EXCLUSIVE- The UK will be providing Carbon Holdings’ Tahrir Petrochemicals Corporation with “an unprecedented” USD 1.6 bn financing package through UK Export Finance, the country’s export credit agency, UK Minister of Investment Graham Stuart told us in an interview in Cairo yesterday.

TPC could help double Egypt’s total exports, catalyze industrial growth: “We are excited about Egypt developing its downstream capabilities and supportive of the aspiration that the plant could help double total Egyptian exports,” he said, adding that the project will not only create jobs, but could also serve as a “catalyst for the development of more manufacturing and other labor intensive activities.” The UK government is in the “closing stages” for the financing, he also said. Carbon Holdings had said last month it was planning to reach financial close on the nearly USD 11 bn project by year’s end. The outfit is covering 26% of the plant’s cost with equity commitments, with the remainder of the finding package taking the form of loans backed by development finance institutions from countries including the UK, United States and Germany, the company said at the time.

Show of confidence in Egypt: The financing package for TPC is a “show of confidence” in Egypt and its reform program from its “top foreign direct investor,” Stuart said, adding that UK investments round off to 41% of Egypt’s total FDI inflows.

UK investors see opportunity across a wide range of sectors in Egypt, including tech and education, which hold a lot of untapped potential,the minister said.

Prosthetics maker Blatchford is planning to establish a major “state-of-the-art microprocessor limb manufacturing plant” in Egypt that is expected to “help develop that kind of technological capacity in the country.”

Investing in K-12, post-secondary education: Education and the development of human capital also offer opportunities, he added, pointing to a 2017 agreement between the government and personal learning platform Kortext to ensure the availability of Education Ministry-issued textbooks to school students. The British government is also trying to support the establishment of British university campuses in Egypt, with Liverpool University already in advanced talks to open a local branch.

On oil and gas, a traditional strength for the UK in Egypt, companies including Shell and BP are already well established in the local market, Stuart said. The minister met with Oil Minister Tarek El Molla yesterday, according to Al Masry Al Youm. El Molla directed UK investors to new tenders out for oil and gas exploration and plans underway to turn Egypt into a hub for natural gas exports, particularly to Europe.

“Double-down” on reforms: The British government is looking to “explore ways that we can support the government’s reform program,” which has already delivered results such as lower inflation and unemployment rates, Stuart also told us. “We want to be partners in helping them strengthen that.” The UK, through the London Stock Exchange, has already helped Egypt raise USD 11 bn in sovereign bonds and is ready to help private sector companies looking to join the financial market. “It’s a constant battle to work to get your fundamentals right and the government’s made great progress over the last two years,” he said. “Our recommendation would be to double-down on that and say that you got to keep working to improve the ease of doing business and to give investors confidence and create the best possible environment to attract and retain investors.”

Does that mean flights to Sharm will be back soon? Don’t get ahead of yourself, Bubba. Talks on that front are ongoing, Stuart said: “We’re pointing out that we have 47 flights a week from the UK to Egypt as we stand,” including trips to Marsa Alam, Luxor, and Hurghada, he said, noting that UK tourist arrivals to Egypt nearly doubled last year, “and we’re expecting the same again to happen this year.”

Post-Brexit trade relations are also secure, the minister said. The UK government is working hard to ensure that its exit from the European Union will not impact its freetrade agreements with all its trade partners, Egypt included. While both governments are keen on the continuity of trade ties, talks over new bilateral agreements will have to wait until the UK is both out of the EU and the implementation period that will follow, he told us.

Is gov’t hinting fuel prices could rise more than previously expected? The Ismail Cabinet has reportedly been importing fuel at a price of USD 75/bbl, according to documents, which state-owned Ahram Online claims to have obtained. As a result, the government is expected to pay EGP 103.8 bn for fuel imports. Vice Minister of Finance Mohamed Maait had told Enterprise that the Cabinet will be deciding in the coming few days whether to raise the overdraft on the FY2017-18 on account of higher oil prices, which the government assumed would average EGP 55/bbl. Oil prices have been trading at levels not seen since 2014, with Brent crude prices breaching the USD 80/bbl mark.

If the document is genuine, the Ismail government may be prompted to raise fuel prices at a steeper rate than it would like if it is going to meet the targeted budget deficit of 8.4% of GDP. While it has not said how much the hikes will be, the government did announce that it was planning on cutting fuel subsidies 19.1% to EGP 89.08 bn in the FY2018-19 budget. That plan, however, assumes an oil price of USD 67/bbl. We noted last week that analysts, including from Capital Economists, see fuel prices rise 60% next fiscal year.

