Lots of investment news

Tuesday, 23 May 2023

Lots of investment news

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Today at a glance

ENTERPRISE EXPORTS + FDI FORUM

Exporting in times of economic uncertainty.

Investment Watch

AstraZeneca plans USD 100 mn investment in Egypt.

M&A WATCH

EAEF, Al Ahly Capital invest EGP 250 mn in Dawi Clinics.

Investment Watch

Ezdehar targets struggling mid-sized firms with new EGP 1 bn fund.

What We're Tracking Today

Egypt’s long-term renewable energy targets just got more ambitious.

Investment Watch

The plan for an Egypt-Oman investment fund is still alive.

LAST NIGHT’S TALK SHOWS

Egypt to support pharma industry amid fears of medical shortages.

What We're Tracking Today

Egyptian electricity exports to Europe are a long way off.

Moves

Former education minister Tarek Shawki named AUC counselor.

PLANET FINANCE

Adnoc L&S IPO just got bigger.

Going Green

What volatile oil markets could mean for the global transition to renewable energy.

What We're Tracking Today

Egypt has new renewable energy targets + SCZone starts China roadshow

Happy hump day, ladies and gentlemen: We have plenty of investment news for you this morning, plus updated renewable energy targets announced by the electricity minister yesterday as well as coverage of the final panel discussion at last week’s Enterprise Exports & FDI Forum.

ON THE AGENDA TODAY-

SCZone in China: A Suez Canal Economic Zone (SCZone) delegation led by CEO Walid Gamal El Din is in China and Hong Kong this week to meet with local business leaders and investors in a bid to drum up interest in Egypt. Gamal El Din yesterday attended the Egyptian-Chinese Investment Forum in Beijing where they met with government officials and representatives from more than 60 Chinese companies — including in the food, textile, green fuel, and manufacturing industries — according to a statement. A number of firms expressed interest in Egypt’s economic zones, including Sinoma Engineering, which is already gearing to set up a factory in the SCZone for the manufacture of turbine blades.

A global roadshow: The SCZone has already traveled to Japan, the Netherlands and Vietnamthis year, and plans to head to India next month.

It’s day two of the AfDB annual meetings: The African Development Bank (AfDB) annualmeetings in Sharm El Sheikh continue today. President Abdel Fattah El Sisi will take part in a discussion alongside other African leaders about the role of multilateral lenders in global finance. The meetings run through to Friday.

National Dialogue is in session: The four sessions scheduled for today will feature discussions on the decline of industry’s contribution to the economy and the current investment climate, according to the agenda. Catch the full sessions on the dialogue’s Facebook page.

Avior — HC Egypt Conference: HC Brokerage and Avior Capital Markets’ virtual conference continues today. The four-day event brings representatives from 29 EGX-listed companies together with financial institutions from the US, Canada, Europe, South Africa, the UAE, and Egypt to discuss investment opportunities.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

Egypt’s long-term renewable energy targets just got more ambitious: The Egyptian government is now targeting increasing its renewable energy generation capacity to cover 60% of the country’s electricity needs by 2040, Electricity Minister Mohamed Shaker told senators yesterday. The government said last year that it was aiming to have renewable energy account for 40% of our energy mix by 2030.

It could be a while before we start exporting electricity to Europe: “We will not be able toexport electricity to Europe and generate FX revenues in just one year, we will need 5-7 years to do so,” Shaker said.

There are proposals for five different interconnectors linking Egypt to Europe,the latest of which was put forward in February by Scatec, which wants to lay a 3-GW cable across the Mediterranean to Italy. Energy insecurity in Europe caused by the war in Ukraine has forced the EU to accelerate efforts to diversify its energy supplies, and is looking at the Eastern Mediterranean as a key source of gas and renewably-generated electricity in the coming years.

ICYMI- Shaker's appearance at the Senate comes a few days after Infinity Power and Greek infrastructure investor Coupelouzos announced plans to study the development of new renewable energy projects in Egypt that would be used to feed power to Europe via the proposed GREGY interconnector.

WATCH THIS SPACE- Ten more golden licenses? The cabinet is currently looking into granting another 10 projects golden licenses, General Authority for Freezones and Investment (GAFI) head Hossam Heiba told Asharq Business yesterday (watch, runtime: 2:06). He said that the state has so far granted 17 of the licenses, which help fast-track new industrial and infrastructure projects by requiring only a single approval.

Golden licenses for all: The government will expand the types of projects eligible to receive golden licenses and will consider requests for any project it considers important, Prime Minister Moustafa Madbouly said last week. Currently, only national and strategic projects are eligible for the fast-track license. The move was one of 22 decisions announced last week aimed at boosting foreign investment.

