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Fitch Egypt Infrastructure Report - 2022-12-20

The document is a quarterly infrastructure report on Egypt from Fitch Solutions that includes the following key points: - Egypt's construction sector is forecast to grow 11% in 2022 and 9% in 2023, supported by large infrastructure projects, but growth is expected to slow to an average of 7.7% between 2024-2031 as government debt limits public spending. - Private investment is expected to remain strong in infrastructure and building and curb the impact of lower public spending. - Recent infrastructure projects signed or underway include several large solar and wind power plants.

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0% found this document useful (0 votes)

273 views53 pages

Fitch Egypt Infrastructure Report - 2022-12-20

Uploaded by

Mansour Mashhour

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Q1 2023
www.fitchsolutions.com

Egypt
Infr
Infras
astructur
tructure
eRReport
eport
Includes 10-year forecasts to 2031
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Contents
Key View............................................................................................................................................................................................ 4

SWOT .................................................................................................................................................................................................. 6
Infrastructure SWOT.................................................................................................................................................................................................................... 6

Industry Forecast........................................................................................................................................................................... 7
Construction And Infrastructure Forecast Scenario ...................................................................................................................................................... 7
Transport Infrastructure...........................................................................................................................................................................................................13
Energy & Utilities Infrastructure ...........................................................................................................................................................................................21
Residential/Non-Residential Building................................................................................................................................................................................27

Industry Risk/Reward Index ....................................................................................................................................................30

Egypt Infrastructure Risk/Reward Index ...........................................................................................................................................................................30
Middle East And North Africa Infrastructure Risk/Reward Index: Solid Long-Term Rewards Prospects.................................................32

Competitive Landscape.............................................................................................................................................................40

Company Profile...........................................................................................................................................................................44
Arab Contractors ........................................................................................................................................................................................................................44
Orascom Construction Industries .......................................................................................................................................................................................46

Infrastructure Methodology ....................................................................................................................................................48

All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.

All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2022 Fitch
Solutions Group Limited.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Key View
Key View: We forecast Egypt's construction sector to grow by 11.0% y-o-y in 2022, followed by 9.0% y-o-y growth in 2023. Near-
term growth will be supported by large-scale infrastructure projects. In the medium-to-long term, we expect growth in Egypt's
construction industry to slow, as the government's high debt load limits public infrastructure investment. Accordingly, we forecast
annual construction industry growth to average 7.7% between 2024 and 2031. Despite a slowdown in government capital
expenditure, we expect private investment in Egypt's infrastructure and building sectors to remain forthcoming and to curb the
impact of lower public spending in the country's construction sector. The government has undertaken business reforms and
continues to expand its divestiture plans, which underpins our view that the government will secure an agreement with the IMF.
These steps, including an IMF programme, will support investor sentiment in Egypt.

