AM — Egypt’s maiden sovereign sukuk issuance sees heavy investor demand

Good morning, everyone, and welcome to a fairly brisk news morning.

THE BIG STORY here at home: The Finance Ministry’s USD 1.5 bn sukuk went to market yesterday — and met heavy investor appetite, with the offering reportedly coming in c. 3.5x oversubscribed. We have chapter and verse in this morning’s news well, below. Our friends at HSBC are lead managers and bookrunners on the transaction.

Why this matters: Beyond it representing a fresh inflow of FX, this is the first tangible (and sizeable) sign of international investor confidence in Egypt since the move to a “durably flexible” exchange rate regime and Central Bank of Egypt Governor Hassan Abdalla’s decision to allow the currency to slide. We’re hoping the next big signal to the community (domestic business leaders and foreign investors alike) involves equity, not debt — likely the sale of the state’s 20% stake in Alexbank to Italy’s Intesa Sanpaolo.

ALSO: EFG Hermes’ Vortex invests in UK EV charging firm: Vortex Energy — the clean energy investment platform from our friends at EFG Hermes Holding — and London-based private equity and infrastructure fund manager Zouk Capital are making an USD 80 mn equity investment in British EV charging outfit EO Charging. Read the full story in this morning’s edition of Enterprise Climate.

SOUND SMART- Enterprise Climate has been banging the drum about growing appetite in the GCC for renewable energy investments in developed markets. That trend started with EFG Hermes and Vortex, which launched in 2014 to go after renewable energy (and, more recently, clean energy technologies) in Europe and the United Kingdom.

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SPEAKING OF HSBC: The bank is marking its 40th anniversary in Egypt by announcing a new program to help women entrepreneurs start their own businesses. The program is launching in partnership with the Global Fund for Widows, which has worked in Egypt since 2012.

The program will help some 1k women widows start businesses in the next two years, targeting people in Alexandria, Minya and Luxor through the launch of what HSBC is calling “Widows Savings and Loans Associations,” or WISALA for short. The bank unveiled the initiative at a reception for clients, investors, and other stakeholders at the Grand Egyptian Museum.

What they said: “It is fitting that our 40th anniversary of doing business here provides an opportunity to launch a programme that brings innovative community banking solutions to a segment of society that really needs additional support and, by providing it, helps Egyptian widows take their first steps to becoming entrepreneurs,” said HSBC Egypt CEO Todd Wilcox.

HSBC by the numbers: From one branch at launch, HSBC now employs more than 3k people, has a nationwide footprint, and supports the bank’s global operations from its fast-growing global service center in the Greater Cairo Area. You can read more about the program and the bank’s anniversary here (pdf).

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EGP WATCH- The EGP slipped 2 piasters against the greenback yesterday, with the USD changing hands at 30.65 from 30.63 on Monday, according to data by the central bank. The currency hit the 30 mark at the end of January following a sharper devaluation that has begun to bring FX back to the country, alleviating a severe currency shortage. The currency has lost nearly half its value against the greenback over the past year due to headwinds caused by the war in Ukraine and rising interest rates.

SMART POLICY- USAID-backed reproductive awareness program launches: US NGO Pathfinder International launched yesterday a USD 39 mn health program funded by our friends at USAID to improve access to information about family planning and reproductive health, according to a press release (pdf). The five-year initiative will target 10.6 mn people in 10 governorates, and will be run in partnership with the Health Ministry. Our large population is a double-edged sword, folks — a little slowdown in population growth would be a very good thing.

PSA- Long commutes on the metro could get more expensive from October: The government will raise metro fares on tickets for more than 25 stops to EGP 12 from EGP 10, Transport Minister Kamel El Wazir said in a press conference yesterday (watch, runtime: 40:48). The hike will likely come into effect in October when more stations on Line 3 are opened, he said in a televised interview (watch, runtime: 4:59). There are no plans to raise the prices of other fares, he said. The government hinted last summer at the possibility of hiking metro fares but the plan never materialized despite rising expenses to keep the underground system running.

