WHAT WE’RE TRACKING TODAY

Scheduled to release 3Q14 results today: Oriental Weavers, EK Holding and Medinet Nasr Housing and Development.

President Abdelfattah El-Sisi issued a decree last night that empowers the Office of the President to deport to their home countries any foreigners accused or convicted of an offense under Egyptian law. Extradition would require the consent of the Prosecutor’s Office and of Cabinet and be “in the national interest.” The move appears to set the stage for the release of at least two of the Al Jazeera English journalists now in jail awaiting their 1 January 2015 appeal. Bureau chief Mohamed Fahmy is a dual Egyptian-Canadian Citizen; journalist Peter Greste is Australian. We see this as leaving in the cold Egyptian producer Baher Mohamed unless there were some pretext for him to be allowed to leave for Qatar. According to tweets from Mohamed Fahmy’s Twitter account, managed by his family and relating his statements from prison, Fahmy says he plans to stay with Baher Mohamed in Egypt to face charges and will not give up his Egyptian citizenship.

The IEA’s World Energy Outlook has been released. The full report is available for purchase online, but individual special publications on Africa Energy Outlook and World Energy Investment Outlook are available for free (links in Energy, Renewable Energy & Subsidy Reform, below).

Remember how Ukraine and Daesh made pretty significant contributions to deep market contractions last month on “fears of political risk”? Well, the headlinein the NY Times this morning reads: “Russian troops are crossing into Ukraine, NATO says.” An invasion by any other name…

LAST NIGHT’S TALK SHOWS

Talk show hosts tackled a variety of lighter topics last night.

Dream 2’s Wael Ebrachi discussed the pros and cons withdrawing from sports tournaments in Qatar. Should we or should we not mix politics with sports? Who are we harming by boycotting these events?

Diaa Rashwan talked with a panel of Islamic scholars on CBC Extra about how to combat extremist ideology amongst Egyptian groups who have adopted “the philosophy of Daesh,” such as Ansar Beit Al Maqdis.

Mahmoud Saad spoke with Coptic leaders about the movement to liberalize divorce laws in the church.

OnTV’s Youssef El Houssieny commented on rumors alleging that Amr Hamzawy — the former member of parliament and talk show host, since fallen from grace — and his wife, the Egyptian actress Basma, are getting a divorce. “It’s unbelievable how we have turned on Hamzawy. Whether or not we agree with his political position, he doesn’t deserve to have his reputation tarnished,” said El Houssieny.

On Al Qahira Al Yawm, Amr Adeeb’s Wednesday night replacement discussed theNour Party sex scandal involving sex videos that are currently circulating on social media. The sex tapes were allegedly taken by a bearded member of the Nour Party leader in the Gharbia governorate. Stranger than the existence of the tapes themselves is the alleged perpetrator’s wife, who has taken the position that it is her husband’s right to do whatever he pleases and that the women being filmed came to him of their own free will. The tapes have supposedly received over 10 million views.

WATCH

Footage of what is reportedly a young Syrian boy who fakes death under sniper fire to save a young girl. (YouTube)

Alleged Turkish nationalists attack three American sailors in Istanbul. (YouTube)

SPEED ROUND

The EGX30 lost 1.55% on Wednesday to close at 9,345 points on turnover of EGP 713 mn, about on par with the 90-day average. Saudi Arabia was flat, Kuwait, the DFM and Qatar all eased 0.2%, while ADX slid just 0.1%.

International markets were mixed yesteday as the Russian invasion of Ukraine and a hefty forex settlement imposed on HSBC, UBS and Royal Bank of Scotland sent European markets into negative territory yesterday, while the Dow Jones and S&P 500 both broke five-day winning streaks to close down just fractionally. The Nasdaq gained ground.

In Asia early this morning, shares were down on weak volumes as traders looked forward to Chinese economic data due out later today.

