BLOOMBERG/SIMA DIAB
Egypt’s new sovereign wealth fund plans to acquire a stake of around 30 per cent in power plants co-built by Siemens with international investors taking the rest, part of its drive to spur greater foreign participation in the Middle East’s fastest-growing economy, reported Bloomberg.
The fund’s initiative is the latest involving the three state-owned plants, which cost about EUR 6 billion ($6.62 billion) and were inaugurated in mid-2018 as one of a string of major infrastructure projects in Egypt.
Ayman Soliman, the Egypt sovereign wealth fund’s CEO, said that the acquisition will be part of the fund’s project pipeline into the sector, then an investor would be selected to hold the remaining stake.
Soliman said that six unidentified international investors have expressed interest and negotiations will be arranged by a financial adviser to be selected next week. The deal is expected to be finalized in 2020.
Egypt is emerging from a tough International Monetary Fund-backed program that restored economic growth after uncertainty following the 2011 uprising. The new deal involving the plants could help the country tackle the twin challenges of easing its debt burden and encouraging foreign investment that’s still mostly lacking beyond the oil and gas industries.
The fund aims to partner with the private sector and generate additional wealth from under-utilized state assets that it plans to manage.
The fund will start with paid-in capital of EGP 5 billion ($309 million), EGP 1 billion of which the Egyptian government has transferred and it’s authorized to manage up to EGP 200 billion. The sovereign wealth fund is initially targeting to manage as much as EGP 60 billion of assets, said Soliman.
In May 2019, Egyptian Electricity Minister said that Blackstone Group unit Zarou and Edra Power Holdings of Malaysia had voiced interest in the plants, which have a total capacity of 14.4 gigawatts and are operated by Siemens until 2024.
Two of the plants—in near Cairo and the coastal city of Burullus—were co-built with Orascom Construction, while the third, in Beni Suef, was constructed with Elsewedy Electric. Financing mostly came from a consortium of lenders led by Deutsche Bank, HSBC Holdings and KfW-IPEX Bank, backed by a sovereign guarantee.
After an investor is selected, the fund could establish a joint venture with them to hold the investment. That will be followed by a power-purchasing accord that would let the JV sell the electricity the plants produce to the government, added Soliman.
The long-term plan may involve “offering a stake from the power plants in the Egyptian or an international stock exchange,” said Soliman, who was appointed last month. He previously worked at global asset managers Gemini Holding.
It’s just one of the plans for the fund, which seeks to be a “catalyst of foreign direct investment flow” by creating attractive partnership opportunities via specialized “sub-funds” for areas such as tourism and industry, according to the CEO.
Potential assets include land, buildings, and stakes in state-owned companies, while shares of some assets could be offered on a stock exchange, Soliman said. He cited a “very encouraging” appetite for the plans among local and foreign investors during recent roadshows.
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