Eni signs concession agreement to begin exploration at offshore Noor gas field: Eni announced yesterday signing a new concession agreement with the Egyptian government to begin exploration activities at the offshore Noor gas field in the East Mediterranean, the company said in a statement (pdf). The USD 105 mn agreement will see Eni drill two exploratory wells in the 739 sqm field during 2H2018. Eni holds an 85% stake in the concession alongside Tharwa Petroleum Company, which holds 15%. Eni had denied last month that it made a massive gas discovery at the Noor gas field, after news reports suggested that Noor could contain around 90 tcf of gas reserves, or 3x as much gas as the supergiant Zohr field. Egyptian Oil Minister Tarek El Molla had also downplayed the reports at the time, saying that seismic studies were not yet complete.

Eni also signed two other agreements with the EGPC and other international oil companies yesterday. A USD 22.5 mn agreement was signed with BP to drill four wells in the Nile Delta’s Greater Nooros Area, while an USD 11.7 mn agreement with Croatia’s INA to drill nine wells in the Western Desert’s Ras Qattara concession was also signed, according to an Oil Ministry statement. After the signing, El Molla indicated that the government would strike more oil and gas agreements in the near future as it moves ahead with plans to turn Egypt into a regional energy export hub.

Meanwhile, Eni plans to bring its total production of crude oil and natural gas from its various concessions to 600k boe/d, sources from Eni-EGPC JV Belayim Petroleum Company (Petrobel) tell Amwal Al Ghad. The Zohr and Nooros gas fields currently account for the lion’s share of the company’s natural gas output, while crude oil production is concentrated in the Gulf of Suez and Mediterranean concessions. The sources did not disclose the expected timeline for these new production targets.

Israel’s foreign ministry gave our quest to become the East Med’s gas export hub a huge pat on the back at the expense of Turkey. A classified report from Israel’s Foreign Ministry has recommended that Israel rely on exporting its natural gas to Europe through Egypt, rather than Turkey, according to Ynet News (Hebrew). According to the report, Egypt is the best option on the economic, political, and strategic fronts than Turkey, which is “a dangerous and volatile player,” and is also preferable to Greece.

The endorsement casts shade on an EU-endorsed pipeline that would run from the East Mediterranean through Turkey — the rival proposal to exporting the gas to Europe from Egypt. Energy analysts have long complained that the pipeline was not cost effective compared with the Egypt option. Regional politics and tensions between Israel, Cyprus and Turkey have also dimmed the prospects of the pipeline. Not to mention the fact that plans to export from Egypt are already underway with international agreements having been signed, including the USD 800 mn-1 bn pipeline.

Is Egypt’s attraction to carry traders making it especially at risk from fallout from the Turkey crisis? The Institute of International Finance (IIF) sees Egypt as one of the emerging markets that will be impacted the most from the Turkish crisis contagion. In a report out on Tuesday (pdf), the IIF said that Egypt, South Africa, Indonesia, Lebanon, and Colombia as especially at risk from contagion due to the concentration risk arising from large portfolio inflows to them in such a small period of time. Essentially, the “hot money” that we’ve picked up from carry traders and the pace with which it came in appears to be making these countries vulnerable.

Not by the gov’t’s count: Finance Minister Mohamed Maait had told us in an exclusive this week that not only is Egypt not vulnerable, but that the Turkey crisis has driven further portfolio inflows to Egypt last week.

One thing that is definitely impacted is our exporters, as Turkish importers of Egyptian ready made clothes have cancelled their contracts as a result of the crisis, Textiles Industry Council’s deputy head Magdy Tolba tells Amwal Al Ghad. He added that Turkish exports make up 30% of all of Egypt’s textile exports.

CABINET WATCH- The Finance Ministry will be postponing its survey and appraisal of the country’s real estate assets to December 2020 from 2018 under amendments to the real estate tax code approved by the Madbouly Cabinet at its weekly meeting yesterday. The move means to give the Tax Authority more time to conduct its review of the country’s residential, commercial, and industrial properties — which should legally take place every five years — in order to determine their value and better calculate its tax base. We had heard earlier this month that the government was getting ready for a major overhaul of how real estate taxes, which would also involve taxing the oil and gas sector.

E&Y to advise on government’s electronic billing system: The cabinet also gave the Finance Ministry the green light to hire Ernst & Young to consult on a tender it plans to issue for the development of the government’s electronic billing system, which is expected to help improve transparency and accountability as a way of battling corruption and tax evasion. The move is part of the government’s transition to a paperless, cashless economy, which saw amendments to the Accounting Act issued last month, making it mandatory for all government transactions to be electronic, and banning the use of paper cheques for transactions above a set threshold. The ministry also received a nod to move forward with its tender.