U.S., British and Swiss regulators have fined some of the largest banks in the world a combined total of USD 4.25 bn for manipulation of foreign currency markets. The banks being fined thus far are UBS, JPMorgan Chase, Citigroup, HSBC and the Royal Bank of Scotland. (Read in DealBook, the release from US regulator CFTC, or the release from British regulator FCA)

The AP has a dark take this morning headlined “Egypt elections unlikely to deliver parliament that can check president’s powers” that is being fairly widely picked up in the United States, even by conservative outlets including Fox News, which typically give Egypt a somewhat smoother ride than, say, The Guardian. Noting that the elections have not yet been set despite “repeated delays,” the piece concludes that electoral laws, general political apathy and a rising intolerance of dissent will hamper the polls, which are expected in March. (Read)

Alain Gresh, the Cairo-born editor of Le monde diplomatique, was briefly detained in Cairo along with two other journalists because a nutter in a café was upset he was talking politics with Egyptians in a mix of English and Arabic. Local online media site Mada Masr broke the story, which has quickly become a “thing” on the internet (see the New York Times as but one example). The Deputy Minister of the Interior responsible for the human rights portfolio has since offered Gresh a personal apology.

The United Nations must pressure Egypt to undertake environmental impact studies of how the New Suez Canal will promote the transfer of invasive species between the Red Sea, the Mediterranean and other bodies of water, the noted science writer Juli Berwald (of Woods Hole) writes in today’sNew York Times We have previously covered the study she mentions (which calls the Suez Canal “one of the most potent mechanisms and corridors for invasions by marine species known in the world”); the study was attacked in the domestic press because its lead author happens to be Israeli.

Saudi Arabia is not engaging in a price war to gain market share, the country’s oil chief said yesterday from Mexico. The remarks prompted observers, who in the main are positive the Kingdom is indeed engaging in a price war, is now comfortable with where oil prices sit and is signalling it prefers they not go much lower. (Read more on CNBC or the FT)

“Egyptian student arrested carrying copy of Nineteen Eighty-Four” reads the headline in the Guardian atop a short story by Patrick Kingsley. The piece underscores both the ridiculous legs this particular story enjoys and the length to which editors will go in their neverending search for the most potent clickbait: The key here is the absence of the word “for” in the headline; Kingsley’s story correctly notes the student wasn’t carrying “1984,” though he can’t help but note, “Some nevertheless joked that it was only a matter of time before possession of Nineteen Eighty-Four became a reason for arrest. The book could be seen as particularly subversive in an Egyptian context.”

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

IEA releases World Energy Outlook 2014 with projections up to 2040
International Energy Agency Press Release | 12 Nov 2014
The International Energy Agency released its annual World Energy Outlook report yesterday, examining scenarios of how the energy mix will evolve by 2040 around the world. According to the release, in the central scenario of WEO-2014, world primary energy demand is 37% higher in 2040, with world demand for two out of the three fossil fuels – coal and oil – essentially reaches a plateau by 2040, although, for both fuels, this global outcome is a result of very different trends across countries. At the same time, renewable energy technologies gain ground rapidly, helped by falling costs and subsidies (estimated at USD 120 billion in 2013). By 2040, world energy supply is divided into four almost equal parts: low-carbon sources (nuclear and renewables), oil, natural gas and coal. As is customary, the full report is not available for PDF download.

Editor’s Note: The Africa Energy Outlook does include Egypt, while the full WEO 2014 apparently includes a case study on Egypt. We’ll be ordering a copy and will have more as soon as we obtain it.

(Go to the WEO 2014 website | download the executive summary in PDF | Download the full Africa Energy Outlook | Download the full World Energy Investment Outlook)

OIL & GAS

3-Year plan to develop petroleum sector in Egypt
Al Hayat | 12 Nov 2014
Egyptian Minister of Petroleum, Sherif Ismail, announced on Tuesday that the Egyptian government has laid out a comprehensive three year strategy to develop the petroleum and energy sector. In a speech delivered to a group of 68 American investors attending a conference organized by the US Chamber of Commerce and AmCham, Ismail stated that investments in the petrochemicals industry have reached USD 6.2 billion. The plan announced by Ismail will involve studying the feasibility of a number of key and strategic projects which would boost investments in the sector. He added that since November 2013, the sector saw USD 2 billion of investments allocated towards developing 153 fields and over USD 12 billion to develop natural gas production.