Key Forecasts And Latest Updates

• We forecast Egypt's construction sector to grow by 11.0% y-o-y in 2022, followed by 9.0% y-o-y growth in 2023. Near-term
growth will be supported by large-scale infrastructure projects.
• In the medium-to-long term, we expect growth in Egypt's construction industry to slow, as the government's high debt load
limits public infrastructure investment. We forecast annual construction industry growth to average 7.7% between 2024 and
2031.
• In December 2022, China Energy Engineering Corporation (CEEC) reported that a joint venture with Energy China signed a
contract for works on Abydos Solar Power's 500MW solar PV power plant in Aswan Governorate, Egypt. The project scope
includes the design, procurement, construction, operation and maintenance of the PV power plant. Construction is planned to
start in Q123, with overall construction due to be complete in 19 months.
• In December 2022, Voltalia and TAQA Arabia signed a memorandum of understanding (MoU) with the Government of Egypt
to develop, finance and operate a green hydrogen production complex. Initially, the complex will feature a 100MW electrolyser
supported with 283MW of renewable power. The proposed green hydrogen production facility, which will come up on a
greenfield site near Ain Sokhna port in the Suez Canal Economic Zone, will produce 15,000 tonnes of green hydrogen per
annum (tpa). The facility will be expanded to 150,000tpa of green hydrogen with an electrolyser capacity of up to 1GW supplied
by an aggregate of 2.7GW of solar and wind power.
• In December 2022, Dubai-based AMEA Power achieved financial close to deliver wind and solar projects worth USD1.1bn in
Egypt. AMEA Power will develop, own and operate a 500MW solar PV plant which will be located in the Aswan governorate.
The International Finance Corporation (IFC), Dutch Entrepreneurial Development Bank FMO and the Japan
International Cooperation Agency are financing the project. The 500MW wind farm, located in the Red Sea governorate, is
being developed in partnership with Sumitomo. A consortium of banks, including the Japan Bank for International
Cooperation, the IFC, Standard Chartered Bank, Commercial International Bank, Sumitomo Mitsui
Banking and Sumitomo Mitsui Trust Bank. The Egyptian Electricity Transmission Company will purchase power from
the facilities.
• In December 2022, Honeywell signed an MoU with Environ Adapt for Recycling Industries to develop a chemical recycling
facility in Egypt. The proposed facility will be able to convert plastic waste into valuable recycled polymer feedstock. Under the
MoU, Environ will conduct a feasibility study to explore trends, feedstock availability, potential markets and technical studies
along with the overall project schedule, financial modelling and analysis, while Honeywell will provide technical and commercial
information along with analysis and broader project support.
• In November 2022, Russia-based Rosatom started construction for the 1.2GW second unit of 4.8GW El Dabaa nuclear power
plant in the Matrouh governorate of Egypt. The nuclear plant will feature four VVER-1200 units with capacity of 1.2GW each.
Rosatom secured approval for the second unit from the Egyptian Nuclear and Radiological Regulatory Authority. Construction
for the third and fourth unit is likely to start in 2023. The nuclear plant is expected to be fully operational by 2030.
• In November 2022, Wadi Degla Developments unveiled plans for the construction of a EGP1.5bn (USD61.2mn) residential
project in Cairo, Egypt. The Club Town project will come up on 283,279.95sq m area in New Degla, Maadi. It will feature 550
residential units and a commercial space. The project will be executed in three phases with the first phase, named Breeze,
scheduled for delivery between 2024 and 2026.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Egypt Infrastructure Report | Q1 2023

INFRASTRUCTURE - CONSTRUCTION INDUSTRY FORECASTS (EGYPT 2021-2031)

Indicator 2021 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f

Construction industry value, EGPbn 429.2 542.5 650.6 752.4 869.3 1,002.1 1,154.3 1,329.0 1,529.6 1,760.1 2,024.8

Construction industry value, real growth,

6.8 11.0 9.0 8.1 8.0 7.7 7.7 7.6 7.6 7.5 7.5
% y-o-y

Construction industry value, % of GDP 6.4 6.9 7.1 7.2 7.5 7.8 8.1 8.4 8.7 9.0 9.3
f = Fitch Solutions forecast. Source: UN, Fitch Solutions

Risk/Reward Index

• Egypt currently ranks sixth regionally and 25th globally on our Infrastructure Risk/Reward Index. Egypt’s score of 59.9 is well
above the regional and global averages of 51.4 and 50.0 respectively. However, key challenges remain regarding the legal
environment, the labour market and the country's ability to complete large announced projects, which will continue to weigh on
its score.