THE BIG STORY ABROAD-

The latest updates (or lack thereof) on the US debt ceiling negotiations are dominating the global front pages this morning: High stakes talks between President Joe Biden and House Speaker Kevin McCarthy to break deadlocked budget negotiations ended without an agreement yesterday, leaving lawmakers just 10 days to find a solution before a potentially catastrophic debt default. (Associated Press | Reuters | Bloomberg | Financial Times | Washington Post | New York Times | Wall Street Journal | CNBC)

Another ceasefire fails to hold? Witnesses in Khartoum last night reported fighting and air strikes minutes after a ceasefire between the Sudanese army and the Rapid Support Forces (RSF) was due to come into effect, according to AFP. The two sides agreed last week to begin observing a week-long truce to allow in humanitarian aid from 9:45 pm (10.45 pm CLT).

REMEMBER- The two sides have been engaged in Saudi- and US-backed peace talks in Jeddah for over a week.

FM postpones evacuation via Dongola airport: The Foreign Ministry said yesterday that it has pushed back its plans to evacuate Egyptians from the airport at Dongola, and that a new date will soon be announced. Egyptians can still leave the country via the Argeen or Kastal border crossings.

CORRECTION- In a story published in yesterday’s Enterprise AM, we incorrectly referred to the National Automotive Company (NATCO) as a state-owned company. The story has since been updated on our website.

COME WORK FOR OUR ADVISORY ARM-Enterprise Advisory (formerly known as Inktank Communications) is looking for smart, talented people to help us tell the stories of exciting companies. Enterprise Advisory is the region’s leading investor relations advisory company and works on investor and strategic communications issues that take you deep inside the c-suite. Our clients are in Egypt, Saudi Arabia, the UAE and beyond. Egyptian and foreign nationals alike are welcome to apply.

We’re running a four-month training program for fresh grads and career switchers and will hire every successful grad of the program.

Apply directly to jobs@enterprisemea.com and mention “advisory development program” in your subject line.

*** It’s Going Green day — your weekly briefing of all things green in Egypt: Enterprise’s green economy vertical focuses each Tuesday on the business of renewable energy and sustainable practices in Egypt, everything from solar and wind energy through to water, waste management, sustainable building practices and how you can make your business greener, whatever the sector.

In today’s issue: What volatile oil markets could mean for the global transition to renewable energy.

Tags:

energy Mohamed Shaker renewables Suez Canal Economic Zone What We're Tracking Today

The TriFactory's Somabay Endurance Festival returns for the fifth time from 25-27 May,bringing together Egypt's multi-sport community for an amazing weekend filled with swimming, cycling, and running throughout the beautiful scenery of Somabay. Select from six different races, Sign up now, and get ready to Experience Endurance.

ENTERPRISE EXPORTS + FDI FORUM

Exporting in times of economic uncertainty

How can would-be exporters navigate an uncertain future? Companies that want to position themselves for success in exports should make sure everyone in the organization is aligned with its vision and foster an understanding of the business environment. That was the conclusion from the closing panel of last week’s Enterprise Exports and FDI Forum, which featured Abdallah Sallam, CEO of real estate developer Madinet Masr, Nadia El Tawil, investment officer at private equity firm AfricInvest, and Mostafa Bedair, CEO of Giza Seeds and Herbs.

Back to basics: “It's all about the fundamentals,” said Giza Seeds’ Bedair. There’s room to develop agricultural exports from their current level of around USD 3-4 bn annually, he said — not by running after the latest agritech, but by solving existing problems to improve yields and quality. To do this, we should examine the entire value chain from the start of production to export, he added.

Focus on the fundamentals: “What we see in our experience, having worked on transactions all over Africa, is that the companies that succeed are the ones that were built on strong fundamentals,” said El Tawil. “Part of that is operating… in a space where your country or business has a competitive advantage.” Businesses should ask themselves a few key questions, she said: “Who do you want to export to? What do they need? What are their requirements? What facilities do you need to have? And then you build your business with these fundamentals in mind.”

Navigating uncertainty: “You can’t plan for a crisis, you just have to be prepared,” said Sallam. “That's why they call it crisis management, not crisis planning.”

Staying on top of industry trends: Organizations need to educate themselves about market trends and what competitors are doing, El Tawil said, noting the importance of having a vision and pivoting the business accordingly. To stay on top of global trends, business leaders and owners should network, attend forums and trade shows, learn from others' experiences, and do their research, as well as get involved with chambers of commerce and trade missions. Government initiatives like the Egypt Makes Electronics program can help bring businesses up to international standards, she added.

