ECHEM inks agreement with Bechtel for USD 6.7 bn petchem, refinery complex: The Egyptian Petrochemicals Holding Company (ECHEM) yesterday signed an agreement with Bechtel to establish a USD 6.7 bn petrochemical plant and refinery in the Suez Canal Economic Zone, according to an official statement (pdf). The agreement, signed on the opening day of the Egypt Petroleum Show, will see the US company manage the construction of the complex and secure the funding from international financial institutions. Under the agreement, ECHEM will begin conducting feasibility studies with an international consultancy. Bechtel, Technip and Saipem have already assisted ECHEM in carrying out preliminary studies for the project, the statement said.

BP signs MoU for youth training in Egypt: Oil Minister Tarek El Molla also signed an MoU with BP to support young workers looking to enter the oil and gas industry by providing training programs and workshops, according to a ministry statement (pdf).

Schlumberger and BP inked a separate MoU to cooperate on digitizing the companies’ oil and gas exploration and production process in the Mediterranean Sea, a separate statement (pdf) said.

El Sisi meets CEOs on forum’s sidelines: President Abdel Fattah El Sisi lauded all of the three companies’ activity in Egypt in talks with each of BP CEO Bernard Looney, Schlumberger CEO Olivier Le Peuch, and Bechtel chairman and CEO Brendan Bechtel.

Correction (12/02/2020): A previous version of this article incorrectly stated that the Egyptian General Petroleum Corporation (EGPC) had signed the agreement with Bechtel.

Egypt to launch international gold exploration tender by the beginning of March: The government will launch an international gold exploration and mining tender for areas in the Eastern Desert by the end of this month or early March, Al Mal reports, citing an unnamed source. This will be the first mining tender since the Mineral Resources Act was amended last year and the first for gold exploration since 2017.

A litmus test for the Mineral Resources Act: Egypt’s last mining tender three years ago was met by lackluster investor appetite due to its uncompetitive commercial terms. Gold mines now will get more favorable terms under the executive regulations to the amended Mineral Resources Act, which will see mine owners paying the minimum 5% royalty on their annual production. The amendments have so far received praise from investors but the demand for concessions in the upcoming tender will be a better measure of the government’s reform efforts.

The industry as it currently stands: Centamin is currently the only company producing gold in Egypt from its Sukari mine, while Aton Resources and Thani StratexResources are still exploring concession areas but are yet to strike gold. Centamin achieved an 8% bump in production in 2019 (pdf) and plans to increase this figure by at least another 6% to 510k oz this year.

New mining exhibition in the pipeline: Separately, the sources said that the government is preparing for a new conference and exhibition with companies and investors in the mining sector to announce the bid and unveil the most recent developments in the sector before the end of the month. The government will also take part in a similar exhibition in Canada in March.

Egypt’s post-loan IMF structural reform agreement will tackle bureaucracy, says Amer: Egypt is still in talks with the IMF over a post-loan structural reform agreement, which could focus on eliminating bureaucracy to clear a significant hurdle in attracting private sector investment, Central Bank of Egypt (CBE) Governor Tarek Amer said at the Egypt Petroleum Show yesterday, according to Bloomberg. Driving home the point that private sector development is a top priority for the government moving forward, Amer said that the CBE has provided a stable FX market with a lower risk premium than in previous years in a bid to attract foreign capital. Reuters also had the story.

When should we expect to see an IMF agreement signed? There’s no clarity yet on that front. Amer said talks are ongoing, but did not indicate a targeted timeline. Finance Minister Mohamed Maait had previously said Egypt and the fund had agreed on aiming to wrap up discussions on the agreement, the duration of which will likely be set at two years, by March. The minister had initially said that the government was aiming to agree on the program by last October, but that plan was swiftly put down by the fund, which declined to enter talks until the end of Egypt’s Extended Fund Facility.

What we know about the potential program so far: The IMF’s Middle East and Central Asia Director Jihad Azour said previously that any future engagement would likely focus on developing the private sector, strengthening welfare provisions, and increasing the transparency of state organizations. Bank of America also suggested back in October that talks could produce a non-loan agreement with a mandatory reserve tranche.

M&A WATCH- Raya receives a bid for 31% stake in its transport arm: Raya Holding has received a EGP 133 mn non-binding offer from British Virgin Islands-based Paradigm Logistics to acquire a 31% stake of its Ostool Shipping Company, according to a regulatory filing (pdf). Raya currently holds a 62.3% stake in Ostool, which was founded in 2010 by Raya Corp and Qalaa Holdings and provides a range of transportation and logistics services. The company’s board of directors will meet today to review the offer.

IPO WATCH- EvergrowFor Speciality Fertilizers is planning to sell a 30% stake in an IPO on the EGX by no later than 2022, Chairman Mohamed El Kheshen told the local press. El Kheshen did not specify how much Evergrow is looking to raise from the sale. The company will begin the process of hiring an investment bank to quarterback the transaction soon, he said.

Meanwhile, Evergrow is working on two fertilizers factories expected to cost up to EGP 19 bn, El Kheshen separately said. The first project is expected to cost EGP 9 bn, and will see Evergrow setting up a 50-50 JV with Belgium-based Ecophos. The second will see the company partner with unnamed Egyptian businessmen to set up a EGP 10 bn factory with a capacity to produce 700 tonnes of nitric acid and 1k tonnes of ammonium chloride a day. The company is in talks with several EU- and Gulf-based banks to borrow USD 562 mn (EGP 9 bn) to finance part of the cost, with the remainder coming through its partners or potentially from IPO proceeds. We noted in December that the company had reached an agreement with four local banks for a USD 150 mn loan to restructure its debts, having borrowed USD 200 mn from the National Bank of Egypt, Banque Misr, and the Arab African International Bank to set up a fertilizer factory in 2017, but has only repaid USD 50 mn.

