Egypt is now just a few signatures away from receiving the second tranche of its USD 12 bn loan from the IMF,after the delegation assessing the country’s economic reform progress gave it a clean bill of health on Friday. The IMF’s executive board will now have to sign off on a staff-level agreement announced Thursday to disburse the USD 1.25 bn tranche, which Egypt Mission Chief Chris Jarvis signed with the government, according to a “This agreement is a vote of confidence by the IMF staff in the continued implementation of the Egyptian authorities’ program,” Jarvis said in the statement, praising decisions including the float of the EGP, the implementation of the value-added tax, and subsidy reforms. It remains unclear when Egypt is to receive its funds, but chatter says sometime in June.

Curbing inflation and continued progress on reform will be top priorities for the government and the central bank, Jarvis added. He also stressed that the importance of strengthening Egypt’s social safety net “to protect the most vulnerable people in Egypt while reform is underway.”

Jarvis gave props to the FY2017-18 budget, which he described as “very strong” and if approved, “will place public debt on a clearly declining path to sustainable levels.” Jarvis was particularly happy that the governmentdecided to raise the VAT in the next fiscal year and that it’s pushing forward with the energy subsidy phase-out scheme. He was also quite optimistic about the prospects offered by the recently-passed investment and industrial permits acts.

News of the staff-level agreement is being played prominently by Bloomberg and Reuters.

We’ve started weaning ourselves off imported natural gas, Reuters says: Egypt is holding talks with its LNG suppliers to defer contracted shipments this year and aims to cut back on purchases in 2018, traders and industry sources tell Reuters. Domestic gas production is squeezing out demand for foreign imports, Oleg Vukmanovic writes for the newswire. EGAS “is also scaling back LNG purchase plans for 2018 from 70 to as low as 30 cargoes, one Egyptian industry source added, signalling the withdrawal of one of the fastest-growing LNG importers from the global stage.”

The deferment is being driven by new gas discoveries. “Test flows from [BP's] West Nile Delta have started ahead of schedule and Eni's giant Zohr find is progressing quickly on track for first gas later this year, but it's output from the Nooros field that has surprised everyone this year,” said Adam Pollard, senior North Africa oil and gas analyst at Wood Mackenzie. BP announced first gas from West Nile Delta, eight months ahead of schedule last Wednesday. “Already this year EGAS has deferred about ten shipments, with about 10-15 shipments left to go, trade sources said. The scale and speed of Egypt's turnaround suggests the government may yet wean itself off foreign gas but how sustainable that turns to be will depend on domestic pent-up demand,” Reuters adds.

Fuel price hikes coming before September? The rumor mill has kicked into overdrive. The government is planning to hike fuel prices by 25-40% before the end of August, Al Shorouk reports, citing an unnamed source. According to the source, the government has yet to settle on a timeline for the hikes and is looking into implementing the new prices as early as July — in time for the start of the new fiscal year. The exact formula for the increase is still under discussion. Meanwhile, Al Borsa alleges the government is debating pushing the expected 20% hike in fuel prices to 2018.

The House wades in: Separately, House Budget and Planning Committee Yasser Omar said that a July price hike will hit only 92-octane gasoline, according to Al Mal. House Economics Committee chair Amr Ghallab tells Al Shorouk that the government has yet to consult parliament on the hikes. Ghallab also criticized the planned move as being ill-timed and “inconsiderate” of citizens’ financial struggles. The government has laid out a target in the FY2017-18 budget of EGP 110.148 for fuel subsidy spending.

Is CIB eyeing expansion into Africa? CIB’s board of directors discussed and approved a plan in principle to expand internationally to African markets, according to a regulatory filing. The board also tasked the bank’s management to assess the required procedures and implement an action plan. The disclosure did not specify which markets the bank is considering.

EFG renewable platform closes UK solar acquisition: EFG Hermes’ renewable energy platform Vortex announced completing its acquisition of 100% of a 365 MW portfolio of 24 operational solar assets in the United Kingdom from TerraForm Power. This increases Vortex’s total net operational capacity to 822 MW. The agreement, which sets an enterprise value of GBP 470 mn for the assets, was signed in January. “Vortex’s success to date underpins our transformation from being a manager of investments across MENA to being an investment manager that caters to our client’s specific needs in our region and beyond. Vortex will continue to target wind and solar acquisitions in Europe with a target of owning a total of more than 2 GW in generation capacity within three years,” EFG Hermes’ Head of Asset Management and Private Equity Karim Moussa says. EFG Hermes says, “Vortex plans to sell down 45% of the equity share capital of the transaction in the near future, retaining a 5% stake in line with its previous transaction structures. Vortex is also in the process of refinancing the portfolio’s existing debt facilities.” Read the full release here (pdf).

