’ouleety (watch, runtime: 5:59)

International Cooperation Minister Rania Al Mashat discussed the government’s NWFE initiative with El Hadidi (watch, runtime: 10:18). She highlighted the importance of the program in drawing climate finance, saying that projects under the program were concessional with repayment period ranging from 20 to 30 years and a grace period of five years.

A new debt swap segment has been added under the NWFE program with Germany, Al Mashat said (watch, runtime: 5:28) with the agreement focused on the program’s energy projects. “We already have the institutional form or governance of debt swaps with Germany since 2015,” she said, signaling the government’s readiness to add new debt swaps with other countries in the coming months and years.

More French companies are interested in Egypt’s green hydrogen ambitions: A French delegation of 30 companies are interested in investing in green hydrogen in Egypt, Dalia Samir, director of budding industry association Hydrogen Egypt (H2EG). told Ala Mas’ouleety (watch, runtime: 4:54).

Most of the nation’s talk shows had coverage of a new virus causing worry among parents: Shows interviewed a number of health experts to discuss the respiratory syncytial virus, which seems to be highly-transmissive and disproportionately affecting children. Its symptoms are similar to flu, including higher body temperatures and a sore throat. The Education Ministry has denied rumors that it has suspended studies because of the outbreak, and said it has upped preventative measures at schools. Kelma Akhira (watch, runtime: 7:58), Masaa DMC (watch, runtime: 3:05) and Ala Mas’ouleety (watch, runtime: 3:05) all had coverage.

Also on the airwaves last night:

  • Another 30 detainees have been released following a presidential pardon. (Yahduth Fi Masr | watch, runtime: 7:06)
  • President Abdel Fattah El Sisi’s follow-up meeting on progress related to New Abu Qir, which will be the first Egyptian city to be built on an island in the Mediterranean. (Ala Mas’ouleety | watch, runtime: 6:10)

EGYPT IN THE NEWS

Alaa Abdel Fattah ends hunger strike + FT editors want the west to put diplomatic and economic pressure on us over human rights

Human rights is still topic du jour in the international press.

The Financial Times’ editorial board wants western governments to use “diplomatic and economic leverage” to get us to make progress on human rights, while the the Guardian continues to beat its drum on the topic.

The big human rights story is news that jailed dual-national activist Alaa Abdel Fattah said he has ended the hunger strike he began in April. Abdel Fattah told his family in a letter that he had stopped his hunger strike, after previously escalating it to include refusing water at the start of the COP27 climate summit in Sharm El Sheikh. Abdel Fattah is expecting a visit from family members on Thursday. (The Guardian | AFP | AP | FT | NYT)

In climate news:

  • The Financial Times’ on-point Heba Saleh is out with another piece on environmental threats to our agriculture sector, as COP continues to draw eyeballs to the impact of climate change on Egypt.
  • Be careful of the water in Allouga: Bloomberg is running a story on the expansion of uranium mining in South Sinai even as evidence mounts that radioactive waste is contaminating water supplies in the area.

PLANET FINANCE

Powered by
EFG Hermes - https://efghermes.com/

Empower rises on Dubai debut: Shares of Dubai’s district cooling provider, Empower, rose 2.3% on their debut on the Dubai stock exchange yesterday. The company recently raised AED 2.7 bn (USD 724 mn) in an IPO that saw huge demand from investors.

As many as 1 mn people want their money back from FTX: Regulators across the world are now investigating the collapse of crypto exchange FTX, which said in court filings yesterday that it could have as many as 1 mn creditors, the Financial Times reports. “Dozens of federal, state and international regulatory agencies” are in contact with the company in a search for answers to what caused its collapse. This is still a huge story in the international business press: Reuters | WSJ | Bloomberg | CNBC.

Crypto lender BlockFi could be the next domino to fall, according to the Wall Street Journal, which reported yesterday that it is preparing to file for bankruptcy. The company has admitted having “significant exposure” to FTX and last week halted withdrawals to contain a liquidity crisis.

