Gov’t unveils timeline of first wave of state privatization program: Public Enterprises Minister Hisham Tawfik unveiled the timeline for the initial wave of five companies that will see a stake sale as part of the government privatization program. Heliopolis for Housing and Development and Eastern Company will kick off the program with stake sales in October, Tawfik tells Bloomberg. Alexandria Mineral Oils Company (AMOC) and Alexandria Container and Cargo Handling (ACCH) will sell shares on the EGX in November, while Abu Qir Fertilizers will sell a stake in December.

Gov’t to offer investors majority stake in Heliopolis Housing: The government intends to allow investors to buy up a majority stake of around 33% Heliopolis for Housing and Development, Tawfik said. The government intends to retain ownership of 40% of the company, which currently has around 28% of its shares already listed on the EGX, Finance Minister Mohamed Maait told Bloomberg in a Thursday interview. “We saw that Heliopolis, given the strength of the real-estate sector in Egypt, could be developed more by offering a bigger stake to investors,” Maait told the news service, noting the previous successful sale of a majority stake to Madinet Nasr Housing and Development (MNHD).

Could more companies see a majority stake put on offer? While so far, a majority offering is available only in Heliopolis Housing, Tawfik hinted at the possibility of more majority offerings in the future. In a bid to maximize private sector presence on the boards of state companies, the government is “giving investors stakes in these companies and allowing them to have majority ownership in some of them,” Tawfik added.

Meanwhile, Eastern Company appears to have upped the stake it plans to sell in October to 4.5% from an initial 4%, according to the timeline put forth by Tawfik. AMOC and Abu Qir will each sell a 30% stake, while ACCH will sell 20% of its stake to investors.

As for the rest of the program? The second wave of the 23 state companies selling shares will go on offer in 1Q2019, although officials have yet to decide on which firms or the sizes of stakes to be sold, Tawfik added. In the next nine months, the government will study the performance of the 121 Public Enterprises Ministry companies. “Strategic investors will be invited in, through management contracts,” to run some of the companies that are unlikely to turn a profit under their current leaderships, he said.

State companies to sell EGP 75 bn in assets: In addition to the stake sales, Public Enterprises Ministry companies will sell some EGP 75 bn in assets, Tawfik said, according to Al Mal. Around half of the proceeds of the sale will go towards paying off overdue gas and electricity bills, as well settling debt payments to the state National Investment Bank. The ministry is currently tallying up the assets it plans to put up for sale, he added. The Ismail Cabinet had set up a timeline in May for state-owned companies to pay overdue gas and electricity bills so that the government can accelerate payments to foreign energy companies and other contractors, including Siemens and GE, among others. The move comes as the Electricity Ministry will reportedly settle some EGP 117 bn in overdue gas bills owed to the Oil Ministry before the end of 2018, in order to allow the latter to repay its arrears to international oil companies, which came in at USD 1.2 bn as of the end of FY2017-18, government sources told Al Masry Al Youm on Friday.

Natural gas prices for household and industry to rise by 30-75% as of 1 August: The Madbouly Cabinet decided on Saturday to raise the prices of natural gas for household and industrial users by 30-75% as of 1 August, pressing ahead with plans to gradually phase out subsidies under the IMF-backed economic reform program, according to a statement carried by Reuters. This translates to an increase of EGP 1.75-3.0 per cbm of gas, depending on the level of consumption. The increase in natural gas prices is meant to correct the pricing imbalance with cooking gas cylinders — which are used as an alternative to natural gas — following last month’s fuel price hikes, Oil Ministry spokesman Hamdy Abdel Aziz tells Al Masry Al Youm.

Natural gas users will now be billed at:

• EGP 1.75 per cbm for up to 30 cbm of consumption, up from EGP 0.1/cbm;
• EGP 2.50 per cbm for consumption between 30-60 cbm, up from EGP 0.175/cbm;
• EGP 3.0 per cbm for anything over 60 cbm, up from EGP 0.225/cbm.

The hike was accounted for in the state budget for FY2018-19, government sources told Al Mal, adding that the amount allocated to fuel subsidies this fiscal year remains the same at EGP 89 bn, down from EGP 125 bn in FY2017-18.

This will likely not go down well with manufacturers: Rising natural gas prices have been squeezing manufacturers, who make their payments in USD, since the currency was floated back in November 2016. Lobby and industry groups had also tried at various points in time to pressure the government into repricing the cost of natural gas for industry to help them cope with rising expenses, to no avail. EGAS had introduced an incentive package back in February that offers manufacturers lower fines and easier payment terms on gas supply contracts.

...and everyone else: A number of House representatives have also requested to send a letter to Prime Minister Mostafa Madbouly and Oil Minister Tarek El Molla to explain the reasoning behind the price increases, Rep. Amr El Gohary tells Al Mal. El Gohary says parliamentarians are incensed that prices were raised despite Egypt approaching natural gas self-sufficiency. Meanwhile, bakers of subsidized bread want to get more out the government as a result of the move, according to Al Mal.

