GCC sovereign wealth fund to announce big-ticket project in Ras Shukeir in the coming days

The government is gearing up to announce a new Ras Shukeir project “in the coming days” involving one of the Gulf’s sovereign wealth funds, a senior government source told EnterpriseAM. The agreement — set to be the first in a series tied to the 174 sq km Ras Shukeir zone on the Red Sea — will back local sovereign sukuk soon to be issued by the Finance Ministry, whose proceeds will go towards lowering the public debt burden.

Our source framed the agreement as the start of a broader push to replicate the success of the Ras El Hekma agreement with ADQ — but with a notable difference. The area — which is slightly larger than Ras El Hekma — was formally allocated to the Finance Ministry under a presidential decree published in the Official Gazette last week for the expressed purpose of raising funds through sovereign sukuk issuances and debt reduction.

This and other future Ras Shukeir projects will use sukuk issuances as their source of funding, with the Finance Ministry set to invite regional sovereign wealth funds and other investors to subscribe to sukuk issuances tied to particular projects, we were told. The framework for this new funding mechanism will be developed in response to the planned GCC-backed projects.

The proposal lets the state “exploit the asset without disposing of it, selling it, or depreciating it,” economist Medhat Nafei said. Many types of sukuk “securitize the revenues from exploiting and investing the asset and do not grant the subscriber the right to own the asset,” he continued in response to criticism of the decision.

The government hopes this new model will revitalize the local capital market and lay the groundwork for a secondary sukuk market, making Egypt’s debt diversification strategy more resilient and investment-oriented.

“This development paves the way for similar agreements to the Ras El Hekma investment agreement, which could lower Egypt’s external debt and increase its FDIs and USD resources,” HC Securities’ Nemat Choucri told EnterpriseAM.

Details on the upcoming project are few and far between, but the area has a lot of potential for energy production — including green hydrogen — in addition to tourism and industry, our source said.

We’re also still in the dark on which GCC sovereign wealth fund will be kicking off the first project, with Saudi Arabia’s Public Investment Fund a prime suspect considering the Kingdom’s plan to convert some of its USD 10.3 bn deposits in the Central Bank of Egypt into investments. Qatar is also a likely candidate, as it agreed in April to work towards a USD 7.5 bn package of direct Qatari investments in Egypt in the near future.

Ras Shukeir has already been getting investor interest, with the cabinet approving plans to establish a green industrial zone for petrochemicals and green hydrogen in the area earlier this year. The cabinet also gave an initial nod for the Transport Ministry to proceed with contracts for a green hydrogen and green ammonia project in Ras Shukeir, along with Saudi renewables giant ACWA Power and local energy and infrastructure leader Hassan Allam Utilities’ 550 MW windfarm in the area.

The new initiative will not affect the planned international sukuk offering set to wrap by the end of this month, we were told. The Finance Ministry is still working to issue USD 1.5-2.0 bn worth of sukuk that will help repay some USD 1.5 bn of maturing 10-year bonds issued back in June 2015.

REMEMBER- Egypt is working towards attracting USD 42 bn in net FDI during the next fiscalyear, with plans to increase that figure to USD 55 bn in FY 2028-2029. The considerable uptick in FDI growth is expected to be driven by increased interest from foreign investors in Egypt — particularly from Gulf countries like the UAE, Saudi Arabia, and Qatar.