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Monday, 26 September 2022

Siemens-built power plant among USD 3 bn assets to join the pre-IPO fund within weeks

Gov’t wants to raise USD 6 bn from stake sales by mid-2023: The Madbouly government expects to raises as much as USD 6 bn by selling stakes in state-owned assets by mid-2023, Planning Minister and Sovereign Fund of Egypt (SFE) Chair Hala El Said told Bloomberg in an interview in New York. The government could sell shares to the public and to strategic investors, and plans to market companies to Gulf sovereign funds and investors in Europe and Asia during a roadshow in October, she said.

Siemens-built power plant up for grabs: El Said didn’t disclose which companies the government could offer stakes in but said that one of the three Siemens-built power plants will be among the first batch of assets that will be transferred to the SFE’s newly-established “pre-IPO” fund. Assets worth up to USD 3 bn will be handed over to the fund in the next three to six weeks, the minister said, without providing further details.

Pre-IPO fund? Announced by the SFE earlier this month, the pre-IPO fund is aimed at preparing state-owned enterprises for listing on the EGX and provides an alternative to public share sales while market conditions remain volatile. Shares held by the National Investment Bank worth up to USD 3 bn will be sold to strategic investors in the first phase, with a second similar sized phase coming later.

The SFE has had the Siemens plants on its radar for years: There has been talk of selling stakes in the power plants going back to 2019 when the SFE was first established. The fund has in the past suggested that it could acquire significant minority stakes in the plants as a prelude to their sale.

What other assets could be up for grabs? NIB holds stakes in a large number of state-owned companies across sectors including banking, media, fertilizers, food and agriculture, building materials, real estate, and transport, according to its website. Two of the companies listed — Egyptian Media Production City and Mopco — have recently been reported in local media to be the target of Gulf wealth funds, though none of the parties involved have publicly confirmed this.

The Saudi wealth fund could be interested: SFE head Ayman Soliman in April said the Saudi Public Investment Fund (PIF) could invest in all three plants as well as military-owned Wataniya Petroleum. This would come as part of Riyadh’s USD 10 bn investment pledge that has seen the Saudi fund buy minority stakes in four EGX-listed companies for USD 1.3 bn.

Gulf sovereign funds will likely be the priority targets of the strategic sale program, after GCC countries pledged more than USD 22 bn in direct investment to help the country weather global economic headwinds. The Abu Dhabi and Saudi funds have both supported the government’s pivot to strategic stake sales by snapping up holdings in EGX-listed, state-owned companies, and there’s talk of the Qatar Investment Authority following suit. “Sovereign wealth funds are usually long-term investors, they add value in terms of expertise, finance and technology,” Bloomberg quotes El Said as saying.

REMEMBER- Our privatization roadmap is ready: The Madbouly government this week finalized its state ownership policy after months of consultations with representatives from the public and private sectors. Strategic stake sales are a key pillar of the privatization plan, which envisions more than doubling the private sector’s role in the economy to 65% over the next three years, and attracting USD 40 bn in investment by 2026. Expanding the private sector is also in step with IMF guidance — something the government is paying close attention to as it looks to wrap talks over a fresh loan from the multilateral lender within the next month or two.

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