Negotiations are ongoing with Cyprus to import gas to Egypt, says BG Egypt
Argaam | 11 Nov 2014
Negotiations are ongoing between the Cyprus National Hydrocarbons Company (CNHC) [sic] and BG Egypt over a deal to import natural gas to Egypt, said Arshad Sufi, the head of BG Egypt on Tuesday. He added that the BG Egypt will conduct a study to gauge the mechanism of transferring the gas in January, while stating that CNHC is currently conducting a similar study. Furthermore, these negotiations were mirrored by high level government talks involving the Egyptian minister of petroleum, as the deal may prove to be strategically vital for Egypt’s energy security. The news has been picked up as well by Al Masry Al Youm and seems to have legs.

Gas exports are both political and economic
Globes | 11 Nov 2014
Israel’s gas partnerships have signed many letters of intent for exports but only one small deal with the Palestinian Authority. Estimates are that revenue from gas exports could bring the State about USD 70 billion over decades (at today’s values). Moreover, gas exports have a major geopolitical importance and can help Israel consolidate its position in the region. However, to date Israel has still not put in place the required arrangements for realizing these exports: what tax rates will be imposed on the gas exploration partnerships, if gas prices will be supervised, how and by whom will the export licenses be given. With this uncertainty, only one small binding gas export agreement has been concluded so far to sell 4.75 BCM of gas to the Palestinian Authority. There are many letters of intent with three separate bodies in Jordan, and two major multinational companies in Egypt – BG and Union Fenosa. There is also talk of deals with Turkey and Cyprus. (Read)

Circle Oil: Egypt payment expected
Company Disclosure | 11 Nov 2014
Circle Oil, the AIM-traded Irish oil and gas company, announced yesterday that Chief Executive Chris Green is to resign from the company after four years of service. A search for a successor is underway, and Green will remain on board until the next chief executive is settled in. The same release gave investors an operational update and revealed that production from Egypt remains in line with the company’s predictions – yielding between 9,300 and 9,700 barrels of oil and10-11 mn cubic feet of gas per day. Furthermore Circle said that cash receivables from Egypt continue to be in line with expectations, the authority is making regular payments and the company expects to receive an additional one-off payment from the recently announced ‘special tranche’ allocated to reduce the country’s debts to oil companies. (Read)

Dana Gas 3Q bottom line surges 36%
Company Disclosure | 12 Nov 2014
In the nine month period ended 30 September 2014, Dana Gas reported a 16% increase in revenue to USD 541 million as compared to USD 466 million the previous year. Net profit in the nine month period of 2014 was also up at USD 129 mn. Production was up 11% at 70,500 barrels of oil equivalent per day (boepd). For the quarter, the company posted revenue of USD 174 million (3Q 2013 USD170 million) and gross profits of USD 79 million (Q3 2013: USD 71 million). Net profits were up 36% to USD 38 million (3Q 2013: USD 28 million) underpinned by an increase in production and a strong focus on cost discipline, Dana said. Production during the third quarter increased by 3% to reach 68,700 boepd compared to 66,850 boepd in Q3 2013. Operationally, the third quarter saw the Company sign two major agreements in Egypt and took a significant step forward in restarting income generation in the Kurdistan of Iraq (KRI) through local sales of liquid products. (Read)

BASIC MATERIALS

Egypt meeting with commodities firms on hub project -minister
Reuters | 11 Nov 2014
Egypt’s supplies minister has begun holding meetings with international commodities trading companies with whom he wants the government to partner in an ambitious plan to transform the country into a global trading hub. The plan, one of a number of mega-projects announced by the government, aims to turn Egypt into a center for processing and re-exporting millions of tons of wheat, soybeans, sugar and other commodities via a new port and also envisages the creation of the region’s first commodities mercantile exchange. Minister Khaled Hanafi told Reuters on Tuesday he had been approached by “very big companies and traders”, including those in the grain storage business, to consider proposals which the government says will boost the economy and create jobs. (Read)

PepsiCo Egypt imports USD 20 mn in agricultural supplies
Daily News Egypt | 12 Nov 2014
PepsiCo has put forward a request to the Ministry of Agriculture for land to cultivate potatoes, according to General Manager of PepsiCo North East Africa and Egypt Ahmed El-Sheikh. The land would allow the company to produce locally instead of importing. The ministry is considering the project.

