By Mahmoud El-Qesas
The Qalaa Holdings Group is working to implement the Suez Canal development project through three of its subsidiaries. The group’s cement subsidiary, ASEC, is acting along with 32 other companies to dig the new canal.
Ahmed Heikal, founder and chairman of Qalaa Holdings, said that his company holds subsidiaries in the transportation and logistics sector, such as Bright Petroleum, which stores and ships petroleum products. The Egyptian government contracted Bright Petroleum to open the first fueling, storage, and handling station on the Suez Canal for a cost of EGP 3bn.
Heikal added that the project would bolster Egypt’s economy and open the way for many investments in various fields. He said his company is interested in any project that will be available to private investors within the Suez project.
He explained that the group’s strategy depended on new investments in the energy sector which it will finance from the proceeds of their non-core investments. The company also intends to increase investment in their river transport, waste, and petroleum subsidiaries.
Heikal added that the volume of investments directed towards the energy sector depends on what the government chooses to sponsor and to whom they award operating licenses. Heikal also pointed out that Qalaa is focusing on all areas of the energy sector, from refining to distribution.
As for agriculture, mining, cement production, and transport, Heikal said that Qalaa is gearing up to restructure their investments in these sectors in the coming years. They also plan to engage in microcredit operation.
Heikal believes that the Egyptian economy is markedly improving and “life is returning to normal.” He claims, “People do not want to demonstrate. They want to eat, drink, learn, and recover.”
He also pointed out that at the same time, a true revival must begin in Egypt in order to resolve problems which impact all industries. Given the clear vision and precise approach of the current regime, real progress is possible despite the grim state of the economy.
With regard to Qalaa’s shareholders, Heikal said, “Our main partner, Citadel Capital Partners, has bought 5 million shares in the company as of our most recent budget disclosure.” He considers this to be a clear indication that they are optimistic about the economic state of Egypt, though they do not wish to expand their involvement at the moment.
Heikal revealed that Qalaa has a great programme in place to increase investment in energy, but governmental approval is still pending.
Regarding gas importation bids, Heikal said, “Importing gas requires the approval of the Minister of Petroleum… this is our third petition, but we have yet to hear anything.”
Heikal believes that Egypt should invest heavily in energy infrastructure in order to pump an additional 7 gigawatts into Egypt’s electrical grid. He pointed out that the cost of a power plant capable of producing 750 megawatts is around $1bn.
He then added that if these investments are presented in a clear legal framework, it will attract many new investors, both foreign and Egyptian alike.
Qalaa’s managing director, Hisham El-Khazindar, explained that the company will pull out of several non-core investment projects over the next four years. This will free up $700m for other investment opportunities in river transportation, energy, food, mining, and cement production.
He went on to say that the company is working towards completing the Egyptian Refining Company (ERC), estimated at a cost of EGP 25bn. Qalaa contributed 15.2% of this total. The project is slated for completion in 2017.
He said that this project would provide for Egypt’s fuel needs and bring buyers back to Egyptian markets, reducing Egypt’s dependence on foreign fuel.
He also pointed out that Qalaa will work to utilise its investments in the river transportation sector and logistics, in which it has invested more than EGP 600m over the last five years.
El-Khazindar cited the advantages provided by the river transport industry, including low costs and greater security, as well as improved environmental impact. This has been aided by the government’s decision to raise fuel prices and reduce the petroleum subsidy, which had distorted Egypt’s transportation infrastructure for years.
This year, Qalaa cut ties with two companies, selling its stake in the Bank of Sudan for $21m, and passing Sphinx Glass to Saudi Arabia’s Construction Products Holding Company for $114m.
The companies Qalaa plans to drop by the end of the year include Qalaa Energy, valued at $100m.
The last quarter of this year will witness Qalaa cutting ties with six other companies in their non-core investment bracket: Djelfa and Zahana (both subsidiaries of ASEC Cement), AAC/AMC (owned by the United Company for Foundries), Dice (a subsidiary of Grandview), and ASEC Engineering and Asenpro (both owned by ASEC Holding). This will net Qalaa $141m, of which $62m will be used to pay off the debts of those companies.
Qalaa expects to also drop four other companies throughout 2015 for a total of $155m. These include Haydelina, a medical company, UCF, an affiliate of the United Company for Foundries, and Smart Village and Nile Logistics, both of Qalaa Holdings.
In 2016, Qalaa plans to sell the Bonyan Company, valued at $75m.
Qalaa expects to see returns worth $475 million from their cooperation with MGM and Wataneya, debt conversions for ASEC Holdings, and loan repayments. The company expects to earn a net revenue of $262m in 2017. Qalaa also expects to pull out of Finance Unlimited, a microfinance company valued at $200m, in 2018.