INFRASTRUCTURE RISK/REWARD INDEX (EGYPT 2020)

Geography Risk/Reward Index Rewards Industry Rewards Country Rewards Risks Industry Risks Country Risks

Egypt 60.9 75.0 84.8 60.2 39.8 41.1 38.5

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Infrastructure Risk/Reward Index

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SWOT
Infrastructure SWOT
Strengths Weaknesses
• Strong future domestic demand for infrastructure owing to a • Uncertainty over the security situation will affect investor
young and growing population. sentiment towards the country.
• Emerging public-private partnership (PPP) market, with new • Legal grey area with land ownership and the process by which it
laws improving procurement and legislation. is awarded.
• Several strong domestic construction companies, with high • High levels of corruption, particularly relating to public sector
levels of technical ability. tenders.
• A sizeable project pipeline creates numerous investment • Weaknesses in power sector could impact delivery of
opportunities. construction projects.
• Major tourism sector driving demand for transport and tourism-
related infrastructure (subject to political and security stability).

Opportunities Threats
• Strong demand for housing, increasing population and • Inflation is expected to rise and the purchasing power of
urbanisation have resulted in the government undertaking Egyptians will be curtailed in the coming years, setting the
major urban planning programmes. stage for potential unrest.
• Loans from the UAE, Saudi Arabia, Qatar and the IMF will help • The country's security situation remains precarious, with
provide liquidity for infrastructure projects. terrorist attacks a key risk.
• The US and the European Bank for Reconstruction and • Continued political instability in the Middle East could act as a
Development have offered financial support (loans and loan destabilising force for the economy, with particularly negative
guarantees) for infrastructure projects, including financing to consequences for tourism.
help support PPPs.
• The government's use of special economic zones will pay
construction dividends by further incentivising foreign
investment.

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Industry Forecast
Construction And Infrastructure Forecast Scenario
Key View: We forecast Egypt's construction sector to grow by 11.0% y-o-y in 2022, followed by 9.0% y-o-y growth in 2023. Near-
term growth will be supported by large-scale infrastructure projects. In the medium-to-long term, we expect growth in Egypt's
construction industry to slow, as the government's high debt load limits public infrastructure investment. Accordingly, we forecast
annual construction industry growth to average 7.7% between 2024 and 2031. Despite a slowdown in government capital
expenditure, we expect private investment in Egypt's infrastructure and building sectors to remain forthcoming and curb the impact
of lower public spending in the country's construction sector. The government has undertaken business reforms and continues to
expand its divestiture plans, which underpins our view that the government will secure an agreement with the IMF. These steps,
including an IMF programme, will support investor sentiment in Egypt.

Latest Developments

• In December 2022, China Energy Engineering Corporation (CEEC) reported that a joint venture with Energy China signed a
contract for works on Abydos Solar Power's 500MW solar PV power plant in Aswan Governorate, Egypt. The project scope
includes the design, procurement, construction, operation and maintenance of the PV power plant. Construction is planned to
start in Q123, with overall construction due to be complete in 19 months.
• In December 2022, Voltalia and TAQA Arabia signed a memorandum of understanding (MoU) with the Government of Egypt
to develop, finance and operate a green hydrogen production complex. Initially, the complex will feature a 100MW electrolyser
supported with 283MW of renewable power. The proposed green hydrogen production facility, which will come up on a
greenfield site near Ain Sokhna port in the Suez Canal Economic Zone, will produce 15,000 tonnes of green hydrogen per
annum (tpa). The facility will be expanded to 150,000tpa of green hydrogen with an electrolyser capacity of up to 1GW supplied
by an aggregate of 2.7GW of solar and wind power.
• In December 2022, Dubai-based AMEA Power achieved financial close to deliver wind and solar projects worth USD1.1bn in
Egypt. AMEA Power will develop, own and operate a 500MW solar PV plant which will be located in the Aswan governorate. The
International Finance Corporation (IFC), Dutch Entrepreneurial Development Bank FMO and the Japan International
Cooperation Agency are financing the project. The 500MW wind farm, located in the Red Sea governorate, is being developed
in partnership with Sumitomo. A consortium of banks, including the Japan Bank for International
Cooperation, the IFC, Standard Chartered Bank, Commercial International Bank, Sumitomo Mitsui
Banking and Sumitomo Mitsui Trust Bank. The Egyptian Electricity Transmission Company will purchase power from
the facilities.
• In December 2022, Honeywell signed an MoU with Environ Adapt for Recycling Industries to develop a chemical recycling
facility in Egypt. The proposed facility will be able to convert plastic waste into valuable recycled polymer feedstock. Under the
MoU, Environ will conduct a feasibility study to explore trends, feedstock availability, potential markets and technical studies
along with the overall project schedule, financial modelling and analysis, while Honeywell will provide technical and commercial
information along with analysis and broader project support.
• In November 2022, Russia-based Rosatom started construction for the 1.2GW second unit of 4.8GW El Dabaa nuclear power
plant in the Matrouh governorate of Egypt. The nuclear plant will feature four VVER-1200 units with capacity of 1.2GW each.
Rosatom secured approval for the second unit from the Egyptian Nuclear and Radiological Regulatory Authority. Construction
for the third and fourth unit is likely to start in 2023. The nuclear plant is expected to be fully operational by 2030.
• In November 2022, Wadi Degla Developments unveiled plans for the construction of a EGP1.5bn (USD61.2mn) residential
project in Cairo, Egypt. The Club Town project will come up on 283,279.95sq m area in New Degla, Maadi. It will feature 550
residential units and a commercial space. The project will be executed in three phases with the first phase, named Breeze,
scheduled for delivery between 2024 and 2026.

