Egypt finalizes settlement with Israel on USD 1.76 bn int’l arbitration ruling: The Madbouly government has finalized a settlement to reduce a USD 1.76 bn award Israeli Electric Company won in 2012 against EGAS, EGPC and East Mediterranean Gas (EMG), unnamed government sources told the domestic press. The settlement, awarded for the cut-off of natural gas exports to our eastern neighbors, will be reduced and amortized over a period of time, one source said. Egypt will begin paying the fine as soon as Israel begins selling natural gas to Egypt sometime in 1H2019, allowing the government to pay off the fine using a portion of revenues from transporting the gas from Israeli fields through its pipeline network. Sources had told Bloomberg in August that the Egyptian government has reached an agreement to reduce the arbitration award to USD 470 mn payable over a period of about 15 years. Egypt is believed to be lining up a facility from banks to cover the sum.

Background: The Egyptian government made settling the USD 1.76 bn award a condition for allowing any multi-bn agreement to buy gas from Israel. Word of a settlement in the offing emerged when Alaa Arafa’s Dolphinus Holdings announced a USD 15 bn agreement with operators of the Tamar and Leviathan fields, Delek and Noble Energy, to buy gas, which could be processed at Egyptian liquefaction plants and exported. The agreement paved the way for Noble Energy and Delek, along with their Egyptian partner East Gas, to acquire a 39% stake in pipeline operator East Mediterranean Gas (EMG) — a crucial milestone in Egypt becoming the regional export hub for the East Mediterranean gas fields.

EMG pipeline sidelined until the end of the year? Israel will export natural gas from its Tamar and Leviathan fields to Egypt through its domestic network and not the Sinai pipeline, which will be “used at a later stage,” Delek Drilling CEO Yossi Abu said, according to Haaretz. Initially, gas will be delivered from Israel through the Arab Gas Pipeline (which the Israeli’s fondly refer to as the Pan-Arab pipeline) connecting Jordan and Egypt. Israel’s gas network will be connected to the Arab Gas pipeline in May 2019, Abu said. The EMG pipeline would be used to send gas to Egypt by December 2019, he added. The decision comes amid concerns that the EMG pipeline would not be enough to meet the contracted delivery of 7 bcf per year, especially when the Leviathan field comes online.

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Banks will be required to separately account for their earnings on holdings of t-bills and gov’t bonds: The Madbouly Cabinet approved yesterday amendments to the Income Tax Act that will, if enacted, force banks and financial institutions separately account on their income statements for returns from their investments in government debt, according to a statement from the Madbouly Cabinet. “The move would bring current accounting practices in line with international best practices” and allow the government to tax earnings on these yields in a “fairer” way, Finance Minister Mohamed Maait said. We’ll have more on the story as it unfolds.

Competition watchdog aiming for out-of-court settlement with pharma distributors? The Egyptian Competition Authority (ECA) is reportedly looking to reach an out-of-court settlement with four pharma companies it slapped with EGP 5.6 bn in fines for alleged anti-competitive behaviour, judicial sources said. The ECA successfully brought a case against players including Ibnsina, Ramco, Multipharma, and United Company for Distribution and Trade on allegations they colluded to cut credit periods and slash discounts to small pharmacies. At the request of the ECA, the Cairo Economic Court postponed to 19 December an appeal hearing originally scheduled for this week to give the parties time to reach a settlement, the sources claim.

INVESTMENT WATCH- Algebra Ventures joins USD 16 mn series ‘C’ funding for the UAE’s HolidayMe: Our friends at Algebra Ventures joined a USD 16 mn series ‘C’ funding round for Dubai-based HolidayMe, the firm said in a statement (pdf). Algebra invested alongside Gobi Partners, Accel Partners, and Global Ventures. Four-year-old HolidayMe is an online platform offering travel solutions and customized holidays targeting customers in the Middle East and North Africa. HolidayMe reported sharp growth in both transactions and gross merchandise value on its platform. “HolidayMe has developed a leadership position in the large and fast-growing Muslim travel online market. The team has the vision, domain experience and capabilities to become the global leader in that market,” said Algebra Ventures Managing Partner Tarek Assaad. “We are delighted to join our co-investors, who are global leaders in venture investing, in supporting HolidayMe to achieve that goal,” he added.

INVESTMENT WATCH- Russia’s Metprom to invest EUR 210 mn in two steel projects: Russian metallurgy company Metprom is planning to invest EUR 210 mn in two projects in Egypt, Metprom Chairman Stel Lomachenko told Trade and Industry Minister Amr Nassar during his visit to Moscow this week, according to a ministry statement. The company plans to invest EUR 60 mn in setting up a rebar and wire production facility with an expected production capacity of 150k tonnes per annum in the Russian Industrial Zone. The remaining EUR 150 mn will be used to refurbish the Helwan iron and steel complex to increase the facility’s production capacity to 500k tonnes of steel billets.

INVESTMENT WATCH- UK-based travel tourism company TUI will launch two new concept hotels, one each in Marsa Alam and Hurghada, according to TravelMole. The hotels are include the Sensimar Alaya in Marsa Alam (due to launch February 2019) and an unnamed resort in Hurghada (launching summer 2019). There was no mention of the investment cost or planned number of rooms at either property. The two are part of a 15-property expansion of TUI’s MENA footprint over the coming fiscal year. TUI, which already has a range of properties in Egypt, recently announced new charter flights to Marsa Alam and Hurghada from Birmingham as part of its winter 2019 holiday packages.