Tarek El Molla on gold exploration, de-regulation of the natural gas industry and the coming swing in priorities toward oil: Petroleum and Mineral Resources Minister Tarek El Molla spoke at an AmCham luncheon we attended on Thursday. We learned that the gold exploration tender results will be out within a week or so, that the amendments to the Mineral Resources Act are in the works, and the Natural Gas Act — which portends de-regulation of the market — is pending a plenary discussion at the House. Key takeaways:

• On whether fuel subsidy cuts will come before the end of the FY, El Molla told Enterprise, “We don’t know yet.”
• Results of the Egyptian Mineral Resources Authority’s controversial gold exploration tender will be announced within the coming week or so. “We received really good offers,” El Molla said, adding that a large number of investors are interested.
• On the Mineral Resources Act, El Molla said, “We are working on amendments to the law that will satisfy most of the stakeholders.” He gave no further details.
• Committee-level discussion of the proposed Natural Gas Act to deregulate the market has ended. The ministry is now waiting for a date on which to introduce the bill to the House as a whole. El Molla stressed that there will be an independent regulator for a deregulated market in which EGAS and EGPC will be players alongside others.
• Production from the second phase of BP’s North Alexandria concession will begin ahead of schedule in 2018 instead of the planned 2019. “By the end of 2018, we will have self-sufficiency in gas and we will exceed [domestic] demand,” El Molla said.
• A record number of 76 upstream agreements were signed in the last three years. 21 gas development projects with USD 7.4 bn investments were completed; nine are ongoing with USD 30.2 bn investments, and 11 are planned with USD 17.5 bn investments.
• Look for the emphasis going forward to swing toward oil from natural gas: “I am satisfied with what we have done with our partners [to accelerate natural gas production] … we need to do the same with oil. This is what we are focusing on,” said El Molla.

EARNINGS WATCH- Edita reported a 23.5% y-o-y increase in net profit to EGP 40.4 mn in 1Q2017, with revenues increasing by 24.0% y-o-y to EGP 642.4 mn, according to the company’s earnings release. “Strong revenue growth in the first quarter of the year came thanks to Edita’s repricing and portfolio optimization strategy, which the company rolled out starting September 2015 and accelerated in 4Q2016 to address a rapidly changing macroeconomic environment… Management notes that production capacity freed by lower volumes on existing SKUs allowed the company to rapidly introduce new innovative propositions, with 1Q2017 witnessing the launch of several new products across all segments, in line with the company’s long-term growth strategy, ” the company says.

Also reporting results this past Thursday:

• Global Telecom Holding reported a 99% y-o-y decrease in profit in 1Q2017 to USD 1 mn. Total revenue dropped to USD 752 mn in 1Q2017 from the pro-forma figure of USD 785 mn of 1Q2016.
• Talaat Mostafa Group Holdings’ consolidated net profit after tax for 1Q2017 grew by 38.85% to EGP 288.5 mn from EGP 207.8 mn in the same period last year, according to the company’s regulatory filing.

Standard & Poor’s affirmed Egypt’s long-term and short-term sovereign credit ratings at B- and B, respectively, with a stable outlook, the ratings agency announced on Friday (paywall). Egypt’s ratings “remain constrained by wide fiscal deficits, high public debt, low income levels, and institutional and social fragility.” (This from the people who helped bring you the Global Financial Crisis…) S&P anticipates that the USD 12 bn IMF facility will support the country’s FX requirements over the coming years “and restore macroeconomic stability via gradual reform implementation over 2017-2020.” The ratings agency also predicts that macroeconomic obstacles such as persistent unemployment and poverty will challenge the implementation of reform measures.

S&P’s lowered its estimate of Egypt’s real GDP growth to 3.8% from 4.3% in 2015/2016, reflecting “the authorities’ tight fiscal and monetary stance and sluggish domestic demand.” Real GDP will maintain an average growth rate “just under 4%” until 2020, while economic growth over the next three years will be spurred by factors such as security improvements, stronger capital flows, improved eternal competitiveness on the back of the EGP float, and improved power supply from natural gas developments.

S&P’s says it could upgrade Egypt’s rating “if GDP growth picks up beyond our expectations, and if Egypt improves its fiscal and external positions substantially.” On the flipside, factors such as increased political risk, reduced funding from GCC countries, and a weaker institutional environment would cause Egypt’s ratings to be lowered. S&P’s unchanged ratings on Egypt comes days after Bloomberg’s Ahmed Namatalla and Ahmed Feteha said Egypt’s performance on the bond market warrants a credit upgrade.

The executive regulations for the new Investment Act are 90% complete and are expected within a month of the bill becoming law, top Investment Ministry officials tell Youm7. The Investment Ministry has already sent copies of the draft regulations to different ministries for their input before preparing a final draft. Prime Minister Sherif Ismail has to sign off on the regulations before they are reviewed and issued by the House of Representatives. The Ismail government is reportedly preparing to hold meetings with foreign diplomatic offices to brief them on the act, South Korea’s ambassador to Cairo tells Al Mal. The act is still pending the signature of President Abdel Fattah El Sisi.

State Council defiant of Judicial Authority Act? Maglis Al Dawla (Council of State) presented one nominee to be the judicial body’s head, violating the controversial amendments to the Judicial Authority Act, which require it to present the names of three nominees to the president, Al Mal reports. The council’s deputy chief maintains that the move is not in defiance of President Abdel Fattah El Sisi and is based on the council’s belief in selecting its head on the basis of seniority, as the law originally stipulates, Al Shorouk reports.

Claims for refugee protection from Canada filed in Egypt are now eligible for expedited processing, effective 1 June, according to an Immigration and Refugee Board of Canada statement. “The designation was initiated based on high 2016 national acceptance rates, a sufficiently high volume of cases, and review of common claim types and issues relating to claims from these countries,” the statement reads. The policy also applies to Syria, Iraq, Burundi, Afghanistan, and Yemen.