We just became the East Med’s premier energy hub: The operators of Israel’s Leviathan and Tamar gas fields, Noble Energy and Delek, along with their Egyptian partner East Gas, have signed agreements to acquire a 39% stake in pipeline operator East Mediterranean Gas (EMG). This paves the way for the gas field operators to export natural gas to Egypt under a USD 15 bn agreement signed in February with Alaa Arafa’s Dolphinus Holdings. “[The agreements] represent another major milestone toward Egypt’s goal to become a regional energy hub, providing access to both growing domestic markets and existing LNG export facilities,” Noble Energy said in a press release on Thursday morning. “With these agreements, we are securing the capacity to deliver on our firm gas sales agreement with Dolphinus for Leviathan while also allowing for interruptible sales from Tamar into Egypt,” the statement read.

The mechanics of the agreement: The agreement grants the three companies access to EMG’s 90 km pipeline connecting Israel’s grid to Egypt’s at El Arish, according to the statement. The partnership will pay USD 518 mn for the stake, with Noble and Delek each paying USD 185 mn, while East Gas will pay USD 148 mn, Reuters reports. Noble Energy will own an indirect and effective 10% stake in the pipeline.

Agreement opens up private sector natural gas import licenses… The Oil Ministry is ready to consider permit requests from the private sector to help Egypt become a regional hub for gas trading, Oil Ministry spokesperson Hamdi Abdel Aziz said in a statement (pdf). “The ministry welcomes this new step by the private companies responsible for the commercial project’s implementation,” he said of the agreement. The Natural Gas Regulatory Authority postponed earlier this month the issuance of natural gas import licenses to private sector companies, ostensibly because the private sector was “unprepared.” EGAS has renewed preliminary approvals giving Qalaa’s TAQA Arabia, BB Energy and Fleet Energy the import licenses.

…and clears arbitration cases: “The [agreement] will also entail the settlement and waiver by the sellers, their shareholders and affiliates of any claims, actions or awards related to arbitrations against the Government of Egypt and state owned companies,” according to an emailed statement by Alliance Law Firm (pdf), which was buy-side legal counsel on the transaction. Sources had told Bloomberg last month that the Egyptian government has reached an agreement to reduce the USD 1.76 bn international arbitration ruling against EGAS, EGPC and East Mediterranean Gas (EMG) to around USD 470 mn and would be amortized over a period of around 15 years. Negotiations are with banks for financing to cover it.

Gas exports to begin in early 2019: “The partnership intends to act to close the transaction and begin piping natural gas from Israel to Egypt as early as the beginning of 2019,” Delek said in a statement. By the end of 2019, 350 mcf/d is expected to be pumped to Egypt from the gas fields, supplying around 64 bn cbm of gas over a 10-year period. Delek and its partners will begin working on reversing the flow of the EMG pipeline, which used to carry Egyptian gas to Israel. The companies still need to test the state of the pipeline, according to Bloomberg.

Delek has a short investor presentation (pdf)and a long statement (pdf) breaking down the transaction.

It’s all coming together nicely: Inking the 10-year agreement with Dolphinus is only the most recent step in Egypt’s march to become the premier export hub of East Mediterranean gas to Europe and other markets. Egypt signed an agreement with Cyprus last weekthat would see the two sides build a USD 1 bn pipeline connecting gas from Cyprus’ Aphrodite field to Egypt’s liquefaction plants. Production at the supergiant Zohr field is ramping up, breaking the 2 bcf/d mark earlier this month, bringing the country’s total production up to 6.6 bcf/d.

More yet to come: Eni and Tharwa Petroleum were also said to have kicked off drilling at the Noor gas field in North Sinai last week. Market expectations are high: Eni, which holds an 85% stake in the field, denied in recent months reports claiming that it had discovered 90 tcf of reserves there, or 3x as much as Zohr. The Oil Ministry had also signed in the past month new exploration agreements that are together worth more than USD 1 bn with Shell and Malaysia’s Petronas, as well as Rockhopper, Kuwait Energy and Canada’s Dover Corporation.