“We're trying to understand our customers,” Sallam said. Madinet Masr approaches new projects outside of Cairo as if it is entering a foreign market — researching the location and then adapting its payment plans, pricing, architectural design, and other factors to suit. Local businesses often rely on intuition, he said — which can bring both benefits and risks. “While intuition can sometimes work, it's a gamble — it’s not based on numbers or research.”

Have a clear plan: A well-defined purpose and strategy is essential when seeking FDI, El Tawil said. Companies should know where they want to go and what resources they require to get there, making sure they really need the financing they’re asking for and can deploy it effectively, she added.

Tags:

Abdallah Sallam AfricInvest Enterprise Exports & FDI Forum FDI Giza Seeds and Herbs Madinet Masr Mostafa Bedair Nadia El Tawil

Investment Watch

AstraZeneca to raise Egypt investments to USD 100 mn

AstraZeneca to boost investment and up production: British pharma giant AstraZeneca plans to increase its investments in Egypt to USD 100 mn over the next three years and increase its production capacity by 50%, country president Hatem Werdany told Al Arabiya.

Localizing supply chains: “Our Egyptian products use 50-60% locally-made products and we hope to reach 80% over the coming three years,” he said.

AstraZeneca in Egypt: The company’s factory in Sixth of October produces medicine targeting a variety of areas — cardiovascular, gastrointestinal, respiratory, neuroscience, and oncology. The facility has the production capacity of 900 mn tablets per year, according to its website.

More products to come: “Egypt is a very promising market,” Werdany said. “This year we have nine new products … and over the coming three years we will introduce 25 new products to the Egyptian market.”

AstraZeneca unaffected by FX crisis: The company has not been affected by the ongoing shortage of foreign currency and has not faced problems repatriating profits, he said.

Correction: 30 May 2023

A previous version of this article incorrectly stated that AstraZeneca plans to invest USD 100 mn in Egypt. The article has been updated after Al Arabiya corrected its story.

Tags:

AstraZeneca investment watch Manufacturing pharma

M&A WATCH

Al Ahly Capital, EAEF invest EGP 250 mn in Dawi Clinics

Fresh funds for Dawi: Primary care company Dawi Clinics is getting an EGP 250 mn investment led by Al Ahly Capital Holding (the National Bank of Egypt’s local investment arm) and with participation from existing investor the Egyptian American Enterprise Fund (EAEF), according to a joint press release (pdf). The fresh capital will finance the expansion of Dawi’s operations across the country, she said.

The EAEF and Al Ahly Capital both received minority equity stakes in Dawi in return for their investment, company co-founder and CEO Magda Habib told Enterprise, declining to disclose the percentage of the stakes or the split between the two firms. The transaction consisted of both primary and secondary share sales, with the majority coming via a capital increase, she added. EAEF has long been a partner in Dawi, investing USD 3 mn in the company back in 2018.

Growth mindset: Dawi is aiming to open 30 new branches in Egypt over a three-year period, with 10 opening each year, Habib said. The company currently runs 18 branches across 10 governorates and has another two under construction that are set to open this summer. “That ramp up is not just a matter of having the funds… it’s also gearing the entire organization to manage [those] branches, from a staffing, operation, audit and marketing perspective,” she added.

The pandemic set back expansion plans: Dawi’s previous target of opening 50 branches by next year was “too optimistic” and faced challenges when covid-19 hit, Habib said. “Covid was a very difficult time for us, but we've emerged as a stronger organization and we validated our concept,” she added.

The company likely won’t seek any further funding for the next two years and will instead focus on opening its new branches and getting “into an overall profitable mode” before looking at “the next phase of expansion that may require further funding,” Habib said.

Advisors: MHR & Partners and White & Case acted as legal counsel for Al Ahly Capital, Nour & Partners and Al Tamimi & Company were legal advisors for EAEF, and Dawi was represented by Ibrachy Legal Consultancy.

Correction: 23 May 2023

A previous version of this story incorrectly stated that EAEF previously invested EGP 3 mn in Dawi Clinics.

Tags:

Al Ahly Capital Holding Dawi Clinics Egyptian American Enterprise Fund healthcare M&A Watch

Investment Watch

Ezdehar targets struggling Egyptian mid-sized firms with new EGP 1 bn fund

A new Ezdehar fund to support strugglingfirms: Private equity firm Ezdehar Managementwill launch a EGP 1 bn local-currency fund targeting struggling medium-sized businesses in 3Q 2023, Managing Director Emad Barsoum was quoted as telling Al Mal. The fund is approaching major local banks and other financial institutions for investment and is in preliminary talks with Avanz Capital Management’s Avanz Manara fund, Ezdehar Managing Director Emad Barsoum told Enterprise.

