The privatization program is well and truly underway: The government has signed agreements worth USD 1.9 bn to sell state-owned assets under its privatization programaimed at ending the ongoing FX crunch and increasing the private sector’s role in the economy. At a press conference (watch, runtime:1:10:15) aimed at bolstering investors’ confidence in the government’s reform agenda, Prime Minister Moustafa Madbouly and Planning Minister Hala El Said announced the sale of stakes in five companies to investors — and pledged more to come.

Remember: The government had aimed to snag some USD 2 bn in proceeds from asset sales by the end of June as part of a reform agenda agreed last year with the IMF for its USD 3 bn loan.

Most of the receipts are in hard currency: The state has raised USD 1.65 bn through the stake sales and received the remainder in EGP, Madbouly said.

WHO BOUGHT WHAT?

#1- ADQ takes stakes in three oil, petchem firms: Abu Dhabi sovereign wealth fund ADQ acquired 25-30% stakes in Egyptian Ethylene and Derivatives Company (Ethydco), Egyptian Linear Alkyl Benzene (Elab), and Egyptian Drilling Company (EDC) for USD 800 mn, El Said said. Each of the companies had been warehoused in the Sovereign Fund of Egypt’s pre-IPO fund.

#2- Hotel company: A group of Talaat Moustafa Group subsidiary Icon Investments together with unnamed foreign investors has invested USD 700 mn in a government holding company for hotels via a capital increase, handing them a 37% stake. The holding company owns seven high-profile hotels in tourist hotspots, and was rumored to have attracted the interest of a Qatari investor. The public enterprises minister suggested earlier this year that the government could sell a 20% stake in the entity.

#3- Al Ezz Dekheila: The government divested its entire 31% stake in Ezz Steel subsidiary Al Ezz Dekheila for USD 241 mn in a move that will lead to the company delisting from the EGX. Some 60% of this amount was raised in USD, with the remainder carried out in EGP. The stake, previously held by state institutions, was acquired by parent company Ezz Steel.We have more on this below.

That brings the total number of privatization transactions in 2023 to seven: The government raised some USD 153 mn — mostly denominated in EGP — by selling stakes in Telecom Egypt and Pachin in May.

IN THE PIPELINE-

There’s more where that came from: The government will soon announce additional transactions worth another USD 1 bn, the prime minister said. And the International Finance Corporation (IFC) is helping onboard more companies to the program to reach 50 in total, he said, adding that the state has so far completed a quarter of the first phase.

Transactions in the pipeline and where they stand:

#1-Gabal El Zeit wind farm: The government is looking to secure more than USD 300 mn by selling the 580-MW Gabal El Zeit wind farm, El Said said, adding that it accepted the highest bid in June after receiving a number of non-binding offers. The buyer will be given 60 days to conduct due diligence on the asset, which the government expects will see the sale wrap up by October.

It’s going to Actis: A government source confirmed to us on Monday that a bid submitted by emerging market-focused private-equity firm Actis has been selected. The UK-based EM giant will be given full access to the data and the asset ahead of making a final offer.

#2- Wataniya: The state has qualified three companies to conduct due diligence on military-owned fuel retailer Wataniya after receiving six non-binding offers. The transaction is expected to close in October or November. The company — whose sale has been in the pipeline for a few years — was reported earlier this year to have attracted the interest of Emirati energy firm Adnoc.

#3- A Siemens power plant: The sale of one of the three Siemens-built power plants in Beni Suef is expected to be finalized in 1Q 2024, the minister said, without providing further details. Actis and Malaysian power company Edra have been rumored to be interested in acquiring the asset.

#4- Water desalination plants: The Housing Ministry has set a five-year plan to sell stakes in21 desalination plants that have a combined capacity of 3.3 mn cubic meters per day. The government expects the first phase of the plan, which ends in 2025, to attract USD 3 bn in investments. The government expects to offload stakes in four plants in 4Q 2023, El Said said.

All in the name of boosting hard currency inflows: The government aims to ramp up annual hard currency inflows to USD 191 bn by 2026, increasing them by USD 70 bn over the next three years, Madbouly said. The plan entails a 20% annual increase in revenues from exports and tourism, as well as a 10% increase in remittances, FDI, Suez Canal receipts, and CIT outsourcing revenues.

SMART POLICY- Don’t expect the state to exit assets by IPO anytime soon given current market conditions, El Said is quoted by CNBC Arabia as saying.

The story got international ink:Reuters | Bloomberg | AP News.

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