The story topped coverage of Egypt in the foreign press on Thursday, with all stating how historic it was. Bloomberg noted that Israeli energy stocks soared on Thursday, while some, including Haaretz, are playing up how the agreement has brought the former enemies together.

Additional reading: Last month, Bloomberg uncovered the web of offshore companies that established the partnership, with a company based in Cyprus and another in the Netherlands. It also revealed that a 37% stake in EMG was bought by Sam Zell and Yosef Maiman, who won arbitration cases against Egypt.

Egypt has pulled the plug on natural gas imports. The pipeline news came as Egypt received its final shipment of imported liquefied natural gas last week, Oil Minister Tarek El Molla told the press yesterday, Reuters reports. El Molla — who did not specify the size of the most recent shipment or total volume of LNG received this year — had previously said that Egypt that LNG imports would come to an end as of October and that Egypt was due to begin exports by January 2019, as more output from gas fields is connected to the national grid. Capacity from the supergiant Zohr gas field had reached 2 bcf/d earlier this month, bringing the country’s total production up to 6.6 bcf/d. Zohr is expected to hit peak production at 2.7 bcf/d next year.

The Central Bank of Egypt left key interest rates unchanged on Thursday, as was widely expected. The CBE’s monetary policy committee left overnight deposit and lending rates on hold at 16.75% and 17.75%, respectively, while the main operation and discount rates were also maintained at 17.25%, the CBE said in a statement. Despite the challenging climate as a result of the emerging markets sell-off, the CBE sees that “the pass-through to domestic inflation from developments in emerging market economies remained contained due to stabilization and structural policies that support improving macroeconomic fundamentals.” Most analysts held the view that the MPC would need to keep rates high to preserve Egypt’s competitiveness in the battle for hot money fleeing EM for higher rates (and more stability) in the United States.

CBE says inflation moving as expected: The central bank’s statement said it expects inflation to come in at c.13% in 4Q2018 before dropping to the single digits “after the temporary effect of fiscal supply shock dissipates.” Annual headline inflation climbed to 14.2% in August, up from 13.5% in July, while monthly inflation eased to 1.8% from 2.4%.

IPO WATCH- Sarwa prices IPO at EGP 7.04 to EGP 8.00 per share, trading to start on 15 October: Consumer and structured finance player Sarwa Capital announced yesterday that it expects to price its initial public offering at EGP 7.04 to EGP 8.0 per share. Our friends at Sarwa are hoping to raise EGP 2.1-2.4 bn from the sale of c. 295 mn ordinary shares on the EGX, which make up 47.2% of the company, after receiving the green light from the FRA. Some 90% of the shares on offer are earmarked for global institutional investors in countries including the US, UK, South Africa and the Gulf. Another 29.5 mn shares have been set aside for retail investors, according to a company statement (pdf). The subscription period for the retail offering will run from 3-10 October, with the final share price set to be announced on 4 October, once the book building process is complete. Selling shareholders will use a portion of proceeds from the transaction to buy up EGP 700 mn’s worth of shares at the offer price in a closed subscription. Trading in Sarwa’s shares should start on 15 October.

Advisers: Beltone Investment Banking is acting as sole global coordinator and bookrunner for the transaction, and Matouk Bassiouny has been tapped as legal counsel.

IPO WATCH- EGX confirms CIRA shares to start trading on 1 October: The first day of trading on shares of private sector education outfit CIRA’s IPO will be Monday, 1 October, according to a bulletin by the EGX on Thursday. Appetite for the company’s shares was strong, with the retail tranche having been 18.9x oversubscribed, while the institutional offering was 10.4x oversubscribed.