The new fund has between five and seven firms in its sights for investment this year, Barsoum told us, declining to name the companies. It will target stakes of 20-25% in medium-sized companies struggling with recent economic pressures including the EGP devaluation and inflation, in sectors including F&B, healthcare, ins., education, and manufacturing, he added.

More where that came from? The fund could target a second close of EGP 2 bn “if market conditions allow,” Barsoum said, adding that the initial EGP 1 bn could be deployed in as quickly as six months or as long as two years depending on the economic situation.

Tags:

Avanz Capital Management Emad Barsoum Ezdehar investment watch private equity

Investment Watch

Egypt, Oman discussing joint investment fund -GAFI head

An Egyptian-Omani joint fund? Oman and the Sovereign Fund of Egypt are looking into establishing a joint investment fund, which would participate in the state offering program and invest in projects across Egypt, General Authority for Freezones and Investment (GAFI) head Hossam Heiba told CNBC Arabia (watch, runtime: 6:14), refusing to disclose the fund’s value.

The idea was floated almost four years agoby Planning Minister Hala El Said, who said that the SFE was in talks with the Oman Investment Fund to set up a joint investment platform.

Egypt, Oman ink dual taxation agreement: Egypt and Oman yesterday signed an agreement to eliminate double taxation and crack down on tax evasion, the Finance Ministry said in a statement. The two countries also signed an MoU to cooperate on financial policies in a way to boost economic relations =develop joint investments, the ministry said, without giving further details. Finance Minister Mohamed Maait and his Omani counterpart Sultan bin Salim Al Habsi inked the agreements on the sidelines of the Egyptian-Omani business forum. The forum was held during day two of Omani Sultan Haitham bin Tarek’s two-day visit to Egypt, where he met President Abdel Fattah El Sisi.

Remember: Egypt recently signed a similar tax agreement with Qatar.

MEANWHILE- The UAE International Investors Council and the Egyptian-Emirati Business Council inked an MoU aimed at facilitating investment in green projects and tech in the two countries, Emirati new agency WAM reported. Under the agreement, the two sides will arrange business meetings and facilitate the exchange of information with the aim of stimulating new investment.

Tags:

Egypt-Oman relations Egypt-UAE relations GAFI investment watch Sovereign Fund of Egypt tax

Moves

Egypt’s former education minister Shawki has been appointed at AUC

Shawki back at AUC: Former education minister Tarek Shawki has been appointed University Counselor at the American University in Cairo (AUC), the university said in a statement (pdf) yesterday. Shawki was formerly dean of AUC’s School of Sciences and Engineering and senior strategic advisor to the AUC president for education and outreach and served as the Madbouly government’s education minister between 2017 and 2022. Shawki succeeds Mohamed Hamza who has been AUC’s counselor since January 2022.

Tags:

AUC Education Mohamed Hamza moves Tarek Shawki

LAST NIGHT’S TALK SHOWS

Egypt to support pharma industry amid fears of medical shortages

Topping last night’s talk shows: Concerns about shortages of pharma products had the talking heads talking for a second night running while Kelma Akhira’s Lamees El Hadidi had something to say about the destruction of historic tombs in Cairo’s oldest cemetery.

Medical supplies have been a major theme on the airwaves this week amid fears that ongoing import blockages caused by the FX crunch could result in shortages of pharma products. In an interview on Kelma Akhira last night, Gamal El Leithy, head of the Federation of Egyptian Industries’ pharma division, told show host Lamees El Hadidi that the pharma industry’s reserves of raw materials are currently enough to last two months, down from the ideal 3-4 months (watch, runtime: 10:14).

The response: In an effort to bolster supplies, the Madbouly government will allocate USD 100 mn a month to support pharma factories, USD 150 mn a month to support hospitals, and will work with the central bank to release medical supplies and raw materials still stuck at ports, El Hadidi said. The measures will help to prevent any shortages from occurring, El Leithy said, offering a message of reassurance to viewers. Mohamed Ismail Abdo, head of the Medical Supplies Division at the Cairo Chamber of Commerce also joined El Hadidi (watch, runtime: 3:10) to voice support for the decisions.

The sector is already mostly localized: “88% of the Egyptian market’s pharma needs are locally made but we need to import raw materials,” Ittihadiya health advisor Mohamed Awad Tag El Din told Ala Mas’ouleety (watch, runtime: 4:36). Head of the Export Council for Medical Industries, Maged George, joined Al Hayah Al Youm (watch, runtime: 5:09) to weigh in on the issue.