CORRECTION- A four-hour working week? We wish. Some companies in the UK are currently trialing a four-day workweek, not a four-hour week as we incorrectly said yesterday. The story has been updated on our website.

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WATCH THIS SPACE- Israel’s NewMed is spending USD 100 mn to up production from Leviathan by 75%: Israel’s NewMed Energy has earmarked nearly USD 100 mn to ramp up production at the country’s Leviathan gas field, the company said in a statement (pdf). The investments are set to up total production from Leviathan to 21 bcm annually, up from 12 bcm.

That means more gas for us down the line: It will take roughly three years from a final investment decision for the increased flows to hit our LNG terminals, an industry source told Reuters. Gas from Leviathan flows to the domestic Israel market and to neighbors Egypt and Jordan.

Though not as much more as we had hoped: Over half of the money will go towards plans to build a floating LNG terminal to process gas from Leviathan for export to Europe. NewMed had been deliberating between the floating terminal and a pipeline linking Israeli fields to our LNG terminals.

REMEMBER- Egypt and Israel signed an MoU in June to ramp up gas exports to the EU, under which Israel is set to send more gas to Egypt’s LNG facilities before exporting it to Europe.

ALSO- NewMed-Capricorn merger officially dead: NewMed’s big plans come nearly a week after a planned tie-up between NewMed and British firm Capricorn Energy was terminated on the back of shareholder opposition, they announced in separate statements. The termination comes less than a month after five of Capricorn’s board members resigned under pressure from activist investors led by Palliser Capital, who were vigorously opposed to the merger.

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THE BIG STORY ABROAD-

US-Russia saber-rattling is dominating the global front pages this morning, following Vladimir Putin’s decision yesterday to suspend Russia’s nuclear pact with the US, and Joe Biden’s framing of the war in Ukraine as a global fight for democracy. In a speech in Warsaw, the US president accused Putin of committing crimes against humanity and cast the invasion as an attack on freedoms across the world. A few hours earlier, Putin accused Washington of provoking the conflict and announced that Russia would withdraw from the START treaty — a landmark post-Cold War agreement between the two powers designed to limit the proliferation of nuclear weapons.

The dueling speeches are all over front pages in the international press: AP | Reuters | WSJ | Washington Post | NYT | Bloomberg | CNN.

A Chinese peace play? The Wall Street Journal is reporting this morning that Xi Jinping could visit Russia in the coming months, citing people familiar with the matter who say that the Chinese president could push for a resumption of formal peace talks.

COME TO OUR NEXT ENTERPRISE FORUM-

We’re excited to unveil our next C-level event: The Enterprise Exports & FDI Forum, where we will take a deep dive into two of the most critical topics affecting our community.

Exports and foreign direct investment (FDI) have never been more important to our economy — or our businesses — than in the wake of the float of the EGP. We think we have a once-in-a-lifetime chance to build an export-led economy that makes us a magnet for FDI and all the benefits that will come with it for our nation.

CIRCLE YOUR CALENDAR-

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

*** 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, and urban development, as well as social infrastructure such as health and education.

In today’s issue: We break down the government’s vision for the Universal Healthcare Ins. scheme and how the project will pan out — including how individuals will navigate the system and how private ins. companies will be looped in.

Egypt has pulled the trigger on its maiden sukuk issuance: Egypt is on course to raise USD 1.5 bn from a sale of three-year sukuk, sources with knowledge of the issuance told Enterprise yesterday. The offering was about 3.5x oversubscribed.

Strong demand: The debut issuance landed orders totalling USD 5.8 bn, interest from the joint lead managers, according to a term sheet seen by Bloomberg, while CNBC says the order book topped USD 5.35 bn. The final guidance price looks like it will be somewhere between 11.00% (per Reuters) and 11.125% (± 1/8th) (per Bloomberg), both of which say they have seen term sheets. Initial guidance on yield was around 11.625%.