[Editor’s Note: The article uses some rather unclear phrasing, and it appears from the article that Pepsi is already cultivating at least some potatoes in Egypt, and is simply seeking to increase its local production. It would be interesting to know if they are really looking to import USD 20 million worth of potato seeds as the author states; one wonders how many potatoes that would yield and how many Pepsi really needs to keep us all in Frito Lays.] (Read)

OCI inaugurates Sofert plant in Algeria; JV with Sonatrach will be Algeria’s largest exporter
Company Statement | 12 Nov 2014
OCI N.V. announced that Sorfert, its joint venture with the Algerian oil and gas conglomerate Sonatrach, was officially inaugurated on 10 November 2014. Sorfert is capable of producing 1.26 million metric tons of granular urea and 0.8 million tons of merchant anhydrous ammonia. Sorfert is owned by a 51/49 OCI and Sonatrach partnership and was constructed by OCI. The facility employs 762 engineers, of which 86% are Algerians. In addition, north of 5,000 Algerians were employed during Sorfert’s construction phase. Nassef Sawiris, Chief Executive Officer of OCI N.V., commented: “Sorfert is Algeria’s first granular urea production facility and is the country’s largest exporter excluding oil and gas facilities.” (Read)

REAL ESTATE

Kuwaiti investors threaten Egypt with lawsuit over land, accuse government of “lack of seriousness”
Daily News Egypt | 09 Nov 2014
An unfolding story this week in the Egyptian press concerned the ongoing saga of the Egyptian-Kuwaiti Company for Development and Investment — not to be confused with EKH Holding (EKHO on the EGX). Kuwaiti investors who own 26,000 acres of land in Ayat, Giza, intend to take Egypt to international courts. In comments to Daily News Egypt, Hany Sarie-Eldin, head of Sarie-Eldin and Partners Legal Advisors, said the move will have an impact on the government’s effort to revive confidence in the economy. The dispute dates back to 2002 when the Egyptian government at the time agreed, through a decision issued by former president Hosni Mubarak, to transfer ownership of the land to the Egyptian-Kuwaiti Company for Development and Investment, which is 90%-owned by Kuwaiti investors. The Kuwaiti company stated: “We cannot cultivate the land because the Egyptian government has not provided us with water as agreed upon, and the National Center for Planning State Land Uses recommended in 2007 that it be used for residential purposes. This was approved by the government before the uprising of 2011, but a Presidential Decree was not issued.” The company requested that it be supplied with water as agreed upon in order to cultivate the land, or that an agreement be made to convert the land to serve urban purposes with the company paying a fair value for conversion fees. (Read)

TELECOMS

Telecom Egypt posts 61.3% drop in 3Q14 net profit
Reuters | 12 Nov 2014
Fixed-line monopoly Telecom Egypt reported a 61.3% drop in third-quarter net profit on Wednesday, due to several one-off and operational costs related to licence fee payments and tax liabilities. It said net profit fell to EGP 251.9 million Egyptian pounds (USD 35.2 million) from EGP 650.8 million pounds a year earlier, while third-quarter revenue fell 5.2% from the previous year. Chief Executive Officer Mohamed Elnawawy said revenue was up 9.5% in the first nine months of the year, driven partly by an improvement in the retail business, which saw a surge in broadband subscriptions. But a delayed settlement in licence fees paid to the regulator as well as an increase in deferred taxes on liabilities and a larger salary bill weighed on the bottom line.
(Read on Reuters or download the release in PDF)

