M&A WATCH- The GCC scramble for Lebanese banks continues as Bank ABC enters race for Blom Bank’s Egypt assets: Bahrain’s Arab Banking Corporation (Bank ABC) is reportedly competing with Emirates NBD to acquire Blom Bank’s Egypt assets, Hapi Journal reports, citing sources close to the talks. Bank ABC is interested in growing its presence here by adding the Lebanese bank’s assets to its Bank ABC Egypt operations, the sources said. Blom confirmed earlier this month it is looking to sell its Egypt assets as its home country suffers its worst economic crisis in decades. The Central Bank of Egypt greenlit its request to kick off a due diligence process on a transaction that could be valued at USD 250-300 mn. Emirates NBD was the first name to emerge as an interested party, but Blom had approached several potential suitors alongside the Dubai-based financial institution.

Emirates NBD is also reportedly interested in purchasing the Egypt assets of Bank Audi, another financially stressed Lebansese bank, the local press reported yesterday, citing sources in the know. Again, NBD’s interest comes from a desire to expand its footprint in Egypt by adding Audi’s assets to its own Egypt branch, the sources said, adding that the acquisition could close as early as October. Bank Audi recently denied that it’s engaged in any acquisition talks after negotiations with First Abu Dhabi Bank (FAB) broke down in May due to the pandemic.

Gulf-based banks have been particularly interested in Egypt over the past few years. Egypt’s favorable interest rate climate, the relatively small market capitalization of some of the country’s largest banks compared to emerging market peers, and a largely unbanked population are all draws for international investors, we noted back in January. GCC countries, by contrast, have smaller populations, with the region tending to be “overbanked.”

GCC bankers first saw an opening when a handful of European banks exited Egypt and other emerging markets following tougher regulations under the 2009 Basel III accords, which limited many established banks’ ability to take risks using depositor money coming from their home countries. And as acquisitions are the only way into Egypt’s banking sector, prominent GCC names including Qatar’s QNB AlAhli (previously National Societe General Bank) and Al Ahli Bank of Kuwait (previously Piraeus), as well as other large banks from Arab and neighboring countries, were able to take advantage of this and buy out the existing European banks.

Egypt had a good year in 2019 for natgas exports and renewables, according to BP: Egypt's natural gas exports more than doubled to 4.5 bn cbm in 2019, up from 2 bn cbm in 2018, BP said in its annual Statistical Review of World Energy (pdf). The report said that 1.7 bn cbm were exported to Europe, while Asia and South Pacific countries received 2.7 bn cbm, led by Pakistan which imported 900 mn cbm. Overall gas production increased slightly during the year to 64.9 bn cbm, up from 58.6 bn cbm in 2018, its highest level in more than a decade.

Renewable power generation almost doubled in 2019, leaping by 82.7% compared to a year earlier to reach 6.5 terawatt hours (TWh) – a considerable spike above the average increase of 14.3% over the past decade. A surge in solar generation was primarily responsible for the increase, rising almost 145% to 3.7 TWh in 2019 from just 1.5 TWh in 2018. Meanwhile, wind generation grew by more than a third to 2.8 TWH, from 2.0 TWh in the previous year.

Consumption of hydrocarbons dips: Oil consumption fell 1.8% to 743k bbl/d as production slid 1.9% to 686k bbl/d. Gas consumption also dipped 1.1% to 58.9 bn cbm despite production rising almost 11% to 64.9 bn cbm.

The increasing role of renewables in Egypt’s energy mix is reflected in the declining carbon emissions, which fell 1.7% to 217.4 mn tonnes in 2019. This is a marked reversal of a trend spanning the last decade (2008-2018), which saw emissions creep up by an average 2.6% each year.

Electricity generation capacity glut forces companies to think smaller on solar: Qalaa Holding’s TAQA Arabia will be focusing on small-scale solar projects to the tune of 2-10 MW in Egypt for the next two years, as the government slows down reliance on renewables amid a production glut, the company’s project director Mohamed Osama said at a webinar hosted by EQ Magazine and the Middle East Solar Association, Zawya reports. “The growth will be in rooftop projects for industries, commercial buildings, hotels, small domestic projects and for off-grid agricultural projects in the 5-15 MW range," he said.

A glut in generation capacity caused the change in direction: Under current conditions, TAQA aims to install just 50-60 MW of capacity each year, a quantity which still might not be achievable given that Egypt has rapidly shifted from an electricity shortage to a 15-GW surplus, Osama says. “Egypt has 50 GW of generation capacity and the consumption is only around 35 GW. The government has limited the solar net metering capacity to 500 MW. For the next two years even reaching 50-80 MW is very optimistic for us," he said. This supply glut has already pushed Egypt to scrap at least a couple of renewable energy projects and impose a 50 MW cap on other projects it currently has in the pipeline, the Electricity Ministry’s spokesman Ayman Hamza told us in June.