Rosneft looking to get in on deregulated natural gas market by selling gas to industrial customers: Russia’s Rosneft signed an MoU with Dubai-based Fleet Energy earlier last week to potentially import and sell gas in Egypt to industrial consumers, the company said in a press release. The agreement will see both parties “explore the possibilities of establishing a joint venture in order to develop a supply chain for further gas supplies to industrial consumers in Egypt.” Fleet Energy was notably one of the three energy companies which reportedly received preliminary approvals from EGAS for a license to import gas (the other two being BB Energy, and Qalaa Holding’s TAQA Arabia)back in August 2017. The final sign-off had reportedly been awaiting the Natural Gas Act, which deregulates the market, to be implemented.

Pharos helps SICO land financing from Banque Misr for New Assiut smartphone plant: Our friends at Pharos Holdings announced yesterday (pdf) that they successfully closed out their mandate to help Egyptian Silicon Industries Company (SICO) obtain a facility from Banque Misr to finance the Egyptian smartphone maker’s new 4,500 sqm phone and tablet device factory in the New Assiut tech park. Pharos acted as the exclusive financial advisor for SICO, whose flagship device, the Nile X, became the first locally-made smartphone to hit the market back in February. The transaction, the size of which was undisclosed, “enabled the company to secure the required financing for its production lines and raw materials,” Pharos’ head of investment banking, Noha El Ghazaly, said. SICO Chairman Mohamed Salem had said earlier this month that the company was beginning to export the Nile X to the UAE and had plans to expand into other Arab and African markets.

Corruption watchdog arrests Food Industries Holding Company head, Supply Ministry officials in graft probe: The Administrative Control Authority (ACA) arrested yesterday the chairman of the state-owned Food Industries Holding Company and three Supply Ministry officials on charges of corruption and graft, MENA reported, according to Reuters. The four are accused of taking bribes of some EGP 2 mn from unnamed commodities trading firms in exchange for “facilitating ‘purchase orders’ and ‘payment of dues,’” the newswire says. “The arrests are the latest shake-up in the market, which has faced supply disruptions, trader boycotts and allegations of smuggling and fraud in the past few years,” Salma El Wardany writes for Bloomberg.

FRA to compile a “naughty list” of companies in Egypt’s capital market: The Financial Regulatory Authority (FRA) is looking into compiling a database of companies that have violated capital market regulations and making it available to investors and brokerage firms, FRA Vice Chairman Khaled El Nashar tells Youm7. The database would give insight into companies’ histories by listing the number of violations committed and warnings received, according to El Nashar. FRA is set to meet with the Egyptian Credit Bureau (iScore) soon to look into the logistics and details of the database, which will likely be ready to launch by 3Q2018, El Nashar said.

CLARIFICATION- EFG, GEMS acquire four schools in EGP 1 bn transaction from TMG: EFG Hermes and GEMS Education’s joint K-12 education platform in Egypt acquired four schools in Madinaty and Al Rehab from the Talaat Moustafa Group (TMG) for EGP 1 bn. The schools, two of which run the British system and two of which follow the national curriculum, are already up and running, with around 5,000 students already enrolled, and will be managed and operated entirely by GEMS. We had incorrectly implied in our coverage yesterday that the schools were still under development. The story has been updated on our website.

TMG tells us that the company has already received the proceeds from the transaction, adding that it “falls in line with the company’s strategy to optimise management of non-core and non-residential assets … this will be achieved by bringing seasoned operators like GEMS Education onboard and entrust them with operatorships and management of assets, which fall beyond the scope of TMG Holding’s core competencies.” TMG has also issued a release on the acquisition (pdf).

The transaction is EFG’s first investment in the Egyptian educational sector. “We will capitalize on the top-tier facilities developed by TMG in the four schools alongside our exclusive partnership with GEMS Education to offer the residents of Madinaty and Al Rehab a world-class educational service,” EFG Hermes Asset Management and Private Equity boss Kareem Moussa said in a joint release yesterday (pdf). EFG and GEMS had announced last week that they were forming a 50/50 JV to invest in education in Egypt. The JV could invest as much as USD 300 mn in Egyptian education opportunities over the next five years, Moussa told the National, a UAE daily, last week.

In other company news, Talaat Moustafa Group (TMG) is planning to break ground on its new USD 350 mn Four Seasons hotel in Madinaty in the coming days, CEO Hisham Talaat Moustafa told the press on Monday, according to Al Mal. Moustafa also said TMG would complete the expansion of its USD 380 mn Four Seasons hotel in Sharm El Sheikh in 2H2019.