Egypt’s Global Telecom reports sharp rise in losses
Reuters | 12 Nov 2014
Global Telecom, the Egypt-based group formerly known as Orascom Telecom, reported on Wednesday a 66% jump in net losses for the first nine months of the year, to EGP 2.013 billion Egyptian pounds due to higher costs and taxes and adverse moves in foreign exchange rates. The company, which is 51.9% owned by Vimpelcom , said revenue for the nine months ending on 30 September slipped 3% to USD 2.52 billion from USD 2.61 billion in the same period last year. The losses over the nine months were also attributable to higher financial expenses, foreign exchange losses in its key foreign markets of Algeria and Pakistan, and an amended Egyptian tax law that has increased the tax burden of foreign subsidiaries, according to the chief financial officer in a conference call.
(Read on Reuters or download the release in PDF)

BANKING & FINANCE

CIB Reports best 3Q and 9M performance ever with 3Q14 net income rising 5.6% y-o-y to EGP 972 mn
Company Disclosure | 11 Nov 2014
Egypt’s leading private-sector bank was just ahead of the consensus forecast with total revenues of EGP 2 bn (up 17% y-o-y) and net income of EGP 972 mn (a 5.6% gain y-o-y), giving the institution its best 3Q and 9M performances at both the top and bottom line. Critically, net interest income was up nearly 20% y-o-y. The bank reported continued loan growth q-o-q despite being in the summer / Ramadan slow season, and bank Chairman Hisham Ezz Al-Arab noted in the earnings release that “The government’s landmark issuance of EGP 64 billion in Suez Canal certificates had a limited  impact on deposit gathering, with the Bank seeing EGP 5.0bn in net new deposits.” Also notable: Trade service volumes surged nearly 25% year-on-year, reflecting “Egypt’s ongoing economic recovery,” Ezz Al-Arab said. (Read earnings release in PDF)

Outgoing transfers by foreign companies apply upward pressure on USD/EGP rates
Al Masry Al Youm  | 12 Nov 2014
Foreign companies operating in Egypt have been converting their earnings into USD as they prepare to transfer them abroad with year-end approaching, pushing the official Bid/Ask exchange rate up to EGP 7.15/7.18 to the US dollar. Meanwhile the black market Ask rate has spiked to EGP 7.62 to the US dollar. In related news, the Central Bank of Egypt (CBE) has shut down 12 foreign currency exchange companies for periods ranging between one to three months on the back of violating regulations. CBE’s actions come on the heels of its efforts to curb illicit currency trading which according to the regulator is a primary cause for unstable exchange rates. (Read in Arabic)

MERGERS & ACQUISITIONS

EFG Hermes advises on creation of world’s largest jack-up ASV and support company
Seafox Contractors Press Release | 07 Nov 2014
HM MOS International Limited (parent company of Millennium Offshore Services Superholdings LLC) and Seafox Group (parent company of Seafox Contractors and Workfox), announced last week that both companies will combine to form the world´s largest offshore jack-up ASV and support company with a global reach spanning Europe, the Middle East & North Africa (MENA), and Asia Pacific Regions. The newly formed company will operate under the brand name Seafox. The newly formed company has combined EBITDA of approximately USD 200 million with 45% of revenues generated from the European operation, 35% from MENA and 20% from Asia Pacific. Investment bank EFG Hermes advised on the merger. (Read)

OTHER BUSINESS NEWS OF NOTE

Juhayna posts 15% gain in revenue, 42% drop in Q3 net profit
Juhayna Earnings Release | 12 Nov 2014
Juhayna Food Industries announced yesterday consolidated results for the third quarter of 2014, reporting a 15% year-on-year rise in total consolidated revenue to EGP 1,008 million, while net income of EGP 54 million was a 42% decline yoy. The company reported net profit of EGP 53.769 million Egyptian pounds for the three-months ending 30 September and revenues of EGP 1.008 billion pounds, up15.1% on the same period last year, with particularly strong growth in the dairy segment. However, these were offset by a nearly 23% surge in cost of goods sold, largely on the back of rising raw materials prices, in addition to rises in financing expenses and a one-time donation to the national trust fund Tahya Misr. (Read)