El Sisi urges patience with reforms: The day after the price hikes, President Abdel Fattah El Sisi stressed that the state is pressing ahead with reforms while working to shield the most vulnerable citizens from the burden of the reform program, in a speech on Sunday. He said that the difficult times Egyptians are facing due to economic reforms are understandable but “causing chaos and destroying the state” are not justified.

Rumors spreading discontent are the greatest danger to Egypt’s stability, says El Sisi: Egypt’s stability is most threatened by rumors attempting to spread discontent and frustration among the people, El Sisi said. According to the president, the government has tallied some 21,000 “false rumors” over the past three months, which he said, along with terror attacks, are part of a “network” aimed at instilling a sense of frustration among Egyptians.

The foreign press’ take: The move — which follows a c. 50% hike in fuel prices in June, as well as increases to the costs of electricity, pipe water, and transportation — “is likely to further fan the flames of popular discontent, especially among poor and middle-class Egyptians who have borne the brunt of the government’s economic reform program,” says the Associated Press.

FIRST LOOK- Hassan Allam Utilities and Lightsource BP form solar energy JV: Hassan Allam Holding subsidiary Hassan Allam Utilities (HA Utilities) will form a joint venture with global solar energy developer Lightsource BP that will fund, develop and operate solar energy projects in Egypt, the two parties said in a statement (pdf) out this morning. “We are very excited to partner with Lightsource BP to further develop our business in Egypt,” Hassan Allam Holdings Co-CEO Amr Allam said. “[The JV] offers both steady income streams that smooth-out the traditionally cyclical revenues of our existing businesses coupled with high growth potential as demand for renewable energy in emerging markets leapfrogs that of developed economies,” he added. “Our business model will allow us to build sizeable renewable platforms by capitalizing on the strong relationships, financing capability and technical know-how of the two partners and of our management teams,” HA Utilities CEO Menatalla Sadek noted.

Lightsource BP sees EMs as more than a portfolio play, championing EM FDI: On a strategic level, Lightsource BP CEO and Founder Nick Boyle appreciates the importance of emerging markets, and Egypt specifically, as an opportunity to build long-term projects that play on macro fundamentals. “Projects in emerging markets are not just yield plays, they’re growth plays to power fast-growing economies and populations. We see exciting potential in Egypt following the country’s economic recovery and recently announced renewable power targets,” he says.

Hassan Allam to sign final contracts for Hamrawein coal power plant in September: In other Hassan Allam news, a consortium made up of Hassan Allam Construction, and China’s Shanghai Electric and Dongfang Electric will reportedly sign in September the final contracts for the 6 GW Hamrawein ‘clean coal’ power plant with the Egyptian Electricity Holding Company, an Electricity Ministry official tells Al Mal. The consortium will source 78% of the USD 4.4 bn needed to build the plant through Chinese financiers, with the balance (around USD 950 mn) set to be acquired through local banks, according to the official, who notes that funding should be secured within the next six months by early 2019.

M&A WATCH- EFG acquires 100% of Nigerian brokerage firm Primera Africa: Our friends at EFG Hermes announced on Thursday signing a sale and purchase agreement for 100% of the Lagos-based Primera Africa. Primera, which offers a range of brokerage and research services to international investors, will begin operating under the EFG Hermes brand name once the transaction is complete, EFG said in a press release (pdf).

The Nigerian operation will serve as a starting point for further expansion into West Africa, the company said. “Nigeria is our fourth direct entry as we continue our strategy of expanding our geographic footprint in high-potential, frontier emerging markets,” said EFG Group CEO Karim Awad. “At the close of this transaction, we will have a direct presence in 12 jurisdictions on four continents to serve our global institutional investors, regional high-net-worth individuals, and local retail investors.”

The move comes just days after EFG said it concluded advisory services on the GBP 125 mn IPO of microfinance lender ASA International on the LSE, which is part of a wider company plan to break into frontier markets that has recently seen it establish distribution and sales capabilities in New York, London, Pakistan, Kenya, and Bangladesh. Reuters also has the story.

IPO WATCH- Meanwhile, EFG Hermes has reportedly been tapped to manage Fresh Electric For Home Appliances’ initial public offering, which is likely to take place in 2019, sources tell Al Mal. Fresh execs had said in June that the company was looking to list as much as 20% of its shares on the EGX soon to raise enough capital to increase production capacity by 10% as it eyes higher exports. The company has already applied for Financial Regulatory Authority approval to list and is undergoing an internal restructuring to meet EGX regulations, senior company executive Bahaa Demtery had said.

