Tharwa and Elab to join the Stock Market

For a long time, the activity of petroleum companies in the Egyptian Stock Market was considerably limited; only two petroleum companies have been listed in the stock exchange. However, this will no longer be the case as more petroleum corporations are to join the stock world. Coping with the current plans to expand the petroleum participation rate, the Ministry of Finance revealed its intention to vend its shares in Tharwa Petroleum Co. and the Egyptian Petroleum Co. for Alkyl Benzene Production (Elab)

According to a top official of Tharwa, the Ministry of Finance, holding 40% shares, plans to sell only 20% of its assets whether through an Initial Public Offer (IPO) or to a main investor in association with H.C Co. for the financial and technical evaluation.

Hussein Shukry, CEO of H.C said that the evaluation phase would take up to six months before publicizing the conditions of this assets sale. Shukry highlighted that negotiations took place between his company and the Ministry of Finance to agree on the methodology and the points to be covered in the evaluation report.

Contract to be signed between the two parties within the coming few days, added Shukry.

“There was a severe competition; representing major companies and investment banks to win this deal,” highlighted Shukry. The competitors’ list included Hermes, CI Capital, Ahly Capital and H.C, which (the latter) was chosen by the ministry.

Asked about the scheduled time for this public offering, the top official clarified that no schedule has been determined yet. The stability and conditions of the local and national markets should be studied first to determine the best timing for the asset sale.

Tharwa is jointly owned by the Egyptian General Petroleum Corporation (EGPC), the Egyptian Holding Co. for Natural Gas (EGAS), Ganoub EL-Wadi Holding Co. (Ganope), the Ministry of Finance and the National Bank of Investment. The company is listed under the free zones category.

The head count of Tharwa when first registered counted for $800 million. Currently, the company’s exporting capital is worth $400 million and contributes in three different entities, which are:

  1. Tharwa-Prida: specialized in the maintenance, manufacturing and assembling of drilling rigs
  2. Sino Tharwa: a service company formulated with a reputable Chinese partner SINOPEC, which is one of the leading Chinese companies in the field of drilling. It is a Limited Liability Company between Tharwa and SINOPEC based in Egypt for handling drilling operations in Egypt
  3. The Egyptian Company for Rigs Manufacture

For two years, the idea of a public offering of petroleum companies’ shares to strategic or stock investors has been suspend, till the announcement made by the government earlier this year disclosing the intention to sell 65% of Alexandria Minerals Oil Co. (Amoc) and Sidi Krir Petroleum Companies to a strategic investor and a partial public offerings of the Middle East Oil Refining Co.’s (Midor) shares in the stock exchange. However, no updates were published since then.

As for the Elab partial sale, Al-Naiem Co. for Financial Counselling conducted the required studies of the financial and technical evaluation and represented a report to the ministry incorporating the suitable plans for a public offering.

Elab, located in the Free Zones of Alexandria, is specialized in the production of alkyl benzene, which is the raw material to produce industrial cleansings.

Hesham Tawfik, a Board Member of Al-Naeim emphasized that the group finalized the evaluation stage and a primary price has been determined to start with. However, an investment advisor for Elab is indispensably needed in order to legally activate this public offering and proceed with the IPO stage.

Asked about the evaluation methodology and pricing range, Tawfik refused to reveal any further details concerning Elab’s deal.

Elab’s production capacity is approximately 100 thousand tons a year; out of which 40 thousand tons are locally distributed to satisfy the increasing local demand, while the remaining 60 thousand are directed for exportation. The company generates 600 direct job opportunities

The $450-million investment factor is jointly shared by the petroleum sector, the Ministry of Finance, the National Investment Bank and Royal Co. for Egyptian Chemicals. According to an official in the Ministry, the factory received various high demands from the national and local markets, although it has started the experimental production last August.

Elab is classified as one of the major projects supervised by the Egyptian Petrochemical Holding Co. (Echem) in the context of the currently implemented national petrochemical plan to execute eight projects worth $6 billion. Elab is expected to lure $120 million profit to the country’s treasury, especially that the factory is characterized by its latest production techniques, provided by VOP.

Being established near the petroleum exportation harbour, the factory will be able to fulfil its target to export 75% of its production; count for $500 million.

Amr Al-Iraqi, a financial expert believes that such moves are to revive the stock exchange and will undoubtedly have indirect positive effects; increasing the public offerings will consequently lead to raise the shares’ price.


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