What’s next? The sharia-compliant bonds will be listed on the London Stock Exchange. The issuance is expected to close later this morning, one of the sources told us.

REMEMBER- The finance will help Egypt replenish stocks after a USD 1.25 bn eurobond repayment due yesterday; those bonds carried an interest rate of 5.577%, according to Reuters.

Moody’s last week gave a (P) B3 rating to a potential USD 5 bn sukuk program which would be used to finance investment and development projects. The rating agency downgraded Egypt’s sovereign credit rating due to the country’s increased vulnerability to external shocks.

BACKGROUND: Egypt has been unable to access fresh finance from the international capital market over the past year due to the knock-on effects of the war in Ukraine and tighter global financial conditions. The sukuk issuance is Egypt’s first international debt sale since last March.

More debt issuances in the pipeline: The sale could pave the way for more issuances this year as the government looks to finance upcoming debt repayments. The Finance Ministry had been planning to issue its maiden USD 500 mn CNY-denominated panda bond in China in 1Q 2023, and previously said it would issue USD 500 mn of sustainable development bonds before the end of the current fiscal year.

Advisors: Our friends at HSBC are acting as lead managers and bookrunners along with Citigroup, Credit Agricole, Emirates NBD Capital, First Abu Dhabi Bank and Abu Dhabi Islamic Bank. Adsero-Ragy Soliman and Partners and Clifford Chance provided legal advice to the Finance Ministry, and Zaki Hashem & Partners and Linklaters acted as counsel to the joint lead managers.

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The issuance was discussed on the airwaves last night, with Kelma Akhira’s Lamees El Hadidi opining that the strong demand reflected “confidence in the Egyptian economy” (watch, runtime: 2:21). This was echoed by former Blom Bank Egypt deputy managing director Tarek Metwally on the show, who described the sale as a “huge success” despite the economic headwinds at home and abroad (watch, runtime: 7:47). He sees the final guidance prices as “fair” given a rise in the USD index and Moody’s recent downgrade of our sovereign credit rating.

They’ve got a golden license: Our friends at Hassan Allam Utilities, as well as developer Bloom Real Estate Development, truckmaker National Company for Transport Industry (N-MCV), and Vaccine & Biotechnology City Company were the recipients of the four new golden licenses awarded by the cabinet at the start of the month, the General Authority for Investment and Freezones (GAFI) said yesterday.

What we don’t know: GAFI didn’t disclose which projects were awarded the licenses. We weren’t able to find any publicly-available information about the ownership and operations of N-MCV.

And what we do: Vaccine & Biotechnology City is a company owned by the military’s National Services Projects Organization (NSPO), and is building a 115k m2 vaccine manufacturing complex on the Cairo-Ismailia desert road. Bloom Real Estate is planning a number of developments in New Zayed.

That makes 13 so far: Nine golden licenses were awarded to mega projects late last year, including a USD 5.5 bn green ammonia plant in Ain Sokhna and an EGP 8.8 bn home and electrical appliances manufacturing and assembly facility group in Menoufia. The GAFI statement doesn’t give details of the projects for which the four new firms have been granted licenses.

Golden licenses? Golden licenses fast-track new industrial and infrastructure projects. Also known as “single approval licenses,” they allow investors to require only one approval that covers everything from establishing the project, land allocation and building licensing, through to operation and management. You can check our guide on the golden license here.

More to come: GAFI is working on issuing new diamond and silver-tiered licenses to investors depending on each sector’s priorities, GAFI head Hossam Heiba told us in January. It’s also working with the Industrial Development Authority to release a new investment map with an estimated 1k available plots of land and 86 pilot projects in key industries up for grabs.

REMEMBER- The minimum capital requirement of EGP 200 mn for businesses looking to apply for golden licenses was scrapped back in December in a bid to make it easier for investors to obtain the licenses. Companies can apply for a golden license online through the cabinet’s website.