Speaking of tourism: Egypt made it to a list of the most popular tourist destinations for Ukrainian holidaymakers following a recorded 43.7% y-o-y increase in arrivals from Ukraine in 1H2018, according to Ukrainian Ministry of Economic Development figures. We had reported yesterday that winter tourism bookings to Egypt – particularly from Germany Italy, Poland, and Ukraine – are looking promising. Ukraine was Egypt’s second largest inbound tourism market in 2017.

REGULATION WATCH- All joint stock companies must register shares in Misr Clearing by January — or else: The Madbouly government is making it mandatory for all joint stock companies (basically, any company with “SAE” at the end) to register their shares with Misr for Central Clearing, Depository and Registry by 16 January 2019. Companies failing to do so will be unable to transfer shares or distribute dividends, and GAFI will refuse to sign off on decisions reached by the companies’ boards and general assemblies. Andersen Tax and Legal in Egypt has a backgrounder on the decision.

CBE to restructure treasury auctions and sales: The central bank, cooperation with the Finance Ministry, is looking to shake up the current bond auction system in a bid to lure new investors to Egyptian treasuries. The CBE will establish a central securities depository that will include a primary and secondary market auction systems, an electronic platform, a date-collection operation and a yield pricing monitor, the CBE said said in a prospectus to the Irish stock exchange (pdf). The initiative is being developed in cooperation with the European Bank for Reconstruction and Development (EBRD) and the MENA Transition Fund.

Euroclear to be set up in early FY2019-20: Egypt is hoping to have all of its government-issues securities available on Belgium-based clearing house Euroclear at the beginning of FY 2019-2020, Finance Minister Mohamed Maait said. Maait said negotiations are still ongoing. He had opened talks with Euroclear back in September to facilitate the settlement of domestic debt for overseas investors, who can currently only access the debt market through a handful of local banks with licenses to operate as primary dealers.

CBE to allow banks set up SME-focused PE firms: The central bank will allow banks to set up private equity funds for SMEs as part of its strategy to attract investment to smaller companies, the CBE noted in the prospectus. The bank is also looking to launch an electronic platform to provide non-financial services to SMEs and working with stakeholders to build an investment map and e-commerce facilities for agricultural projects.

CABINET WATCH- “Meeza” debit card to encompass all government services: The government is working to expand its new “Meeza” state debit card to be the single platform through which citizens will access all government services, including healthcare services under the Universal Healthcare Act, according to a Cabinet statement. Subsidies beneficiaries (whether it be fuel and commodities) and recipients of cash subsidy programs such as Takaful and Karama will receive their benefits through these cards when they start rolling out in December. Other decisions taken by the cabinet include:

• Approving a EUR 213 mn loan from the European Investment Bank to upgrade sewage systems in the Nile Delta region;
• Approving a USD 300 mn loan from the World Bank to develop and upgrade water and sewage system across rural Egypt;
• Approving a grant from China for an unspecified amount to help fund upgrades to Egypt’s public schools;
• Dedicating a portion of tithes collected from theaters, cinemas and entertainment venues towards funding charitable organizations;
• Approving payments of EGP 100k to each of the families of the victims of a Daesh terrorist attack on a bus carrying Coptic Christian pilgrims earlier this month.

EXCLUSIVE- Gov’t looks to raise stamp tax on phone lines: The Finance Ministry could raise the stamp tax on phone lines through legislative amendments now on the drafting table, a ministry source told Enterprise. Mobile network customers currently pay EGP 6 a year in stamp tax dues for their credit usage, whether that be under a monthly payment plan or phone top-up cards. The ministry will hold meetings with the National Telecommunications Regulatory Authority (NTRA) and mobile network operators to decide how much the stamp tax will increase. The ministry could raise the fees by 2-4x. A senior government official had told us last month that the ministry was mulling raising the stamp tax or introducing an entirely different fee to replace the EGP 50 levy imposed on new phone lines at the start of the fiscal year in July.

LEGISLATION WATCH- Executive regulations for the Food Cart Act will be ready “soon,” Investment Minister Sahar Nasr said, according to Youm7. The act was ratified by President Abdel Fattah El Sisi in June. The legislation, proposed by Rep. Mohamed Ali Youssef, includes 17 clauses regulating permits, equipment, location, fees, and food safety standards.

MOVES- Sherif Elwy (bio) was reportedly named CEO and managing director of Arab African International Bank, replacing Hassan Abdalla, an unnamed banker told Masrawy, confirming our report of this past September. Elwy previously led Arab Bank in Egypot. The central bank’s Mai Aboulnaga, finance ministry’s Ahmed Kochouk and Ibrahim Safwat Lotfy have reportedly been appointed to AAIB’s board of directors. The changes are not yet reflected in the bank’s website.

MOVES- Facebook has announced it had tapped veteran Booz management consultant Ramez Shehadi (LinkedIn) as its new managing director for the Middle East and North Africa (MENA), according to a press release.

MOVES- Trade Minister Amr Nassar has appointed Shady Amin to head the ministry’s Industrial Development Authority (IDA), ministry sources said, according to Youm7. Amin succeeds Ahmed Abdel Razak, who’s been in office since October 2016. His appointment comes as issues related factory licensing and industrial registry are expected to top the IDA’s agenda in the near future.

CORRECTION- We had incorrectly said in our Monday issue that Pioneers Holding was looking to acquire 100% of Electro Cable Egypt in a transaction valued at as much as EGP 711.5 mn; that figure actually represents the value of 100%, and Pioneers Holding already owns 48.5% of the company. That implies the acquisition is actually worth closer to EGP 366 mn. We have corrected the story on our website.