IFC pledges USD 2 bn in funding to Egypt’s private sector until 2019: The International Finance Corporation (IFC) is committed to extending as much as USD 2 bn in funding to Egypt’s private sector until 2019 under the country’s cooperation framework with the World Bank Group, IFC CEO Philippe Le Houérou told Investment Minister Sahar Nasr this weekend at a meeting in Washington, D.C. The amount could be increased to support SMEs and other entrepreneurial projects, Le Houérou said, according to a ministry statement (pdf). Nasr —who said she hopes to see the IFC support more projects in transportation, energy, communications, and entrepreneurship — also discussed increased cooperation with the World Bank on social protection with Senior Director for Social, Urban, Rural and Resilience Global Practices, Ede Ijjasz-Vasquez.

The economic reform agenda also received props from the team that puts together the World Bank’s Doing Business Report, who told Nasr they were confident that recent measures would improve Egypt’s global ranking on the ease of doing business index.

M&A WATCH- Sawiris, Fortress Investments’ Edens acquire 55% stake in Aston Villa FC in GBP 30 mn transaction: Nassef Sawiris is joining forces with Fortress Investment Group co-founder Wes Edens to buy a 55% stake in English football club Aston Villa for GBP 30 mn, sources close to the matter told Bloomberg on Saturday. The club, which lost its spot in the English Premier League in 2016, has struggled financially since it failed to win its way back from relegation last season, especially as it spent considerable sums to acquire new players. Chinese businessman Tony Xia, who has owned the football club since 2016, said that “in finding such strong partners as Nassef and Wes we’re gearing up to fight again and bring back the success that this club deserves and we all so want to provide it with.” The Financial Times also has the story.

The Supply Ministry will reportedly begin registering more citizens to the subsidy rolls as of August under tighter regulations adopted last year, a ministry source tells Al Shorouk. The ministry will begin accepting applications to issue new ration cards as the registration window also opens for families to add newborns to their data, according to the source. The government had issued new regulations last year to govern new entrants, which cap the number of family members per card to four and introduce a EGP 1,500 monthly income threshold for eligibility for full-time workers, as well as a EGP 1,200 monthly threshold for pension earners. The rules also stated that orphans, widows, divorced women, single mothers, those with disabilities or special needs, minors, seasonal workers, and those eligible for social welfare benefits under the Takaful and Karama program would also be candidates for ration cards.

It’s unclear how the government intends to finance the addition of new beneficiaries to its rolls. Sources had also previously told us that the cabinet was currently debating how to fund increased commodity subsidies for 6 mn newborns and is considering a budget overdraft, the reallocation of funds from other ministries, or reclassifying newborns as beneficiaries of cash subsidy programs. It might just be that the Supply Ministry plans to have completed the purge of the subsidy system by August to make room for new additions, while spending on commodity subsidies is set to rise 36.6% this fiscal year to EGP 86.18 bn.

Is the gov’t banning exports of raw goods? The government is currently looking to ban exports of raw materials in order to maximize their use in the value chains here at home, Trade and Industry Minister Amr Nassar said. Raw materials which have not undergone any type of processing will not be exported, Nassar told the ministry’s various export councils at a meeting to discuss the nation’s trade strategy. Nassar was not clear on whether this ban will take the form an outright prohibition or will the ministry simply disincentivize exporters. The Ismail Cabinet had put in place and extended export tariffs on several raw goods including raw and scrap copper and aluminum. Nassar was also unclear on the type of goods which will be banned.

Egypt, Sudan to form joint task force to oversee future cooperation with an eye for boosting ties: President Abdel Fattah El Sisi and Sudanese President Omar Al Bashir agreed on Thursday to form a joint ministerial task force that would draw up a vision for future cooperation between Cairo and Khartoum, with a clear timeline and a detailed strategy for clearing any existing obstacles, which will likely include lifting the ban on Egyptian agricultural goods, according to an Ittihadiya statement. The group would also oversee the execution of plans such as the USD 60-70 mn power interconnection project and the construction of roads and railway lines to link both countries, which talks for are currently ongoing, according to El Sisi.

Regional developments were also among the points of discussion, with El Sisi and Al Bashir both reaffirming their commitment to maintaining the others’ national security and interests, according to the statement, which makes no mention of talks related to the disagreements over the disputed border areas of Halayeb and Shalatin or the Grand Ethiopian Renaissance Dam (GERD). El Sisi, however, did thank Sudan for the role it has played in “settling regional disputes.” You can view the full text of Sisi’s speech in Khartoum here.  Sudan Tribune and the Sudan News Agency both have coverage.

MOVES- Tourism Development Authority (TDA) boss Serag El Din Saad was named assistant tourism minister, according to state-run Al Ahram. Saad will continue on as head of TDA.

CORRECTION- French law firm Gide Loyrette Nouel was tapped as joint legal counsel for Cairo Investment and Real Estate Development’s (CIRA) IPO, and not GED Lawyers as we wrote on Thursday. The story has since been corrected on our website.