Cairo metro + monorail updates: Transport Minister Kamel El Wazir delivered a few updates on transport links to the new administrative capital (NAC) in a press conference (watch, runtime: 40:48) yesterday.

#1- Metro Line 4 will extend to the new capital: The under-construction fourth metro line will be extended to run from Al Rehab to the new capital via Madinaty, El Wazir said. The minister didn’t mention a timeline for the extension or clarify which phase of the project would see the buildout of the line to the new capital.

REFRESHER- The first, 19-km phase of the fourth line will connect Cairo, Giza and Sixth of October City. It is expected to take six years to complete. The second, 23.5-km phase, will connect to New Cairo. The project is being financed by a JPY loan provided by the Japanese International Corporation Agency (JICA).

#2- Monorail to go live in early 2024: The eastern section of Cairo’s monorail, which connects Nasr City to the new capital, will start trail operations this October before opening its doors to passengers in early 2024, the minister said. The government had previously hoped to inaugurate the eastern segment in time for the COP27 climate summit last November.

e-Finance had a strong 2022: e-Finance’s adjusted net income rose 83% to EGP 948.6 mn in 2022, according to the company’s earnings release (pdf). Revenues came in at EGP 2.6 bn, up 35% y-o-y. In 4Q, the state-owned tech company’s adjusted net income jumped 67% y-o-y to EGP 232.7 mn on a 6% increase in revenues.

Digital operations and eAswaaq led revenue growth last year: Growth was driven primarily by the company’s flagship business, e-finance Digital Operations, which generated EGP 2.4 bn in revenues during the year, up 56% from 2021. Meanwhile, revenues at the company’s e-commerce subsidiary eAswaaq grew sixfold to EGP 141.3 mn, driven by the rollout of its digital ticketing service at 32 tourist sites.

Not doing so well: Revenues at eCards fell 65% during the year, due to fluctuations in revenue stream for its smart solutions services as well as “an unfavorable FX environment and the impact of global supply chain issues on SIM availability.” eKhales posted a 28% decline in revenues owing to a base effect caused by one-time POS sales made in 2021.

Shareholders in line for a bigger payout: The board has proposed paying out a dividend of EGP 0.23 per share to shareholders, according to an EGX disclosure (pdf). This is more than double the EGP 0.10 dividends distributed last year.

e-Finance is planning Saudi-backed expansion: e-Finance intends to expand into new markets during 2Q or 3Q this year by leveraging the Saudi sovereign wealth fund’s recent investment in the company, Chairman Ibrahim Sarhan told Asharq Business yesterday (watch, runtime: 8:15). The company completed a roadshow in Dubai last week and will soon visit Saudi Arabia to talk with investors alongside the Public Investment Fund, he said. The PIF last year invested EGP 7.5 bn to acquire a 25% stake in the firm, money that will enable the company to “strengthen the group’s offering and operational footprint in Egypt as well as beyond its borders across the Middle East and Africa,” Sarhan said in the earnings release

And fresh capex: The company plans to invest EGP 2 bn this year in its subsidiaries, Sarhan told Asharq.

It was a mixed bag on talk shows yesterday: Kelma Akhira’s Lamees El Hadidi discussed Egypt’s debut sukuk issuance with Tarek El Metwally, the former head of Blom Bank Egypt (more on this in the news well above), Transport Minister Kamel El Wazir made an appearance on Ala Mas’ouleety to talk about new capital transport links and metro fare hikes (see above), and Al Hayah Al Youm looked at the latest initiative to locally produce electric cars in Egypt.

Ultra-cheap, locally-assembled electric cars? The Arab Academy for Science, Technology and Maritime Transport (AAST) has added its name to the list of companies proposing to start assembling EVs in Egypt, and says it can do it at an ultra-low price. In an announcement Tuesday, the Arab League-run university said it will launch the country’s first Egypt-made EVs in the next six months, and will sell them at prices far below cars manufactured by international auto firms.