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CONSTRUCTION AND INFRASTRUCTURE INDUSTRY DATA (EGYPT 2021-2031)

Indicator 2021 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f

Construction industry value, EGPbn 429.2 542.5 650.6 752.4 869.3 1,002.1 1,154.3 1,329.0 1,529.6 1,760.1 2,024.8

Construction industry value, real growth,

6.8 11.0 9.0 8.1 8.0 7.7 7.7 7.6 7.6 7.5 7.5
% y-o-y

Construction industry value, % of GDP 6.4 6.9 7.1 7.2 7.5 7.8 8.1 8.4 8.7 9.0 9.3
f = Fitch Solutions forecast. Source: National sources, Fitch Solutions

Structural Trends

We forecast Egypt's construction sector to grow by 11.0% y-o-y in 2022, followed by 9.0% y-o-y growth in 2023. Near-term growth
will be supported by large-scale infrastructure projects, including the USD4.5bn Ain-Sokhna-Marsa Matrouh High Speed Rail project.
In the medium-to-long term, we expect growth in Egypt's construction industry to slow, as the government's high debt load limits
public infrastructure investment. We forecast annual construction industry growth to average 7.7% between 2024 and 2031.
Despite a slowdown in government capital expenditure, we expect private investment in Egypt's infrastructure and building sectors
to remain forthcoming and curb the impact of lower public spending in the country's construction sector. The government has
undertaken business reforms and continues to expand its divestiture plans, which underpin our view that the government will
secure an agreement with the IMF. These steps, including an IMF programme, will support investor sentiment in Egypt.

Growth To Outperform Despite Shutdown

Egypt & MENA - Construction Industry Value, Real Growth, % chg y-o-y (2019-2031)

f = Fitch Solutions forecast. Source: UN, Fitch Solutions

Our positive view on the sector is informed by strong underlying factors, including rising demand for infrastructure from an
expanding economy and population, government commitment to infrastructure funding and the greater adoption of public-private
partnership (PPP) financing frameworks. Pressure that a growing urban population place on Egypt's existing transport and energy
infrastructure will continue to necessitate a need to address the country's historical infrastructure deficit via fresh investment. The
government is committed to meeting pressing infrastructure needs through providing financial support for key projects.

The government acknowledges the need for private investment to assist with financing efforts, particularly where the state is unable
to provide sufficient support. Egypt will see a greater role for private capital, especially under the PPP framework managed by the
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Ministry of Finance. This has been successful in improving transparency in the tendering process, which has translated into greater
certainty for investors and a rise in business sentiment.