Cotton Textiles Holding Co, NIB ink EGP 8.7 bn debt settlement agreement: The Cotton & Textiles Industries Holding Company signed yesterday an agreement to settle EGP 8.7 bn in debt owed to the state National Investment Bank (NIB), Ahram Gate reports. The company’s debt to NIB had peaked at EGP 10.5 bn, Public Enterprises Minister Khaled Badawy told reporters following the signing of the agreement. Part of the settled debt will be repaid in kind, Badawy said without providing further details, according to Al Shorouk. Company CEO Ahmed Moustafa had told us that the agreement could be a prelude to an asset sale to the private sector, and that the company will also shed some assets to pay off EGP 2 bn in late electricity and gas bills owed to the government.

NAT wants another EUR 500 mn for Cairo Metro’s Line 3: The National Authority for Tunnels (NAT) is reportedly in talks with international lenders for EUR 500 mn in fresh financing for the final stretch of the Cairo Metro’s third line, an unnamed official tells Al Mal. The French Development Agency (AFD), which is already providing the project with some EUR 300 mn in loans, is at the top of the list, according to the source. The line will connect Heliopolis to Cairo International Airport. The European Investment Bank is lending Egypt around EUR 600 mn for Line 3, where Orascom Construction and a JV comprised of VINCI, Bouygues, and Arab Contractors broke ground on last week. We’ve been hearing that Transport Minister Hisham Arafat has been meeting with the AFD over the last several months to discuss additional funding for the Cairo Metro and Alex tramway.

House eyes complicated tax formula for Uber, Careem? The House of Representatives’ Transportation Committee is proposing that the state scrap the idea of a standard base tax for ride-hailing company drivers, such as Uber and Careem, and implement instead a variable tax based on the number of days and hours worked, Rep. Abdallah Zein tells Al Mal. Consider this smoke, not fire: The jumbled story speaks of taxing the companies, but describes a tax system that could only apply to drivers. We’re flagging this as “watch this space” and not as the definitive word on how the House feels the ride-sharing companies or its drivers should be taxed. The Tax Authority had said last week that it was looking into how best to impose the value-added tax (VAT) on ride-hailing companies once they official register their businesses under the Ride-hailing Apps Act.

Five companies win tender for phase one development of 200 PPP schools: The Education Ministry has chosen five companies to develop the first of 200 schools under a public-private partnership framework and has sent the list of winning companies to the Ismail Cabinet for approval, according to Education Ministry advisor Sherine Matar says. Matar did not name names, but government sources had said earlier this month that El Gazeera, the Middle East Education Services Group, and CIRA were among seven shortlisted bidders. Work on developing the 21 schools is expected to begin as soon as Cabinet signs off on the result of the tender; the schools should open their doors to students by next year, according to Matar. The government is also gearing up to issue tenders for the second phase of the PPP schools program.

The education ministry is pushing ahead with plans to do away with the public education system currently in place by 2026, minister Tarek Shawki said at AmCham’s annual general meeting and iftar yesterday, according to Youm7. The ministry will push ahead with its plans for a major overhaul of primary and middle school education despite public resistance to the new system, which will be implemented gradually as of the 2018-19 academic year. Shawki also said the ministry is planning on installing high-speed WiFi in all schools across the country by August, Al Mal reports.

Teachers’ salaries are the biggest drain on the Education Ministry’s budget, says Shawki: Paying teachers’ salaries and covering the costs of printing textbooks and providing school meals leave the Education Ministry with virtually no money to finance the improvement of the education system, Al Masry Al Youm reports the minister as having said. According to Shawki, salaries and bonuses handed out to teachers alone account for EGP 68 bn of the ministry’s total EGP 80 bn budget, while the remaining EGP 12 bn are split among other annual expenses such as school meals and building new schools. Shawki said he does not expect the Finance Ministry to loosen its purse strings for education spending. Parliament’s Education Committee has recommended earmarking an additional EGP 60 bn to spending on education in the FY2018-19 state budget, as we noted last week.

Separately, Shawki announced that the government’s new Japanese-style schools will begin accepting applications for the 2018-19 school year in mid-June, according to Al Shorouk.

Four Egyptian universities make it to world’s top 1,000 list: Cairo University, Ain Shams University, Mansoura University, and Alexandria University were the only Egyptian universities to make the cut for the list of the world’s top 1,000 universities this year, according to the Center for World University Rankings. Cairo University received the top ranking for Egypt at 452, followed by Ain Shams at 715. The ranking is based on an assessment of the institution’s quality of education, alumni employment, research output, and citations, without relying on surveys and university data submissions.

Egypt’s favorite footballer Mohamed Salah will stay in Spain to receive treatment for his shoulder injury from which he (and 100 mn others) hopes to recover in time for Egypt’s first World Cup match in two weeks’ time, according to the Egyptian Football Association (EFA). The Liverpool striker will go through an intensive rehabilitation program after he sustained an injury at the hands of Real Madrid’s Sergio Ramos during the Champions League final on Saturday. Egypt’s national team doctor had said he was “optimistic” Salah would bounce back in time for the championship in Moscow.