Tombs in City of the Dead under threat: El Hadidi voiced criticism of the ongoing demolition of parts of the historic City of the Dead to make way for a flyover linking central Cairo to the new capital. “I don’t know who to talk to about this but I am directing a message to society, the government, and the Tourism Ministry: Protect our history. Protect the fingerprints of those who created this history or else we will be erased as well,” she said. “There must be another way” (watch, runtime: 2:00 | 4:22).

The tomb of Al Azhar Grand Imam Sheikh Mostafa Al Maraghi is one that has to make way:El Hadidi spoke to Sheikh Al Maraghi’s granddaughter (watch, runtime: 5:03), who told her that her family received a letter from the state to relocate his remains to a cemetery in Tenth of Ramadan, and issued a plea to officials to reconsider their plans.Researcher Mostafa Al Sadek also joined El Hadidi (watch, runtime: 9:17) to relay the importance of preserving Egyptian history.

A record month for tourism arrivals: Ala Mas’ouleety’s Ahmed Moussa said that a record 1.4 mn tourists visited Egypt in April (watch, runtime: 7:39). Arrivals have been on the rise this year, jumping 33% y-o-y in the first four months of 2023. The Tourism Ministry is currently expecting to receive a record 15 mn tourists this year, up 28% from 2022.

Tags:

Federation of Egyptian Industries foreign exchange healthcare LAST NIGHT’S TALK SHOWS pharma

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EGYPT IN THE NEWS

Egypt’s City of the Dead, Mohamed Mansour feature in the foreign press

There’s not a lot happening in the foreign press this morning:The Telegraph is reporting the latest on the government’s construction projects in the City of the Dead, which have resulted in ancient mausoleums being bulldozed to make way for new bridges. Meanwhile, theBBC follows a Sudanese woman’s trip from Oxford to Egypt to help her mother escape Sudan, and

Sky News reports that Mohamed Mansour has made a GBP 5 mn donation to the UK Conservative Party.

Also on our Radar

EU + AFD to disburse new funds for Egypt grain silos. PLUS: New Xylem water pump factory

DEVELOPMENT FINANCE-

More EU funding to improve food security: Egypt is getting an EUR 60 mn facility from the EU and the French Development Agency to help the Madbouly government expand its silo capacity, Reutersreported, citing an email from the European Commission delegation in Cairo. The funding will help the state add at least 420k tons of wheat storage capacity, amounting to a 12% increase on the current 3.5-mn-ton capacity.

REMEMBER- This is the second tranche of the EUR 100 mn in EU funding announced last yearto address Egypt’s food insecurity following the war in Ukraine. The first EUR 40 mn tranche was disbursed last month and went towards upgrading wheat storage capacity and to help the Agriculture Ministry acquire better seeds.

MANUFACTURING-

Xylem inaugurates EGP 300 mn water pump factory: US-based water solutions company Xylem and local firm Tiba Manzalawi Group yesterday inaugurated a EGP 300 mn water pump factory, the Trade Ministry said yesterday. The factory will produce pumps to be used in irrigation, heating, air conditioning, and industry, half of which will go towards exports to Arab and African countries.

Tags:

ALSO ON OUR RADAR development finance EU food security French Development Agency Manufacturing Tiba Manzalawi Group wheat Xylem

PLANET FINANCE

Adnoc ups offering of logistics arm amid huge investor demand

Adnoc L&S IPO just got bigger: Abu Dhabi National Oil Company (Adnoc) is now selling a 19% stake in its maritime logistics subsidiary Adnoc L&S, up from the initially planned 15% after the order book was oversubscribed within minutes of opening last week, the company said (pdf) yesterday. The company will now offer 1.41 bn shares for AED 1.99-2.01 apiece in an IPO that could raise as much as USD 769.4 mn and value the company as high as USD 4.05 bn.

Subscription wraps tomorrow: Retail subscription closes today and institutional book building will wrap tomorrow. The final offer price will be disclosed on Thursday and shares are expected to hit the Abu Dhabi stock exchange on 1 June.

High demand comes amid a regional IPO slowdown: Last year’s oil-fuelled IPO craze in the Gulf has tempered this year, with proceeds falling 69% so far this year to USD 3.5 bn, according to Bloomberg data. Earlier this month, ADES International and Aramco’s energy trading arm both postponedtheir plans to list in Riyadh due to current market conditions.

