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Wednesday, 7 December 2022

Checking in on the government’s PPP plans

Where do Egypt’s PPP plans stand? We’ve been hearing a lot of plans for the state’s PPP program this year especially after the Madbouly government revealed its plans to reduce the state’s role in the economy earlier this year. To find out more about what we can expect going forward, we spoke to Atter Hannoura, director of the Finance Ministry’s PPP unit, which is responsible for bringing private-sector companies and private finance into government projects.

Key takeaways:

  • There has been a lot of regional and international interest in PPPs in Egypt
  • The state will soon launch a number of tenders in search for private-sector partnerships in a variety of sectors — desalination, sewage, education, logistics and ports.
  • The World Bank is helping PPP projects go green.

REFRESHER- The Madbouly government has acted to increase the volume of PPPs in Egypt, passing legislative amendments earlier this year that make it easier for companies to bid for government contracts. The government sees PPPs as forming a key part of its privatization strategy, which will attempt to double the private sector’s role in the economy over the next three years.

PPPs have been met with regional and international appetite: There has been a lot of interest expressed by foreign companies, as well as investment funds in the GCC and elsewhere around the world, Hannoura told Enterprise, without disclosing further information.

Strengthening Egypt’s water security is a key priority right now: The PPP unit is working with the Housing Ministry, the New Urban Communities Authority and the Sovereign Fund of Egypt to launch tenders for 21 new desalination plants that will process a combined 3.3 cubic meters of water per day once fully operational by 2025. The tender is part of the government’s wider desalination program that will eventually provide the country with an extra 8.8 mn cbm/d of fresh water.

Companies can bid based on the size of the plant: The government has invited firms to bid for desalination plants according to their capacity, Hannoura said. Private-sector firms can choose to bid for plants with capacities of 200k, 400k, 600k or 1 mn cbm/d, Hannoura said.

Demand is high: Around 200 investors purchased tender booklets for the projects, Hannoura said, adding that the unit will go through the pre-qualification files submitted over the coming month. Pre-qualification closed at the end of November.

Tenders coming soon: The government plans to launch the tenders for the plants over the next 18 months, Hannoura told us. This contradicts recent statements made by Sovereign Fund of Egypt head Ayman Soliman, who said that final contracts will be signed in 2023. Only companies that have pre-qualified will be able to bid, Hannoura said.

The ministry is running the studies on more wastewater treatment plants: The ministry could soon launch a tender for five sewage stations, including the Damietta station, once the unit is done studying them, he added. Egypt has used PPP to fund wastewater infrastructure in the past, most recently awarding a USD 49 mn contract for the Gabal El Asfar water treatment plant to French infrastructure firm Suez and Arab Contractors.

The Tenth of Ramadan Dry port project will be awarded in 1Q 2023, Hannoura told us. The Tenth of Ramadan dry port has seen interest from four consortiums wanting to get their hands on the contract to build the 250-feddan dry dock. The consortiums include: MSC, Elsewedy Electric-CGM CMA-CEVA Logistics, Orascom Construction-Abu Dhabi Ports, and Bollore Logistics-Meridiam.

More dry ports, logistics + industrial projects are on the horizon: The unit is also gearing up to tender three new dry ports in Damietta, Beni Suef and Sadat City, a logistics area in Sixth of October, and a number of industrial and drainage projects, Hannoura told us. Feasibility studies are currently being done on these projects ahead of being submitted to the PPP Supreme Committee, he said.

Where do things stand with the PPP schools program? Fifteen consortiums have qualified to bid for projects in the PPP schools program, which the government is looking to relaunch after a three-year hiatus. The ministry is now inviting bids for a contract to build 1k language schools by 2030, having resolved the issue that put the program on pause — a lack of available land. “We are currently ready to tender and there is great demand from investors for this program,” he told us.

More info coming soon: The ministry will soon disclose which companies are in the running, Hannoura said. The terms of the tender are expected to be released before the end of the year and we should know who won the bid soon, Hannoura said. The first phase of the program kicked off in 2019, when the government signed PPP agreements with five consortiums to build and operate 24 schools.

Phase three? The tender for the third phase of the program will go live next year, he added, without disclosing further details.

The private sector could soon start bidding for the Olympic City in the new capital and youth centers under the PPP framework. The PPP unit is currently working with the Youth Ministry to prepare 27 youth centers and three sports medicine centers for private sector bids, Hannoura told us.

The EGP deval has caused problems: Companies have had to revise their feasibility studies in light of the higher import costs triggered by the currency devaluation in October, Hannoura said. The currency has slid 24.9% since the deval and is currently trading at 24.66, according to the official rate.

DFIs to help fund studies: The state is working with international financial institutions — the European Bank of Reconstruction and Development, the World Bank and the African Development Bank — to help fund feasibility studies for infrastructure projects.

Money for green projects: The World Bank will provide a USD 350k grant to the PPP unit to help convert its projects into green projects, Hannoura said, adding that the bank is working to train the PPP unit on the framework for launching green projects.

Your top infrastructure stories for the week:

  • New Mansoura, phase one: President Abdel Fattah El Sisi inaugurated the first phase of New Mansoura City on the Mediterranean coast in Dakahlia governorate.
  • The biggest sock factory in MENA? Port Said Governorate signed an agreement with a Chinese investor to establish a sock factory with investments of USD 37 mn. The factory will be the biggest of its kind in the region.
  • A big gas find in the EastMed: Chevron has discovered an offshore gas field in the Mediterranean estimated to hold 3.5 tn cubic feet of gas.

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