Egypt to press ahead with sale of stakes in state companies — government adviser

Mohamed Metwally, CEO of NI Capital, made the remarks during an interview with Reuters. (Courtesy: NI Capital website)
Updated 18 October 2019

Egypt to press ahead with sale of stakes in state companies — government adviser

  • The government has been talking for years about selling the stakes but has repeatedly postponed the program
  • The government set up NI Capital in late 2015 as a state-owned financial services company to help it navigate financial markets

CAIRO: Egypt is fully committed to its program to sell minority stakes in state companies and is tackling a number of issues that have held it up, a government adviser on the share sales said on Thursday.
The government has been talking for years about selling the stakes but has repeatedly postponed the program, raising doubts among some economists about its commitment to privatization.
“From the meetings I attend on a weekly basis, the government is as keen as I have ever seen them on proceeding with the privatization program,” Mohamed Metwally, CEO of NI Capital, told Reuters.
“There has never been slack on this. It’s just a matter of sometimes you face things that take longer to prepare than expected,” said Metwally in his first interview with the media since taking over as NI Capital’s CEO in July.
The government set up NI Capital in late 2015 as a state-owned financial services company to help it navigate financial markets.
The government announced in 2016 that it was selling company stakes, with some to be sold by the end of that year. Since then it has sold only 4.5% of one company, tobacco monopoly Eastern Company in a transaction in March.
Metwally said the delays had been caused by weak markets, legal hurdles, the readiness of each company’s financial documentation and in the case of some companies a downturn in the business cycle.
Egypt last year released a list of 23 state-controlled companies to be brought to market as an initial batch.
The first sales will be companies already trading on the Egyptian Exchange, most likely Abu Qir Fertilizers and Chemicals Industries and Alexandria Container and Cargo Handling Co., sources familiar with the planned transactions told Reuters.
Metwally, citing reasons of financial compliance, declined to discuss individual companies before they reached the market.
He said stake sales could raise around 40 billion Egyptian pounds, roughly equal to 5% of the stock market’s current capitalization of 750 billion-800 billion pounds.
Among the hurdles bringing companies to market has been a tangle of ownership structures, with different entities requiring different legal processes for selling their assets.
“We had a few transactions that were held up by this process, but now it’s behind us,” Metwally said.
A potential future delay to the Egyptian share sales could be the initial public offering of Saudi Arabia’s state oil company Aramco, which may be announced as early as next week.
“Right now liquidity is being sucked out of the market because of anticipation of the Aramco offering,” Metwally said.
If the Aramco sale raises more than $25 billion, it would make it the world’s biggest IPO.
“Now should it (the Egyptian sales) happen, let’s say, in November, or wait till January or February when the Aramco IPO is out of the way?” he said.
Another stumbling block has been the trade war between China and the United States, which by creating a glut in products sold by some of the companies reduced their prices by 30-40% and temporarily lowered valuations, Metwally said.
He said these issues were all being resolved, paving the way for a possibly rapid roll-out.
“Progress is happening in every single transaction,” he said.
“That might put us in a high-quality problem in the future, in which they’re all ready at the same time, and we’ll just have to schedule them one after the other as part of our capital markets management process.”


Oil recoups losses as OPEC, US Fed see robust economy

Updated 14 November 2019

Oil recoups losses as OPEC, US Fed see robust economy

  • US-China trade deal will help remove ‘dark cloud’ over oil, says Barkindo

LONDON: Oil prices reversed early losses on Wednesday after the Organization of the Petroleum Exporting Countries (OPEC) said it saw no signs of global recession and rival US shale oil production could grow by much less than expected in 2020.

Also supporting prices were comments by US Federal Reserve Chair Jerome Powell, who said the US economy would see a “sustained expansion” with the full impact of recent interest rate cuts still to be felt.

Brent crude futures stood roughly flat at around $62 per barrel by 1450 GMT, having fallen by over 1 percent earlier in the day. US West Texas Intermediate crude was at $56 per barrel, up 20 cents or 0.4 percent.

“The baseline outlook remains favorable,” Powell said.

OPEC Secretary-General Mohammad Barkindo said global economic fundamentals remained strong and that he was still confident that the US and China would reach a trade deal.

“It will almost remove that dark cloud that had engulfed the global economy,” Barkindo said, adding it was too early to discuss the output policy of OPEC’s December meeting.

HIGHLIGHT

  • US oil production likely to grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations.
  • The prospects for ‘US crude exports had turned bleak after shipping rates jumped last month.’

He also said some US companies were now saying US oil production would grow by just 0.3-0.4 million barrels per day next year — or less than half of previous expectations — reducing the risk of an oil glut next year.

US President Donald Trump said on Tuesday Washington and Beijing were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony.

“The expectations of an inventory build in the US and uncertainty over the OPEC+ strategy on output cuts and US/China trade deal are weighing on oil prices,” said analysts at ING, including the head of commodity strategy Warren Patterson.

In the US, crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.

ANZ analysts said the prospects for US crude exports had turned bleak after shipping rates jumped last month.