EGX30	16,764	-0.6% (YTD: +14.8%)
USD (CBE)	Buy 30.83	Sell 30.96
USD at CIB	Buy 30.85	Sell 30.95
Interest rates CBE	18.25% deposit	19.25% lending
Tadawul	11,329	-0.1% (YTD: +8.1%)
ADX	9,527	+0.5% (YTD: -6.7%)
DFM	3,549	+0.1% (YTD: +6.4%)
S&P 500	4,193	0.0% (YTD: +9.4%)
FTSE 100	7,771	+0.2% (YTD: +4.3%)
Euro Stoxx 50	4,386	-0.2% (YTD: +15.6%)
Brent crude	USD 76.05	+0.6%
Natural gas (Nymex)	USD 2.40	-7.2%
Gold	USD 1,993.00	-0.4%
BTC	USD 26,906	+0.2% (YTD: +62.5%)

THE CLOSING BELL-

The EGX30 fell 0.6% at yesterday’s close on turnover of EGP 1.76 bn. Local investors were net sellers. The index is up 14.8% YTD.

In the green: Juhayna (+2.9%), Oriental Weavers (+2.2%) and Edita Food Industries (+1.9%).

In the red: Taaleem Management Services (-6.0%), Ibnsina Pharma (-4.4%) and Eastern Company (-3.1%).

Tags:

ADNOC Financial Markets Planet Finance

Diplomacy

Nato discusses anti-Russia, China strategy with Egyptian officials during visit

Nato delegation in Egypt: A delegation from Nato’s Cooperative Security Division was in Egypt last week to discuss its strategic priorities with diplomatic and military officials, including Military Intelligence head Khaled Megawer, it said in a releaseyesterday. Nato officials briefed the Egyptian delegation on its latest strategic concept, “emphasizing how current challenges are deeply interconnected,” the statement said. Approved last year following Russia’s invasion of Ukraine, the strategic concept (pdf) defines Moscow as the “most significant and direct threat” to the West and for the first time identified China as a strategic challenge.

Tags:

DIPLOMACY Egypt-Nato relations NATO

AROUND THE WORLD

China announces major development plan for Central Asia

China makes its play for Central Asia: Beijing unveiled an ambitious development plan for Central Asia encompassing new infrastructure, bns of USD of financing, and expanded trade relations at the China-Central Asia Summit at the weekend, Reuters reports.

Regional integration vs. economic coercion: The summit was held at the same time that G7 leaders were meeting in Japan, where they pledged to respond to Beijing’s “economic coercion” and reduce ties with Chinese suppliers.

An international arrest warrant for Lebanon’s central bank governor: Lebanon has received a red notice from Interpol for the arrest of central bank governor Riad Salameh, Interior Minister Bassam Mawlawi told Reuters. This comes shortly after France issued an arrest warrant for Salameh after he failed to show up for questioning about money laundering allegations.

Tags:

Around the World China G7 Lebanon

Our weekly deep dive into the green economy and ESG issue in Egypt.

Published every Tuesday in EnterpriseAM.

Read going Green

Going Green

Oil prices are on a rollercoaster. What does it mean for the green transition?

Could volatile oil markets shake up the world’s renewable energy plans? The oil and gas markets have been particularly volatile in recent weeks, with prices spiking in response to fresh production cuts from the OPEC+ cartel before dropping on recession fears. If prices rise once more, some say it could spur on the transition to renewable energy, while others claim it will encourage even more and faster drilling. Uncertainty abounds — so what exactly is going on in energy markets and what will the impact be on the green transition?

Oil markets had been set for a hot year: Less than a month ago, signs of strong post-covid growth out of China had the International Energy Agency predicting that global oil demand would hit an all-time record of nearly 102 mn barrels per day in 2023. The agency said surprise production cuts by the OPEC+ cartel in a time of high demand would lead to a supply deficit in global markets, “pushing both crude and product prices higher” and potentially piling further pressure on global inflation.

But a few weeks is a long time in the energy markets: China’s post-lockdown rebound appears to be fizzling out, the Federal Reserve’s tightening cycle threatens to slam the brakes on US growth, and US lawmakers are dangerously close to allowing the country to default on its debt — all factors that increase the chances of a global recession this year. The energy markets are responding to the gloomier outlook: Hedge funds are now almost as bearish on oil and fuel as they have been at any time in the last decade, Bloomberg reports.

All this volatility could spell trouble — with potential knock-on effects for other sectors: If the demand outlook improves or OPEC decides to make deeper cuts, investors could scramble to reverse their bearish bets, Bloomberg cites Goldman Sachs analysts as saying. That would send oil prices on a sudden rise and spur additional inflation. On the other hand, a further drop in crude prices could trigger falls in other markets including stocks, analysts told the business newswire earlier this month.