EGYPT POLITICS + ECONOMICS

New Egypt decree: President can deport foreigners
AP | World | 12 Nov 2014
Egypt’s president issued a new decree Wednesday granting him the power to deport foreign defendants convicted or accused of crimes, a move that could allow him to free imprisoned journalists from the Al-Jazeera English satellite news channel. The decree by President Abdel-Fattah el-Sissi allows him to deport foreigners whenever he decides it is the best interest of the country. The presidency did not elaborate about the decree. It was not immediately clear if the decree would apply to dual citizens such as Fahmy, or whether the president intended to use the new powers on this case. (Read)

Egypt reports attack on naval patrol
Al Jazeera, Daily News Egypt | 12 Nov 2014
Three boats reportedly opened fire on a navy boat while it was on patrol north of the port of Damietta, said the military spokesperson’s office on Wednesday. The navy sent backup forces, and there was an exchange of gunfire that left a navy boat on fire but no casualties are reported. The forces destroyed the attacking boats and arrested 20 people. This is the first attack by armed groups on naval vessels. It is so far unknown whether this was a terrorist attack or whether the patrol boat was fired on by smugglers operating in the area. (Read on Al Jazeeraor Daily News Egypt)

Former Egyptian antiquities minister faces questions over theft from pyramid
The Guardian | 12 Nov 2014
The world’s most famous contemporary Egyptologist, Zahi Hawass, has been summoned for questioning over claims that he helped three German hobbyists steal rock samples from inside Egypt’s largest pyramid. Hawass denies the charges, saying “there is nothing against me,” noting that the theft happened two years after he left office. This rather lengthy article from Patrick Kingsley discusses the alleged crime in detail, and Hawass generally, ending with some particularly engaging quotes from the ex-Minister. (Read)

Sinai buffer zone no solution to militancy in Egypt: Amnesty
Reuters | 12 Nov 2014
Egypt’s plan to create a security buffer zone along its border with Gaza is not a solution to growing militancy in the Sinai region as it does not address the roots of the problem, the head of Amnesty International said on Wednesday. (Read)

ON YOUR WAY OUT

As we reported yesterday, the US and China have inked a climate change agreement in which they pledge to reduce their carbon emissions to 26-28% below 2005 levels by 2025. Chinese President Xi Jinping furthermore said China will draw 20% of its power from non-fossil sources by 2030. For further reading:

• Calls are already going out for other nations to follow their lead (cf:Australia);
• The pact has touched-off speculation (premature, but still) that thechances of failure at next fall’s critical Paris round of talks on a global framework;
• The White House has a pretty extensive factsheet on what yesterday’s agreement really involves;
• US Secretary of State John Kerry has penned an op-ed for the NY Times to begin selling it to US voters;
• This is what Beijing looks like (in side-by-side photos) with and without the impact of the factory shutdowns and alternate-day-driving strictures put in place by China’s government for the duration of the APEC summit

Shares of newly listed National Commercial Bank (Saudi Arabia’s largest lender, which has gone public in the world’s second-largest IPO of 2014) closed up their daily maximum in their first day of trading yesterday, climbing 10%.

Are we the only ones happy that EFG Hermes is bookrunner for the USD 690 mn IPO of Dubai Parks? It’s got nothing to do with Dubai Parks in particular, and everything to do with Legoland Dubai… (Goldman, HSBC and Emirates Financial Services are global coordinators.) (Read more on Bloomberg)

It has nothing to do with business, economics or politics in (or affecting) our fair country or corner of the world, but: The European Space Agency has made history by landing a probe on an asteroid after flying something on the order of 5 billion miles. The Washington Post has the best coverage we’ve read in non-science media.

Following the news we commented on earlier this week of oil billionaire and fracker extraordinaire Harold Hamm reaching a USD 972 million divorce with his now ex-wife, Susie from “Curb Your Enthusiasm” suggests that it could always be much worse (YouTube)