The Ministry of Petroleum is considering issuing shares in the petrol refinery company MIDOR to the public on the Egyptian Stock Exchange. Al-Borsa newspaper sources have also revealed that the Ministry of Petroleum estimates profits will range between $1 billion and $1.5 billion as a result of the IPO.
The financial advisor who will oversee the IPO and the investment bank that will handle the finances are expected to be selected soon, with the IPO scheduled to take place early next year. However, this will only happen if the Egyptian cabinet approves the IPO.
The Ministry of Petroleum plans to publicly issue 20% of the company shares in order to provide liquidity. This will be done in keeping with the policy of recycling petroleum sector assets and hopefully will help lift the sector out of the funding crisis which has stymied investments and repelled foreign partners.
Arrears owed to foreign partners in the petroleum sector currently stand at around $6.2 billion. The Government recently pledged to pay $1 billion during the current month and will develop several alternative solutions. The UAE proposed tapping into the financial surpluses of the SUMED petrol company, of which Saudi Arabia, Kuwait and Qatar own 50% and Egypt the other 50%, and which made $130 million in profits last year. Proceeds from the IPO would be directly diverted to paying off the arrears owed to foreign partners.
Sources said that in 2008, a specialized British firm valued MIDOR, which has $1.1 billion in capital, at about $6.4 billion, provided that that no investor gained a controlling stake and sales on the Egyptian Stock Exchange through an IPO were limited. The General Authority for Petroleum holds 78% of MIDOR’s shares with Petrojet, Enppi and Suez Canal Bank holding 10%, 10%, and 2%, respectively.
MIDOR was founded in 1994 with $930 million in capital distributed across 930,000 shares, with a nominal value of $1000 per share. In 2003 it was operating at an annual capacity of five million tons, refining 100,000 tons daily.
MIDOR realised profits of $8.8 million in 2003, $92 million in 2004, peaking at $327 million in 2008, before decreasing to $118 million last year.
Omar Radwan, HC’s director of Asset Management, said that now was the time for IPOs following the market’s recovery and the optimistic mood amongst investors and speculators. Radwan said that the MIDOR IPO was a simple solution for resolving the funding problem that had been dogging the Government and that it would also help repay a large portion of the sector’s debts to foreign corporations.
He continued by saying that the valuation of IPO and the incentives for investors would not be determined until the time of the offering. However the market indicates that incentives may be superfluous due to the market›s demand for large and successful proposals. Beltone predicts petrochemical profit multipliers will expand 8-fold in 2013, which is less than the profit multipliers in the rest of Egypt’s sectors. The petrochemical sector is represented on the Egyptian Stock Exchange by Sidi Kerir Petrochemical, AMOC, Financial and Industrial, and Abu Qir Fertilizers.