The cabinet had a few other items on its plate yesterday, including:

• Approving a KWD 50 mn loan agreement with the Kuwait Fund for Economic Development for the establishment of a sewage water treatment facility in Bahr El Baqar, which should help in the reclamation of 330k feddans of agricultural land east of the Suez Canal;
• Giving the Education Ministry the green light to renew its USD 5 mn teacher-training program with Discovery Education for another three years;
• Awarding the Egyptian Electricity Holding Company the EGP 10.6 mn contract for the installation of 1.5 MW-worth of transformer stations for an Endowments Ministry-affiliated oncology hospital.

IDH to launch new Egyptian radiology business under Al Borg brand name: The London-listed Integrated Diagnostics Holdings (IDH) is launching a new radiology business in Egypt under the Al Borg brand name as part of plans to develop into a “one-stop shop diagnostics service provider,” the company announced in a press release yesterday (pdf). The company’s new facilities, Al Borg Scan, will be led by some of the country’s top radiologists and offer the complete range of radiology services using state-of-the-art equipment supplied by brands including GE Healthcare, Siemens, Hitachi, and Fujifilm.

Around 70% of the project’s costs are being covered by a EGP 130.5 mn, eight-year loan to Al Borg from Ahli United Bank, with operating cash flows covering the balance. "Our market in Egypt is growing in the double digits, and so is our top line,” said IDH CEO Hend El Sherbini. “Our expectation is that our pathology business will deliver new patients to our radiology business and that, in the fullness of time, having both services under one roof will also drive growth in our pathology test volumes.” IDH grew its top line 29% y-o-y in 1Q2018.

Dana Gas says fresh investments in Egypt delayed over unpaid arrears: Egypt’s irregular repayments of its arrears to Dana Gas is putting a damper on the company’s investment plans in the country, the company said in its earnings release yesterday (pdf). “Due to the lack of regular and predictable payment the Company will continue its strategy of balancing its investments in Egypt against its collections in the near term,” according to the release.

Egypt repaid the company USD 89 mn in overdue arrears in 1H2018, bringing its total trade receivables from Egypt reached USD 202 mn as of 30 June 2018. This includes USD 120 mn which is overdue, according to S&P Global.

Dana Gas is not planning to take legal action against Egypt but is “in discussion with the government to make it clear to them that the sooner they pay us the sooner we would reinvest the money back into Egypt,” Dana Gas CEO Patrick Allman-Ward told reporters yesterday, according to The National. There is no dispute between Egypt and the company, and the issue “is about [Egypt’s] capacity to pay,” he added. Allman-Ward had previously said that his company would spend USD 47 mn in capex in Egypt this year, “but any new investments will be made only if the country pays some of the money it owes.”

Ocean Alliance quits East Port Said to protest high fees: International shipping alliance Ocean Alliance has decided to cease operations in East Port Said as of today due to high port fees, an unnamed executive tells Al Mal. The group — which includes CMA CGM Group, APL, Evergreen, and China’s COSCO Shipping — will continue to operate in West Port Said, the source said. An alliance made up of Yang Ming, Hapag-Lloyd, K Line, Mitsui O.S.K. Lines, and the NYK Group had retired from East Port Said last year also due to high fees, after the government decided to raise prices by nearly 100%. Since then, however, Egypt has been offering discounts and other incentives to attract more traffic to its ports, and we had even heard that Transport Minister Hisham Arafat and Suez Canal Authority head Mohab Mamish had promised the shipping lines to try and repeal the hike. The two officials had also agreed to begin implementing unified port fees across the country as of July in order to eliminate competition between national ports.

Zotye Auto, Changhe Automobile cars to be assembled locally in 2019: China’s Zotye Auto’s local agent, IFG Group, is planning to build an auto assembly plant in 6 October City by 2019, Chairman Mohamed Farag tells Al Mal. The new factory will produce 4,600 cars a year when operations start. No details on the investment value were provided. Meanwhile, Changhe Automobile’s local agent, Boudy Group, also said it was reviewing offers from ِAboul Fotouh Automotive and the Egyptian German Automotive Company to begin locally assembling Changhe Q7 next year, Chairman Osama Boudy tells Al Mal. The company is expecting to assemble 1,000 cars a year at an initial investment cost of EGP 100 mn.

INVESTMENT WATCH- Evergrow in talks with IDA for land to complete second phase of fertilizer complex: Fertilizers producer Evergrow is in talks with the Industrial Development Authority (IDA) to acquire a 100k sqm land plot in Sadat City to complete the second phase of its fertilizer project, Marketing and Sales Director Mostafa Foad tells Al Mal. The first phase of the EUR 7 mn project — a production line for potassium sulfate products that are used in a wide variety of industries — is expected to begin operations in January 2019, with work on the second phase scheduled to begin in January 2020. Each phase will produce around 50,000 tonnes a year, of which 75% will be earmarked for exports, with the rest sold locally, according to Foad, who adds that Evergrow recently signed an agreement with a Belgian company to market its products in Europe and Africa. Evergrow had announced last month that it was scaling back its investment in a new calcium diphosphate plant to EGP 2 bn, from an original EGP 9.5 bn.