ALSO WORTH NOTING-

  • Buffett goes big on TSMC: Warren Buffett’s Berkshire Hathaway acquired a USD 4.1 bn stake in major Taiwanese chipmaker giant TSMC, marking the company’s biggest new investment in 3Q 2022. (Financial Times)
  • M&A Watch: Cosmetics giant Estée Lauder is on course for its biggest-ever acquisition after it agreed to buy Tom Ford for around USD 2.8 bn. (Wall Street Journal)
  • US-based multinational retailer Walmart announced a USD 20 bn share buyback program and upgraded its earnings forecast amid resilient demand for groceries despite price hikes. (Reuters)
  • Japan’s economy sees surprise contraction in 3Q 2022: GDP fell by 1.2% on the back of soaring import bills as the JPY fell to its lowest in decades. (Financial Times)

None

EGX30

12,137

0.00% (YTD: +1.6%)

Up

USD (CBE)

Buy 24.41

Sell 24.50

Up

USD at CIB

Buy 24.43

Sell 24.48

None

Interest rates CBE

13.25% deposit

14.25% lending

Down

Tadawul

11,097

-0.9% (YTD: -1.6%)

Down

ADX

10,503

-0.9% (YTD: +24.0%)

Down

DFM

3,374

-0.6% (YTD: +5.6%)

Up

S&P 500

3,992

+0.9% (YTD: -16.3%)

Down

FTSE 100

7,369

-0.2% (YTD: -0.2%)

Up

Euro Stoxx 50

3,915.1

+0.7% (YTD: -8.9%)

Up

Brent crude

USD 93.74

+0.6%

Up

Natural gas (Nymex)

USD 6.16

+3.8%

Up

Gold

USD 1,781.50

+0.3%

Up

BTC

USD 16,888

+3.2% (YTD: -63.7%)

THE CLOSING BELL-

The EGX30 was flat at yesterday’s close on turnover of EGP 593.89 mn (48.2% below the 90-day average). Local investors were net buyers. The index is up 1.6% YTD.

In the green: Rameda (+3.2%), Ibnsina Pharma (+2.5%) and Orascom Construction (+2.2%).

In the red: Fawry (-2.6%), Ezz Steel (-1.8%) and EFG Hermes (-1.6%).

CALENDAR

NOVEMBER

6-18 November (Sunday-Friday): Egypt will host COP27 in Sharm El Sheikh.

13-22 November (Sunday-Tuesday): Cairo International Film Festival (CIFF).

15-16 November (Tuesday-Wednesday): G20 summit, Bali, Indonesia.

20 November (Sunday): House of Representatives is back in session.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

22 November- 23 November (Tuesday-Wednesday): The Fingerprint Summit will be held at the Nile Ritz Carlton Hotel.

27 November (Sunday): Senate in session.

27-28 November (Sunday-Monday): The first edition of the Egypt Media Forum.

27-30 November (Sunday-Wednesday): Cairo ICT, Egypt International Exhibition Center, New Cairo.

Late November or early December: US and Russia to hold talks on resuming mutual nuclear inspections in Cairo.

DECEMBER

1 December (Thursday): Sphinx International Airport will begin operating international flights.

1 December (Thursday): Contractors to break ground on Egypt-Saudi interconnection project.

3 December (Saturday): Dior Men’s pre-fall collection show in Giza.

5-8 December (Monday-Thursday): QS Reimagine Education Awards and Conference, multiple locations.

6 December (Tuesday): Enterprise Climate X Forum, Grand Egyptian Museum.

7 December (Wednesday): Euromoney Egypt 2022 conference

10 December (Saturday): The TriFactory’s Pyramids Half Marathon.

10-12 December (Saturday-Monday): The 2nd edition of the Nebu Expo for Gold and Jewelry kicks off.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

13-15 December (Tuesday-Thursday): US-Africa Leaders Summit.

15 December (Thursday): European Central Bank monetary policy meeting.

22 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

December: The Sixth of October dry port will begin operations.

December: Egyptian Automotive Summit.

