EGP hedging is limited and expensive, so Hassan Allam writes currency protection into its infrastructure contracts

The International Finance Corporation (IFC) infrastructure stakes in emerging markets beat the S&P 500 over six decades — but the IFC publishes no Egypt figure, and its stakes in the Middle East and North Africa trailed the index. A rising USD is one drag on recent returns, the IFC finds. That’s the risk Hassan Allam builds its protection against into contracts, since financial hedging of the EGP is limited and expensive. Contract structure is the group’s “primary hedge,” Dalia Wahba, CEO of Hassan Allam Investment Managers, tells EnterpriseAM. Egypt’s public-private partnership (PPP) law covers pricing and risk sharing in such contracts but says nothing on currency.

The IFC’s 2025 study (pdf) scores the portfolio at 1.17 on the public market equivalent (PME), a measure of returns against the S&P 500. Anything above 1 means outperformance. The figure covers 266 core infrastructure stakes in power, transport, information, and utilities started between 1961 and March 2020, with unsold stakes valued as of June 2023. Only 40.6% of projects beat the index individually, and stakes started between 2010-2020 scored 0.68.

Why no Egypt figure? “We deliberately chose not to report country-specific results,” Paolo Mauro, director of development impact measurement at IFC, World Bank and a co-author of the note, says. In a sample that small, most individual countries, especially in the Middle East and Africa, would have fewer than a handful of projects. Country results would “risk reflecting specific projects with their own idiosyncrasies,” he tells us. He points readers to income-group and regional averages instead.

Egypt’s proxies: Lower-middle-income countries, Egypt’s World Bank income group, posted a PME of 1.65 overall but just 0.78 for 2010-2020 stakes. The Middle East and North Africa scored 0.88 overall and bucked the portfolio-wide drop, rising from 0.48 for 1996-2009 stakes to 0.96 for 2010-2020 stakes.

Currency played a smaller role in the portfolio-wide drop. The note traces the drop mainly to the S&P 500’s outsized returns and weaker growth in developing economies and, to a lesser extent, to the USD’s real appreciation.

For Hassan Allam, currency risk starts with how it gets paid. It depends on the sector, the offtake, and the revenue currency. USD-linked revenue is paid in EGP, so it stays exposed to foreign currency availability and convertibility risk, Wahba says. Those assets matter: “In 2025, around 50% of the group’s earnings came from utilities and infrastructure assets we own and operate,” she tells us.

The group wants every protection at once: a creditworthy take-or-pay or availability-based offtake, secured land rights, currency convertibility and repatriation, and USD-linked or indexed tariffs where costs or financing are in foreign currency. “If any one of these is missing, it usually needs to be offset by stronger terms elsewhere or a higher return,” Wahba tells us.

Beyond the contract, the group’s main protection is assets with long-term demand. The group can absorb short-term distortions from sharp devaluations “provided revenues self-correct over time,” as airport operations and logistics “generally do.” Where revenues don’t self-correct, partial or full indexation is essential, she says.

Whether a project needs the state behind it depends on the sector. Water and wastewater treatment and desalination still require government support to be bankable, Wahba says, and so does power, “since Egypt remains largely a single-buyer market.” In ports, airports, and storage and handling, private investors typically take market risk.

Development finance institutions bring long-tenor foreign currency financing, which commercial lenders haven’t offered in Egypt for some time, plus partial risk mitigation, Wahba says. Their presence reassures other lenders and co-investors and strengthens the group’s position with government counterparties but doesn’t necessarily lower funding costs. “The benefit lies in tenor, currency, and availability rather than price,” she tells us.

Partnerships are on the state’s agenda: President Abdel Fattah El Sisi highlighted private partnerships at the Egypt Forum on 20 October. Their rules sit in Law 67 of 2010 (pdf), and its 2021 amendments (pdf) require contracts to set price adjustment rules and to allocate change-in-law, force majeure, and site handover obligations. Under Article 7, the contracting authority, meaning the government body that signs the contract, can change an operating project’s prices in the public interest. It can do so only within contract limits, with approval from the Supreme Committee for Partnership Affairs, and without affecting either side’s compensation rights. Neither text addresses foreign currency or convertibility.

Optional state backing: Under Article 38, the contracting authority may sign direct agreements with lenders that can include a Finance Ministry commitment to cover its payments. These agreements can also let lenders step in if the project company seriously breaches its obligations, with approval from the minister or agency head in charge.

The law also reaches the exit: Hassan Allam typically sells down stakes to long-term investors after five to seven years, once assets are “de-risked,” Wahba says. Article 36 requires the project company’s articles of association to bar any share trading before construction ends, as well as majority-stake trading after it, without prior written approval from the minister or agency head in charge.

The 2021 amendment covers part of what Wahba wants. The Finance Ministry’s PPP Central Unit now confirms the state has allocated a project’s land before the Supreme Committee reviews it, and public tenders are the standard route. Wahba wants more timely, predictable tendering and land on commercial usufruct terms. On currency, she wants “timely payment by state off-takers, or a clear framework for FX convertibility for projects with long-term foreign currency-linked operating costs.”