Yahduth fi Masr picked up the news last night following talks between Prime Minister Moustafa Madbouly and AAST representatives, and spoke to AAST Dean of Applied Research Mohamed Elghamry, who is behind the project (watch, runtime: 11:01). The vehicles will be sold at between EGP 100k and EGP 170k, Elghamry said, adding that the initiative is attempting to address the high prices of traditional cars in the market. The first batch of EVs will go on sale in the second half of the year, and 500 vehicles will be produced in the initial phase, he revealed. Around 60% of the components will be sourced from local suppliers but AAST hopes to increase this to 100% in the future.

Meanwhile: Masa’a DMC took note of the Higher Education Ministry opening the door for applications for a new AAST-backed grant for local EV assembly and technology transfer, with a deadline set for 15 March (watch, runtime: 5:47).

AUTOMOTIVE-

More natgas filling stations: The number of natural gas filling stations has risen more than fourfold since 2020 to more than 900, as part of the state’s push towards converting traditional vehicles to run on natgas, Oil Minister Tarek El Molla said in a statement yesterday. The state is working to build as many as 120 stations this year, he added.

STARTUPS-

Cartona eyes Saudi debut: Egyptian B2B e-commerce platform Cartona plans to expand to Saudi Arabia in early 2024, CEO and co-founder Mahmoud Talaat told Asharq Business in an interview. His statements come nearly a year after Cartona raised USD 12 mn in a series A round led by VC firm Silicon Badia.

ICYMI- We sat down with Talaat for an interview last year when he was featured as our Founder of the Week in EnterprisePM.

AND- inDrive raises USD 150 mn: Global ride-hailing app inDrive — FKA inDriver — has raised some USD 150 mn from existing investor General Catalyst to support the company’s growth plans, it said in a press release (pdf). This marks the company’s first round of funding since it rebranded to inDrive back in October to reflect the company’s growth into verticals beyond ride-hailing, including helping users “look for jobs, request household services, and book long-distance trips and deliveries.”

REMEMBER- The company has been operating in Egypt since September 2020, offering its services in Suez before expanding to Cairo.

Speaking of ride-hailing services: DiDi Egypt has expanded its motorcycle ride-hailing service — dubbed DiDi Tayaran —- to Alexandria, it said in a statement (pdf) yesterday. The Chinese firm landed in Egypt last year and launched a scooter service in November.

COMMODITIES-

We just bought rice from abroad: State grains buyer GASC has bought 50k tons of imported rice, the Supply Ministry said. The purchase comes a few days after the government prematurely lifted a cap on local rice prices, with officials saying that the state could look to increase rice imports in a bid to control soaring prices.

INFRASTRUCTURE-

Cannon Artes lands contract for Suez water treatment plant: Italy-based water engineering company Cannon Artes has secured a USD 31 mn contract to build a desalination and demineralization plant for the state-owned Suez Oil Processing Company’s (SOPC) oil refinery, it said in a statement. Under the contract, the company will be responsible for designing, constructing, commissioning and delivering the plant. The plant will process almost 30k cubic meters of water a day, and is expected to come online in 1Q 2024.

REFRESHER- SOPC launched an international tender for the water treatment plant in 2021, almost a year after it secured a USD 200 mn loan from the European Bank for Reconstruction and Development (EBRD) to finance its energy efficiency investments.

El Sisi talks trade, investment with his Uzbek counterpart: President Abdel Fattah El Sisi sat down with Uzbek President Shavkat Mirziyoyev on the final day of his two-day trip to Egypt. They agreed to enhance bilateral trade, investment, and economic relations, according to an Ittihadiya statement. Egyptian and Uzbek government officials also inked a raft of agreements to cooperate in fields ranging from education to tourism.

Israeli MPs shrug at protests over judicial reforms: Israeli MPs pushed ahead with a controversial overhaul of the justice system pushed by Prime Minister Benjamin Netanyahu’s far-right government despite mass protests, AFP reported. In the first reading, the Knesset voted by 63 to 47 in favor of the reforms, which would hand politicians more control over the judiciary.