Egypt to float shares in Suez Canal project
Egypt is relying on the sale of shares to investors to fund its multibillion-dollar Suez Canal Axis Development Project after regulations allowing for initial public offerings for projects under construction were introduced in February.
“This is an iconic IPO,” said Tariq Qaqish, the head of asset management at the Dubai-based investment bank Al Mal Capital. “Long-term investors who look at infrastructure themes will be delighted to access such an IPO if the price is right.”
Egypt’s president, Abdel-Fattah El Sisi, on Tuesday revealed plans to capitalise on the 145-year-old waterway by creating an industry and logistics hub in addition to the digging and construction of a new channel alongside the canal and tunnels for motor vehicles and trains.
The cost is expected to be at least US$4bn.
Five-hundred million shares in the project will be available to investors at a rate of $14 a share for Egyptians and $100 per share for foreigners, Mr El Sisi said at the inauguration of the project on Tuesday.
Egypt’s government in May signalled a policy shift would occur under the administration of Mr El Sisi and that ministries would take advantage of the regulations to raise funds needed for public-sector businesses and new infrastructure through the country’s stock exchange.
The Suez Canal, which the British took full control of in 1886, served as the main trade route connecting the United Kingdom with its colonial possessions in Asia for 80 years. It was renationalised by the government of Gamal Abdul Nasser in 1956.
Nasser’s renationalisation instigated “the Suez crisis”, in which British, French and Israeli forces drew up plans to invade and seize the canal. They were forced to withdraw when roundly criticised by the United States, which threatened to undermine the currencies of Britain and France. The canal remained in the hands of the Suez Canal Authority, owned by the Egyptian government. Today, it generates about $5bn in annual revenue, with about 17,000 ships passing through the channel last year.
The development project is scheduled to be completed in three years, but Mr El Sisi called for the work to the new channel to be finished in a year. It is expected to allow 46 ships to cross per day alongside the 49 ships per day passing through the existing channel.
The Egyptian army and more than 20 Egyptian companies are expected to undertake work on the development plan.
Egyptian stocks were lacklustre in trading yesterday, with the EGX 30 Index edging a mere 0.4 per cent higher to 9047.61 points. The benchmark is up 33.3 per cent so far this year.
“The whole project came as no surprise,” said Wafeek Dawood, the director of institutional sales at Cairo-based Mega Investments Securities. “It’s been in the headlines for some time.”
Another Cairo trader who spoke on condition of anonymity said the news was already priced in.
“It’s very early to judge its outcomes,” the trader said. “Usually the market reacts to news that will have immediate effect. We have heard about developing the Suez Canal ever since El Sisi came to power.”
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Updated: August 6, 2014 04:00 AM