LEGISLATION WATCH- House mulls tax breaks for companies owned by Sovereign Fund of Egypt: The House Planning and Budget Committee approved yesterday proposed amendments to the Sovereign Fund of Egypt (SFE) law that would provide VAT refunds to any company that is more than 50% owned by the SFE and its sub-funds, Al Mal reports. The government plans to set up sub-funds for the SFE to set up to attract investment into the logistics, renewables and manufacturing sectors.

Limiting legal action against the fund also approved: The amendments, which the Madbouly Cabinet had approved in December, would also limit the scope of legal action that can be taken against the fund and would shield contracts the fund has signed from third-party legal challenge. Presidential decrees to transfer public assets to the fund can also only be appealed by the entity which directly owns those assets or by the fund’s management team. Don’t assume the move is state encroachment: There’s a long track record of self-appointed (and very media-hungry) guardians of the public interest challenging privatization decisions taken in the open by cabinet and / or government officials.

The amendments will now make their way to the House general assembly for a final review and vote.

In other SFE news, the sovereign wealth fund will only hold minority stakes in military-owned companies under a recent agreement that will see the fund market army companies to prospective investors, said Planning and Economic Development Minister Hala El Said, according to Al Mal. The cooperation agreement, signed last week between the SFE and military-affiliated National Service Products Organization (NSPO), allows the private sector to obtain stakes of up to 100% in the companies, and paves the way for the companies to sell stakes on the EGX. Its signing came after President Abdel Fattah El Sisi twice said we could soon see army-owned companies and assets on sale as part of the state privatization program.

The SFE is also in talks with several unnamed multinationals to get them to invest in the health and education sectors, El Said told reporters yesterday.

M&A WATCH- Vodafone taps UK-based Linklaters as legal counsel in STC acquisition: Vodafone Group has appointed law firm Linklaters to act as legal counsel in its planned sale of a major stake in Vodafone Egypt to Saudi Telecom Company (STC), the local press reports, citing anonymous sources. Vodafone Egypt has already appointed law firm Zaki Hashem & Partners to act as local legal counsel.

Financial advisors: Vodafone Group tapped Goldman Sachs earlier this week to advise on the transaction, which would see STC acquire its entire 55% stake in the Egypt arm. Goldman will likely bring PricewaterhouseCoopers’ Egypt office on board to act as a local financial advisor, the sources said yesterday.

Background: According to a non-binding acquisition agreement signed between STC and Vodafone Group, the former is moving ahead with due diligence to acquire the 55% stake in a USD 2.39 bn all-cash transaction. STC is required to submit a mandatory tender offer for the remaining 45%, which is almost entirely held by state-owned Telecom Egypt, and could end up acquiring 100% of the company and directly control over 40% of Egypt’s telecoms market.

DEBT WATCH- CIAF to submit prospectus for USD 50 mn sukuk issuance to market regulator within two weeks: Aircraft leasing company CIAF will be ready to submit a prospectus for its USD 50 mn sukuk issuance to the Financial Regulatory Authority (FRA) within two weeks, the local press reports, citing sources familiar with the matter. The company is in the process of amending the prospectus after putting the issuance on hold following shareholder concerns over dividend payments and changes in the board’s structure.

Where does the proposal currently stand? Al Tamimi & Company is currently ironing out the final changes before a CIAF general assembly is held to approve the prospectus and submit it to the FRA.

Background: News of the first sharia-compliant corporate bond offering in Egypt came in December 2019 when CIAF announced plans for a USD 50 mn issuance. The offering will be sold in two tranches: USD 7 mn in 3-year sukuk will be offered locally, and a larger USD 43 mn tranche of 5-8-year bonds will be open to both local and foreign investors.

LEGISLATION WATCH- The Supply Ministry has drafted a unified law to regulate internal trade, Minister Ali El Moselhy said at a press conference yesterday. El Moselhy was scant on details on what the law entails, noting only that a bill is expected to make its way to the House of Representatives by early 2021.

STARTUP WATCH- Vezeeta raises USD 40 mn in series D funding from Gulf Capital and STV: Healthcare app Vezeeta, which has decamped from our beloved city to Dubai, has secured USD 40 mn in a series D round funding led by asset manager Gulf Capital with the participation of Saudi Telecom’s investment arm Saudi Technology Ventures (STV), it said in a statement (pdf) without disclosing how much the investors had contributed. STV had led Vezeeta’s USD 12 mn series C funding round in 2018 which helped the healthcare startup’s expansion to Saudi Arabia. The company, which provides a platform that connects patients with doctors, is now active in 50 cities across Egypt, Saudi Arabia, Jordan and Lebanon and has raised USD 63 mn since its founding in 2012.

EARNINGS WATCH- Americana Egypt profits halve in 2019: Americana Egypt’s net profit plunged 48.4% in 2019 to EGP 15.1 mn down from EGP 29.3 mn in 2018, according to the company’s consolidated earnings statement (pdf). The drop in profits come despite the company seeing revenues rise 11.7% to EGP 4 bn during the year.

MOVES- SODIC board approves Hussein Shoukry’s resignation: HC Securities Chairman Hussein Shoukry’s resignation from the SODIC board was approved effective 31 January, the company said in a bourse disclosure (pdf). Shoukry had submitted his resignation last month.

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