We expect President Abdel Fattah el-Sisi's commitment to structural reform to persist, which will serve to buoy private sector
sentiment towards Egypt's infrastructure sector. The president has demonstrated commitment to his government's USD12.0bn IMF
programme in 2017, as illustrated by the IMF's favourable evaluation of progress to date in December 2017. The government has
made increasing private sector investment in infrastructure a key policy goal.

We expect macroeconomic stability and the broader improvement in private sector sentiment to translate into heightened PPP
activity in Egypt, which possesses one of the more robust PPP regulatory frameworks in the region. The PPP Central Unit (an agency
within the Ministry of Finance charged with guaranteeing the transparency of the tendering process and coordinating funding and
partner selection across the government) will be central to the continued success of the country's PPP model. The 2010
Concession Law governing various stages of PPP delivery will also play a central role.

We also expect larger involvement of the private sector through PPPs to carry out large infrastructure projects, owing to the
government's efforts towards fiscal consolidation. Our Country Risk team forecasts that Egypt will report a budget deficit of -6.1% of
GDP in 2021/2022. This compares favourably to the 2020/2021 (which started July 1 2020 and ends June 30 2021) budget deficit
of -7.3% and marks the continuation of Egypt’s multi-year trend of narrowing its fiscal deficits.

Risks to our outlook remain, as the emergence of new, highly-transmissible Covid-19 variants could cause construction activity to
decelerate significantly if mobility restrictions are imposed. While Egypt’s vaccination campaign was slow in H121, the process
accelerated after Mainland China's Sinovac began producing vaccines in Egypt in August 2021, and the government increased its
procurement efforts. The vaccination rate rose from about 3.4% at the end of June 2021 to 38.5% in September 2022. Other risks
include supply chain disruptions, and elevated shipping and transportation costs, increasing the risk of project delays.

Egypt Fiscal Deficit To Continue Narrowing Trend

Egypt - Fiscal Balance By Component (2012-2023)

f = Fitch Solutions forecast. Source: CBE, Fitch Solutions

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SEZ Embrace To Yield Construction Dividends

The rise in investment in manufacturing industries and key infrastructure projects through the development of special economic
zones (SEZs) is one emerging area of investment for the country. Infrastructure development continues to gain traction. Egypt
established an economic area in the Suez Canal Zone (SCZone), with business-friendly regulations such as more liberal and efficient
administration, tax incentives, the facilitation of registration and customs procedures, as well as better infrastructure.

The SCZone has four unique zones and six strategically located ports. The four zones are:

• Ain Sokhna, set aside for heavy industry and renewable energy manufacturing (being near Egypt's windiest region)
• East Port Said, allocated to light industry and logistics
• Qantara West, a coastal area reserved for logistics
• East Ismailia, targeted at agri-business, textiles and ICT industries

The main incentives include:

• reduced income tax rates for businesses and individuals

• one-stop shop for completing bureaucratic procedures
• special customs services
• proximity to ports

Suez Canal To Be Infrastructure Investment Catalyst

Egypt - Suez Canal Economic Zone

Note: Blue zones denote development free zones. Source: Fitch Solutions

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The announcement that DP World will develop an integrated industrial zone within Egypt's SCZone will support our positive
construction sector outlook for the country and highlights the increasing proliferation of SEZs throughout the Middle East and
North Africa region as a means of stimulating infrastructure investment. The industrial zone will host light- and medium-sized
industries, ranging from medical devices to food processing. The zone will aim to provide an international hub for manufacturers,
providing access to European and African markets.

The announcement that DP World will commission an SEZ at Sokhna aligns with the broader infrastructure development strategy of
the Egyptian government, which has designated the area surrounding the Suez Canal as an investment focus. DP World's planned
SEZ will form a component of the wider SCZone, which pairs logistics infrastructure and access to one of the world's premier
maritime trade routes with business-friendly policies in an effort to entice global companies to establish operations there. We have
already seen this policy begin to be productive, with Russia-based companies pledging USD4.6bn out to 2035 in a designated
economic zone in Port Said. The participation of DP World in further building out the SCZone solidifies our already positive
outlook regarding its ability to attract the hoped for levels of capital investment. DP World is a market leader in the development of
similar zones around the world, most notably in emerging markets (such as Azerbaijan, Kazakhstan, Rwanda and Somalia).