Advisers: EFG Hermes is sole global coordinator and bookrunner for the transaction. Al Tamimi & Co. is acting as the issuer’s local counsel, while Zulficar & Partners is domestic counsel to the underwriter. White & Case is international counsel to the issuer, while Gide Loyrette Nouel is doing duty for the global coordinator and bookrunner. Inktank Communications is serving as investor relations advisor to CIRA.

M&A WATCH- OIH hires BDO to conduct FV report on Nile Sugar: Orascom Investment Holdings (OIH) has hired BDO Corporate Finance to do a fair value report on Nile Sugar Company before a possible acquisition, OIH said on Thursday, according to an EGX filing (pdf). Naguib Sawiris had said last week that the company was expected to complete the transaction by year’s end. Reuters also has the story.

Sawiris criticizes crowding-out of the private sector: Naguib Sawiris criticized the involvement of state- and military-owned firms in a number of key economic projects. Sawiris reportedly made the remarks in an interview with DPA picked up by Gulf Times. “We need to reduce the government’s interference in business and we need to encourage the private sector. We still have a lot of problems,” Sawiris said. He was particularly critical of the involvement of state firms in construction and housing, saying that “there are private construction companies for [these projects].”

Private livestock importers have also been pushed out of the market since the EGP float, making the ministries of supply, agriculture and defense now “Egypt’s largest importers of live cattle and frozen beef,” according to a report from the US Agriculture Department’s foreign service (pdf). The report expects local beef production to rise moderately next year as the expanding population generates increased demand.

Egypt received the third and final USD 500 mn tranche of a USD 1.5 bn African Development Bank loan on Thursday, according to an Investment Ministry statement (pdf). Authorities will use the funds to finance development projects and provide services to citizens in under-developed regions, Minister Sahar Nasr said. The bank is expected to dole out further financing to support Egypt’s private sector and development in the Sinai Peninsula during the coming period, the statement says, without providing further details. Nasr had met with a delegation from AfDB earlier this month to discuss its 2015-2019 cooperation strategy with Egypt.

CBE looks to introduce nano credit: The central bank is looking at introducing nano lending — providing mobile-based cash loans — as part of the third phase of its mobile banking strategy, CBE Sub-Governor for Payment Systems and Business Technology Ayman Hussein said on Thursday,according to Al Mal. The new nano credit system will also allow users to deposit savings. Under the system, credit scorer iScore will be allowed to monitor transactions to provide credit ratings for users.

220 people want to run our SWF: Egypt has received some 220 applications from potential managers for its new EGP 200 bn sovereign wealth fund, according to Planning Minister Hala El Said. The applicant pool for the CEO post is a mix of local and global talent, a source close to the search tells us. In all, some 400 individuals applied for the manager’s position or other posts. A shortlist for the manager’s gig is will be in Prime Minister Mostafa Madbouly’s hands by mid-October, with our source telling us that the independent committee includes reps from the financial, law and business communities as well as economic exports.

The executive regulations for the law governing the SWF should be with Cabinet for review by mid-October, our source tells us.The Ministry of Planning is working on the regs together with a team including PricewaterhouseCoopers, Baker McKenzie and Sarie-Eldin & Partners.

Madbouly is now reviewing nominations for the SWF’s board of directors and the general assembly and will present names to President Abdel Fattah El Sisi, who has final signoff on appointments to both bodies. The SWF CEO’s position was advertised in the Financial Times, the Economist and the domestic press earlier this month. The deadline for applications was last Thursday.

MOVES- AXA Egypt Health Insurance has tapped Ayman Kandeel as CEO, effective tomorrow, says Amwal Al Ghad. Kandeel moved over from sister firm AXA Egypt Investments.

CORRECTION- We garbled an S&P statement on the revision of its outlook on NBE and Banque Misr. We had said that the ratings agency revised it to ‘positive’ from ‘stable,’ when it was the other way around: From ‘stable’ to ‘positive.’ The story has since been corrected on our website. We regret the error.