December: Egypt to expand Sudan electricity link capacity to 300 MW.

December: Chinese President Xi Jinping visit to Saudi Arabia

JANUARY 2023

January: EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

January: Fuel pricing committee meets to decide quarterly fuel prices.

1 January (Sunday): Use of Nafeza becomes compulsory for air freight.

1 January (Sunday): Residential electricity bills are set to rise as per the government’s six-year roadmap (pdf) to restructure electricity prices by 2025.

7 January (Saturday): Coptic Christmas.

24 January-6 February: The 54th Cairo International Book Fair, Egypt International Exhibition Center

25 January (Wednesday): 25 January revolution anniversary / Police Day.

26 January (Thursday): National holiday in observance of 25 January revolution anniversary / Police Day.

30 January-1 February (Monday-Wednesday): CI Capital’s Annual MENA Investor Conference 2023, Cairo, Egypt.

FEBRUARY 2023

11 February (Saturday): Second semester of 2022-2023 academic year begins for public universities.

13-15 February (Monday-Wednesday): The Egypt Petroleum Show (Egyps), Egypt International Exhibition Center, Cairo.

23-27 February (Thursday-Monday): Annual Business Women of Egypt’s Women for Success conference.

MARCH 2023

March: 4Q2022 earnings season.

23 March (Wednesday): First day of Ramadan (TBC). Maghreb will be at 6:08pm CLT.

APRIL 2023

1 April (Saturday): Deadline for banks to establish sustainability unit.

17 April (Monday): Sham El Nessim.

22 April (Saturday): Eid El Fitr (TBC).

25 April (Tuesday): Sinai Liberation Day.

27 April (Thursday): National holiday in observance of Sinai Liberation Day (TBC).

Late April – 15 May: 1Q2023 earnings season.

MAY 2023

1 May (Monday): Labor Day.

4 May (Thursday) National holiday in observance of Labor Day (TBC).

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

JUNE 2023

19-21 June (Monday-Wednesday) Egypt Infrastructure and Water Expo debuts at the Egypt International Exhibition Center.

28 June-2 July (Wednesday-Sunday): Eid El Adha (TBC).

30 June (Friday): June 30 Revolution Day.

JULY 2023

18 July (Tuesday): Islamic New Year.

20 July (Thursday): National holiday in observance of Islamic New Year (TBC).

23 July (Sunday): Revolution Day.

27 July (Thursday): National holiday in observance of Revolution Day.

Late July-14 August: 2Q2023 earnings season.

SEPTEMBER 2023

26 September (Tuesday): Prophet Muhammad’s birthday (TBC).

28 September (Thursday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

OCTOBER 2023

6 October (Friday): Armed Forces Day.

Late October-14 November: 3Q2023 earnings season.

EVENTS WITH NO SET DATE

2H 2022: The inauguration of the Grand Egyptian Museum.

2H 2022: IEF-IGU Ministerial Gas Forum, Egypt. Date + location TBA.

2H 2022: The government will have vaccinated 70% of the population.

3Q 2022: Ayady’s consumer financing arm, The Egyptian Company for Consumer Finance Services, to release its first financing product.

3Q 2022: Swvl to close acquisition of Urbvan Mobility.

4Q 2022: Infinity + Africa Finance Corporation to close acquisition of Lekela Power.

End of November: SFE’s pre-IPO fund to kick off roadshow.

4Q 2022: Electricity Ministry to tender six solar projects in Aswan Governorate.

4Q2022: Raya Holding subsidiary Aman and Qalaa Holdings’ Taqa Arabia to launch their fintech company.

4Q 2022: Saudi Arabia’s Jamjoom Pharma to inaugurate its EGP 1 bn pharma factory in El Obour.

End of 2022: Decent Life first phase scheduled for completion.

End of 2022: e-Aswaaq’s tourism platform will complete the roll out of its ticketing and online booking portal across Egypt.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

1Q 2023: Adnoc Distribution’s acquisition of 50% of TotalEnergies Egypt to close.

1Q2023: Internal trade database to launch.

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