EARNINGS WATCH- Elsewedy Electric reported a 21% y-o-y decline in net profit after minority interest in 1H2018 to EGP 2.37 bn, down from EGP 3.01 mn in the same period last year, according to the company’s earnings release (pdf). Revenues for the period fell 3% y-o-y to EGP 20.1 bn, largely due to a drop in the turnkeys project segment. Despite that, however, the company witnessed strong growth across its business lines as “the fundamentals supporting Elsewedy Electric’s business remain strong: Populations in the MENA region and the GCC continue to grow at a quick pace and the movement towards industrial modernization has only intensified in the last year,” CEO Ahmed Elsewedy said. Looking ahead, Elsewedy will focus on growth through the optimization of its cost and governance structure, as well as depend on its reputation and competitive edge to allow it “capture the upside across a variety of infrastructure projects.”

Egypt Kuwait Holding (EKH) saw bottom-line growth for 2Q2018 gain a solid 46% y-o-y to USD 30.7 mn, the company reported (pdf). EKH saw growth in revenues for the quarter rising 45% y-o-y to USD 116.1 mn. Revenue growth was driven by strong operational performances by subsidiary companies and supported by the commencement of operations at Offshore North Sinai (ONS). "Our results in the second quarter of the year demonstrate the operational excellence of our portfolio companies,” Chairman Moataz Al Alfi said. After having weathered macro and market headwinds and re-emerged as leaders in their respective markets, our subsidiaries today are delivering organic growth through a continued improvement in on-the-ground results and success in paving new growth avenues,” he added. Moving forward: “Our focus during the second half of the year will continue to be on operational improvements as a primary growth driver, all while pushing forward expansion initiatives across our subsidiaries and keeping an eye out for new [options], such as our ongoing investment in the production of medium-density fiberboards,” Al Afifi said.

Orascom Development Holding (ODH) reported a net loss of CHF 16.4 mn in 1H2018, the company said in its earnings release. The results for the period reflect “a one-off FX translation loss of CHF 16.7 mn...mainly related to the devaluation of the EGP in 2016.” ODH delivered strong operational results, however, that “curbed bottom lines losses” for the group, helping it break even.

Talaat Moustafa Group Holdings (TMG) reported an 11% y-o-y jump in net profit after taxes to EGP 774.21 mn in 1H2018, compared to EGP 696.54 mn in the same period last year, according to an EGX filing (pdf). The company’s revenues also increased to EGP 3.97 bn in 1H2018, marking a 19% y-o-y rise from EGP 3.33 bn.

Emaar Misr for Development posted a net profit of EGP 1.10 bn in 1H2018, compared to 976.95 mn in the same period last year, according to an EGX filing.

Al Tawfeek Leasing (AT Lease) posted a net profit (pdf) after tax of EGP 17.9 mn in 2Q2018, up from EGP 13.8 mn during the same period last year.

MOVES- Gold miner Centamin appointed former Mubarak-era minister Ibrahim Fawzy to its board as an independent non-executive director, according to a company statement (pdf). Fawzy was most recently the chairman of the Egyptians Abroad Company for Investment & Development.

MOVES- Preferred Hotels & Resorts named Nicolas Villemin as regional director for Middle East and North Africa, according to Hotelier Middle East. The appointment was made in June. Villemin previously served as a consultant for hotel brands like Viceroy, Shangri-La, and Habtoor Hospitality.

MOVES- Suez Canal Authority (SCA) head Mohab Mamish will remain in his post for another year, according to a presidential decree yesterday picked up by Al Masry Al Youm. Mamish has been head of SCA since 2012.

Egypt may face challenges as it ventures into the realm of nuclear power generation, which requires substantial and sophisticated infrastructure to support it. Egypt needs “USD 18 bn of investment in transmission and distribution to support generation capacity in the next five years,” according to a report by Arab Petroleum Investments Corporation (Apicorp), which implies that financing is the main hurdle. Despite that, the report nods to regional efforts to diversify energy resources and Egypt’s plan to bring the USD 30 bn Dabaa nuclear power plant online in partnership with Russia’s Rosatom. “For countries in the GCC, nuclear power can free up more oil and gas for exports while net-importing countries like Egypt and Jordan will be able to diversify their energy sources, enhance energy security, and reduce their expensive import bills.” Tap or click here for the full report (pdf).