Egypt's New Wealth Fund Eyes Stake in Siemens-Built Power Plants
Egypt's New Wealth Fund Eyes Stake in Siemens-Built Power Plants
(Bloomberg) -- Egypt’s new sovereign wealth fund plans to acquire a stake of about 30% in power plants co-built by Siemens AG with international investors taking the rest, part of its drive to spur greater foreign participation in the Middle East’s fastest-growing economy.
The fund’s initiative is the latest involving the three state-owned plants, which cost about 6 billion euros ($6.62 billion) and were inaugurated in mid-2018 as one of a string of major infrastructure projects in the North African nation under President Abdel-Fattah El-Sisi.
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,” Chief Executive Officer Ayman Soliman said in an interview in Cairo.
He said six unidentified international investors have expressed interest, and negotiations will be arranged by a financial adviser to be selected next week. Soliman expects the pact to be finalized in 2020.
Egypt, the most populous Arab nation, is emerging from a tough International Monetary Fund-backed program that’s 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.
Egypt’s first-ever sovereign fund, which was established last year, is modeled after initiatives in Malaysia and India. 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 5 billion Egyptian pounds ($309 million), 1 billion of which the government has transferred, and it’s authorized to manage up to 200 billion pounds. It’s initially targeting managing as much as 60 billion pounds of assets, some of which it will own, Soliman said.
Electricity Minister Mohamed Shaker said in May that Blackstone Group unit Zarou Ltd. and Edra Power Holdings Sdn Bhd 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 the new administrative capital 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 AG, HSBC Holdings Plc and KfW-IPEX Bank AG, 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’d let the JV sell the electricity the plants produce to the government, said Soliman, who didn’t elaborate on how the fund plans to finance the deal.
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.
To contact the reporter on this story: Mirette Magdy in Cairo at mmagdy1@bloomberg.net
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Michael Gunn, Stefania Bianchi
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