So what does this all mean for the green transition? Volatility breeds uncertainty, and with the outlook on oil prices through the end of the year so unclear, it’s hard to say what the knock-on impacts will be on the green economy. There are a few potential scenarios if energy prices start to climb again:

Higher oil prices could incentivize green investment: “All else equal in the medium term, higher prices are good for clean energy,” John Larsen, partner at research firm Rhodium Group told CNBC. The argument is that when prices are high in the wider energy market, the risk of investing in clean energy is reduced. “The higher the cost of traditional fuels, the bigger the incentive to continue the transition,” Ole Sloth Hansen, head of commodity strategy at Saxo Bank told Bloomberg.

And force governments to double down on the transition: Tighter oil and gas markets raise energy security concerns for countries who rely on imports for their energy supply, which they may look to alleviate by investing more in renewables at home and offering incentives to speed the green transition. “Renewables were already expanding quickly, but the global energy crisis has kicked them into an extraordinary new phase of even faster growth as countries seek to capitalise on their energy security benefits,” IEA Director Fatih Birol said in December, referencing the energy crunch brought on by the outbreak of war in Ukraine.

Consumers paying more at the pump may be tempted by EVs: Higher crude prices translate into higher fuel prices — and that could accelerate global demand for electric vehicles as households look to save where they can. The IEA says nearly one in five cars sold in 2023 will be electric. “If the oil producers try to push prices up, this will only accelerate the electric cars’ penetration,” Birol said last month, according to Bloomberg.

But higher prices will likely trigger more oil production in the short term: Climbing prices mean climbing profits for oil and gas firms, who may look to ramp up drilling as much as possible while markets remain hot. That can lead to a flood of supply that soon brings prices back down, CNBC notes — but the concern is that renewable energy development takes a backseat in the meantime.

And expensive energy could also make renewable projects more costly: One downside to higher oil prices is the knock on effect on inflation. Energy is a key input cost in a huge range of sectors from manufacturing to transport — meaning when fossil-fuel prices go up, so does the cost of building new renewables projects. Higher inflation also spurs central banks to raise interest rates — as we’ve seen in the US and almost everywhere else in the past year — meaning borrowing to finance renewables expansion also becomes more expensive, Bloomberg points out.

In the long term, fossil fuels are still on the way out: The eventual phase-out of fossil fuels is more or less assured — even if high prices cause a short-term spike in drilling. “You might see marginally higher oil and gas investment in shale but energy majors won’t be adjusting transition plans” in response to a potentially tighter market, says Bloomberg Intelligence Analyst Will Hares.

Energy prices can rise or fall — but the real killer is volatility: Not knowing where oil prices will go next makes it hard for investors to plan new projects, and sudden changes in price can see projects canceled, Reuters reports. “The much bigger risk for the energy transition is volatility,” one US-based energy researcher told the newswire. “It's not high prices or low prices, it's this ongoing shift.”

Your top green economy stories for the week:

Ministers approved green hydrogen incentives designed to boost the country’s green hydrogen sector and enhance FX inflows.
Egypt attracted the most FDI in the MEA region in 2022 and emerged as the second largest recipient globally thanks to planned green hydrogen projects.
Egypt plans to allocate 30-40% of its investments in the upcoming FY for environmental sustainability projects.
Green panda bonds: AfDB has agreed to provide a credit guarantee for USD 345 mn of the USD 500 mn CNY-denominated bond issuance, which will fund sustainable development projects, such as green transport, renewable energy, and energy efficiency.

Tags:

energy global markets going green green energy oil and gas renewable energy

CALENDAR

MAY

17-31 May (Wednesday - Wednesday): Second round of applications for sixth phase of export subsidy program.

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

22-25 May (Monday-Thursday): HC Brokerage and Avior Capital Markets conference, virtual.

23 May (Tuesday): National Dialogue session.

24 May (Wednesday): EFG Hermes will host its extraordinary general meeting.

25 May (Thursday): National Dialogue session.

28 May (Sunday): House to reconvene.

28 May (Sunday): Turkish election run-off vote.

29 May (Monday): IEF-IGU Ministerial Gas Forum, Cairo.

29 May (Monday): Egyptian-Rwandan Investment and Trade Day, Helnan Landmark Hotel, Cairo.

30 May (Tuesday): Listed companies have until this date to report and publish their 1Q results.

JUNE

June: Indian representatives to discuss prospect investments in the Suez Canal.

June: Egyptian-Saudi business forum.