The hydrocarbons and petrochemical sector remains an important area of the economy and there is considerable activity from
multinational oil majors in the domestic industry. This industry will also support industrial construction, as shown by recent
developments regarding petrochemical facilities in the SCZone. Egypt's state-run Red Sea National Refining and
Petrochemical Company signed an agreement with the SCZone's development company for the construction of a new
petrochemical complex in Egypt. The estimated investment for the project is USD7.5bn. The complex will come up on a 3.6sq km
area in the Ain Sokhna industrial zone. The facility will produce polyethylene, polypropylene, polyester, bunker fuel as well as other
petroleum and chemical products.

Anchorage Investments has awarded a contract to Lummus Novolen Technology to provide Novolen gas-
phase polypropylene technology for a polypropylene unit at Anchor Benitoite's proposed USD2.0bn petrochemical complex in
Suez, Egypt. Lummus will also provide basic engineering design, training, catalyst supply and other services for the unit. The
polypropylene unit is expected to produce 590,000 tonnes of polypropylene per annum. Honeywell UOP also secured a
contract at Anchor Benitoite's petrochemical complex to provide its proprietary C3 Oleflex technology for a propane
dehydrogenation (PDH) unit. Honeywell will also provide basic engineering design, equipment, catalysts, adsorbents and other
unidentified services for the unit. The PDH unit is likely to produce 750,000 tonnes of propane per annum. The complex will feature
five main units to provide 1.8mn tonnes of petrochemical products per annum.

Egypt-Ethiopia Tensions Over GERD Will Increase Need Of Water Infrastructure

We expect tensions between Egypt, Ethiopia and Sudan over the Grand Ethiopian Renaissance Dam (GERD) to continue to rise in
the months ahead, highlighting Egypt's need for water infrastructure investment in the medium term. The dispute dates back to
2011, when Ethiopia announced the construction of a dam on the Blue Nile River to supply electricity to its population. The
proposal received pushback from Cairo as the country fears that the dam would reduce the volume of water flowing into Egypt,
potentially lowering its agricultural output. Attempts to relaunch talks have proved unsuccessful amid disagreements on the pace of
filling the dam and the type of resolution. Egypt and Sudan would prefer a binding contract recognised by international law, while
Ethiopia would rather opt for a more flexible compromise between the parties.

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GERD Dispute Risks Involving Whole Region

Map Of Nile River Basin

Source: Atlantic Council, Fitch Solutions

In 2020, Abdel Fattah el-Sisi announced a series of measures aimed at maximising water usage and reducing water waste, as well as
the construction of desalination plants. This should help reduce Egypt’s water supply needs, thus mitigating water insecurity fears
due to GERD and allowing Cairo to compromise more as time passes. Egypt proposed linking its power grid lines to Ethiopia through
Sudan, which will likely be part of a larger deal package to help resolve the issue diplomatically. The project would provide Sudan
with cheaper power, while allowing Ethiopia to export power to Europe through Egypt and the EuroAfrican Interconnector project.
This will further strengthen Egypt's role as a strategic intercontinental energy provider.

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Transport Infrastructure
Key View: Egypt's transport sector will largely contribute to the construction industry's strong growth in the coming years, as the
government invests in internal mobility projects to accommodate the needs of a growing and increasingly urban population. Rail
infrastructure will remain the primary driver of transport infrastructure growth in Egypt, including construction of the USD4.5bn Ain-
Sokhna - Marsa Matrouh High-Speed Rail project. Throughout the decade, we expect robust investment in Egypt’s container port
infrastructure to increase container handling capacity at the Mediterranean and Red Sea ports, as the government aims to improve
Egypt’s position as a transshipment hub. We anticipate significant investment in container terminal infrastructure across all of
Egypt’s key Mediterranean ports, benefitting both Egypt’s transshipment hub status and the country’s trade. Investment in Red Sea
port infrastructure will likely reduce pressure on Egypt’s Mediterranean container port infrastructure, supported by UAE-based port
operators’ expansion in the region.