And TAQA isn’t the only one: You can expect investment in renewables to slow down substantially for the next 18-24 months, the CEO of a prominent renewable energy company told us on condition that they remain anonymous. “This mainly hits solar companies looking to invest in large-scale projects,” they said. The limitations and fees mean new stations are going to be small in the interim — effectively capped at 20-60 MW.

In other Qalaa news, the company continues its divesting plan, disposing 3 mn shares it held in ASEC Mining: Qalaa Holding sold 3.1 mn shares it held in ASEC Mining for EGP 25.26 mn, bringing its stake in the company down to 54.05% from 61.323%, according to a regulatory filing (pdf) Qalaa had embarked on a divestment plan back in 2015 to dispose of non-core assets across its footprint to focus on core business units including the Egyptian Refining Company and TAQA. Pharos Holding was the sell-side advisor for the ASEC transaction.

Egypt is investing some EGP 134.2 bn through 2050 to build seawater desalination plants that would give us 6.4 mn cbm/d of potable water, Housing Minister Assem El Gazzar said in a statement. The plan spans over six five-year phases, the first of which will see the government investing EGP 45 bn to build 47 desalination plants by 2025, he said, noting that 19 desalination plants that would output 550k cbm/d are already under construction in several governorates, including Sinai, Port Said, and Dakahlia. The new facilities would join 65 existing plants that produce 800k cbm/day. The ministry is also investing EGP 20 bn in two water treatment plants to re-use agricultural wastewater that could provide 6.6 mn cbm/day, which would be sufficient to water 460k feddans.

DEBT WATCH- Naguib Sawiris’ Ora Developers is looking to issue bonds and take out more loans to finance its real estate projects, the b’naire told Hapi Journal, without specifying how much the company wants to raise or the type of debt securities it will use. Ora already acquired a EGP 1 bn loan from Banque Misr earlier this year to finance the construction of the first phase of its ZED Sheikh Zayed project. Other future plans include an investment of up to EGP 30 bn in a 1k-feddan project on the North Coast that Ora is waiting to acquire land for, Sawiris said.

Real estate sector still experiencing lagging slump in demand: House prices are unlikely to rise in the coming months as the sector continues to feel the effects of the covid-19 pandemic, Sawiris said. Despite seeing recent improvements in the sector, he said that sales volumes remain below their pre-covid levels.

M&A WATCH- Is IMEX International’s acquisition of Nile Cotton Ginning stumbling? Energy trading company IMEX International’s offer to acquire 50% of Nile Cotton Ginning has been plunged into uncertainty after majority shareholder Samir Afifiy and associates who collectively own 13% of the company refused IMEX’s offer price, unnamed sources told Al Mal. IMEX told the Financial Regulatory Authority last week that it would submit a mandatory tender offer for the company at EGP 50/share, a move which Afifiy described as “hostile,” and pledged not to accept any offer below EGP 70. Meanwhile, the workers’ union, which holds 7.06% of the company believes that the bid is suitable, given that the latest offer they received priced the shares at EGP 49 apiece, the sources said.

Advisors: The company has appointed EgyTrend as its financial advisor on the transaction.

Background: The company has been mired in a decade-long dispute that arose after a court ruling in 2011 to reverse the company’s Mubarak-era sale to private investors. The ruling nullified the privatization claiming that the company had been undervalued. An appeal was turned down in 2013 by the Administrative Court. The government’s investment dispute resolution committee reached a settlement agreement with the company that will see Nile Cotton pay EGP 231.1 mn to the Holding Company for Construction and Development. The agreement came as Nile Cotton’s shareholders were looking to reach a settlement in the hope of resuming trading the company’s shares on the EGX after an eight-year hiatus.

Corrected on 31 August 2020

Updated the homepage link for EgyTrend.

STARTUP WATCH- On-demand food booking startup Ordera has raised a six-figure USD investment from Alex Angels, Saudi venture capital fund VC Daal and AUC Angels, Menabytes reports. The company’s mobile app provides users with a food delivery platform where they can pre-order and prepay for meals from food vendors. Ordera has so far inked agreements with some 150 food outlets and has its sights set on expanding its retail partners and users to Alexandria in September with the new funds, according to co-founder and CEO Karim Abdel Kader.

EARNINGS WATCH- Abu Qir Fertilizers saw net profits decline 0.1% y-o-y in 4Q FY2019-2020 to EGP 560 mn, down from EGP 561 mn last year, according to a company earnings release (pdf). Revenues fell 1% y-o-y during the period to EGP 2.74 bn from EGP 2.9 bn last year.

MOVES- Sherif Seif El-Din Hussein appointed advisor to Madbouly on corruption : Former Administrative Control Authority (ACA) head Sharif Seif El-Din Hussein was yesterday selected to advise Prime Minister Moustafa Madbouly on corruption, according to a cabinet statement.

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