1-3 June (Thursday-Saturday): Fintech Industry retreat, Hurghada.

3-4 June (Saturday-Sunday): OPEC+ meeting, Vienna.

4 June (Sunday): Senate back in session.

7-10 (Wednesday-Saturday): The second edition of Africa Health Excon.

10 June (Saturday): Thanaweya Amma examinations begin.

12 June - 15 July (Monday-Saturday): Thanaweya Amma exams.

13-14 June (Tuesday-Wednesday): Federal Reserve interest rate meeting.

19-20 June (Monday-Tuesday): The forum for insolvency reforms and corporate restructuring in the Middle East and North Africa.

19-21 June (Monday-Wednesday): Egypt Infrastructure and Water Expo, Egypt International Exhibition Center.

19-21 June (Monday-Wednesday): Big 5 Construct, Egypt International Exhibition Center.

22 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

28 June-2 July (Wednesday-Sunday): Eid El Adha (TBC).

30 June (Friday): June 30 Revolution Day.

30 June (Friday): Egypt to exit Grains Trade Convention.

JULY

1 July: House of Representatives deadline to approve the FY 2023-2024 budget.

1 July: GAFI to launch the country’s first integrated electronic platform to facilitate setting up a business.

5 - 6 July (Monday - Tuesday): Gov’t to pay out subsidies to first wave of applicants under its sixth export subsidy program.

15 July (Saturday): Deadline for bids in EGPC’s mature oil fields tender.

18 July (Tuesday): Islamic New Year.

19 - 20 July (Wednesday - Thursday): Gov’t to pay out subsidies to second wave of applicants under its sixth export subsidy program.

20 July (Thursday): National holiday in observance of Islamic New Year (TBC).

23 July (Sunday): Revolution Day.

25-26 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

27 July (Thursday): National holiday in observance of Revolution Day.

Late July-14 August: 2Q2023 earnings season.

AUGUST

August: Hassan Allam Utilities + Agility to open Yanmu East logistics park.

2 - 3 August (Wednesday - Thursday): Gov’t to pay out subsidies to second wave of applicants under its sixth export subsidy program.

3 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

10 August (Thursday): Shalateen Mineral Resources gold mining tender closes.

22-24 August (Tuesday-Thursday): BRICS summit, Johannesburg, South Africa.

SEPTEMBER

September: Sustainable Debt Coalition Initiative agreed at COP27 to launch.

9-10 September (Saturday-Sunday): G20 summit, New Delhi, India.

15 September (Friday): IMF to review USD 3 bn program.

19-20 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

21 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

21-23 September (Thursday-Saturday): Narrative PR Summit, Somabay.

25 September (Monday): Nasdaq deadline for Swvl Holdings Corp to increase its market value of publicly held shares to a minimum of USD 15 mn.

26 September (Tuesday): Prophet Muhammad’s birthday (TBC).

28 September (Thursday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

OCTOBER

October: Deadline for ins. providers to link their databases with the FRA.

2-5 October (Monday-Thursday): ADIPEC 2023, Abu Dhabi National Exhibition Center.

6 October (Friday): Armed Forces Day.

13 October- 20 October (Friday-Friday): The sixth edition of El Gouna Film Festival (GFF).

Late October-14 November: 3Q2023 earnings season.

26 October (Thursday): Daylight saving time ends.

31 October - 1 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

NOVEMBER

November: Cairo to hostIntra-African Trade Fair.

2 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

15-24 November (Wednesday-Friday): Cairo International Film Festival, Cairo.

DECEMBER

10-11 December (Sunday-Monday): eGlobe Expo, St. Regis Almasa Hotel, Cairo.

12-13 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

21 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

EVENTS WITH NO SET DATE

2023: The inauguration of the Grand Egyptian Museum.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

Summer 2023: EGX to launch a shariah-compliant index.

1H 2023: GAFI roadshow set to launch to drum up foreign investment for golden licenses

1H 2023: Abu Dhabi Islamic Bank intends to launch a digital consumer finance company

2H 2023: Egyptian government expected to sign agreements with a consultant for the EuroAfrica electricity interconnector.

2H 2023: President Abdel Fattah El Sisi and Turkish President Recep Tayyip Erdogan expected to hold a summit.

3Q 2023: E-Finance to launch in Saudi Arabia.

4Q 2023: EGX to launch its new futures exchange.

End of 2023: A Developments’ first phase of the Lazoghly development completed.

November 2024: Egypt to host the 12th session of the World Urban Forum (WUF12).

2Q 2025: Safaga Terminal 2 to initiate operations.

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