Egyptian Government Executed ‘Courageous’ Fiscal Reforms – Qalaa

Hisham El-Khazindar, Co-Founder and Managing Director of Qalaa Holdings (formerly Citadel Capital), a leading African investor in infrastructure and industry, joined key policymakers and business leaders to discuss Egypt’s new economic landscape amidst a mood of optimism at the Euromoney Egypt conference, according to the company’s release.
“The Egyptian government has implemented a courageous set of fiscal reforms this year which were a necessary step to rebalance the country’s finances,” said El-Khazindar. “The greatest impact of these measures from our perspective has come from energy reform. The gradual removal of subsidies on petroleum products resulted in pricing that is more in line with international norms. In parallel, the government has also opened the door for the importation of natural gas, coal and coal-like products.”
“These reforms are essentially a validation of our investment thesis. Many of the investments that we made 7 years ago when we were first established as a private equity firm were geared towards the view that Egypt was in the process of becoming a net energy importer rather than a net energy exporter and that this shift would necessitate a re-pricing of energy and the opening up of the energy sector in general,” added El-Khazindar.
As one of the largest investors in Egypt’s crucial energy sector Qalaa Holdings, in partnership with the Egyptian government, is in the process of building the Egyptian Refining Company (ERC), a US$ 3.7 billion greenfield refinery which will come on stream in 2017 to meet Egypt’s deficit in petroleum products particularly diesel. The strategic national project, which is to date the largest project finance deal in Africa, has enjoyed the unwavering support of successive Egyptian administrations since it was merely an idea on the drawing board in 2006.
Qalaa Holdings has undergone a transformation process that has seen it develop from a private equity model to an investment holding company with a focus on the core industries of energy, cement, agrifoods, transportation & logistics, and mining. The new structure gives the company the leeway to hold investments longer and thus create more value for both shareholders and the regional economies in which it invests.
“Earlier this year, as part of our transformation, we increased our capital to EGP 8 billion, expanded our balance sheet and began disposing of non-core assets and investing the proceeds into our core assets,” said El-Khazindar. “Now we are consolidating our subsidiaries in refining, gas distribution, power generation and distribution, dairy farming and cement production. With the larger balance sheet, the cash flows from divestitures and the majority ownership in our core assets, we are able to grow faster in the areas that we had bet on a few years ago.”