Latest Developments

• In November 2022, Alstom signed a framework agreement with the National Authority of Tunnels of Egypt to design, build and
maintain the Cairo Metro line 6. The 35km-long driverless metro will feature 27 stations (12 underground). Under the agreement,
Alstom will supply signalling systems, telecom systems, traction, power supply, high voltage substation, depot equipment, depot
design, track work, third rail and automatic fare collection along with providing rolling stock and 294 metropolis cars. It will also
be responsible for maintenance work on the metro line.
• In October 2022, the European Bank for Reconstruction and Development (EBRD) agreed to provide up to EUR40.0mn
(USD38.8mn) in a sovereign loan to Egyptian National Railways to support the EUR220.0mn (USD213.4mn) 10th Ramadan
Railway Link in Egypt. The loan will partially finance the supply and installation of the railway tracks and signalling and
telecommunication systems of the Robeiky – 10th of Ramadan – Belbeis freight line. The remaining section of the project is
likely to be financed by another financial institution via a sovereign loan, while the Government of Egypt will fund the project's
civil works.
• In August 2022, the Suez Canal Authority signed a USD500mn contract with Denmark-based Maersk to build a berth at the
East Port Said Port in Egypt. The project will include the construction of a 1km-long dock near the existing 500m quay at the
Suez Canal container terminal.
• In July 2022, European Investment Bank (EIB) representatives attended the inauguration of the new Adly Mansour Station as part
of Metro Line 3 in Cairo, Egypt. The overall railway line project is supported by EUR600mn (USD626mn) in financing from the EIB,
EUR300mn (USD313mn) in financing from the French Development Agency and a EUR43mn (USD44.8mn) grant from the EU.
The railway line will serve more than 20mn residents of Cairo.
• In May 2022, the Egyptian Cabinet approved a EUR51.5mn (USD53.8mn) agreement between the National Railways Authority of
Egypt and the Export-Import Bank of Korea for the country's 224km Luxor-high dam line upgradation project. The scope of work
includes adding new passenger cars, lines and stations, locomotives, level crossings, modernising the signalling system, and
inspecting old trains, as well as establishing control towers and installing inspection cameras. The South Korean government,
which has declared Egypt to be an official development assistance priority partner country over 2021-2025, is also expected to
provide financial support for Phase II of the project.
• In May 2022, the consortium of Eurogate, Hapag-Lloyd and Contship Italia signed an agreement with Damietta Port
Authority to invest USD500.0mn in the development of Phase I of the EGP4.5bn (USD244.8mn) Tahya Misr 1 project in Egypt.
The project, developed by Arab Contractors and Archirodon, will increase container handling capacity at the port from
46.2mn cu m to 181mn cu m. The scope of work includes construction, management, operation and maintenance for the
project. Completion for the project is scheduled in December 2022.

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Structural Trends

Rail infrastructure will remain the primary driver of transport infrastructure growth in Egypt, given the need to diversify the transport
network to rely less on an already congested road network. Throughout the decade, we also expect robust investment in Egypt’s
container port infrastructure to increase container handling capacity at the Mediterranean and Red Sea ports, as the government
aims to improve Egypt’s position as a transshipment hub. We anticipate significant investment in container terminal infrastructure
across all of Egypt’s key Mediterranean ports, benefitting Egypt’s transshipment hub status and the country’s trade. Investment in
Red Sea port infrastructure will likely reduce pressure on Egypt’s Mediterranean container port infrastructure, supported by UAE-
based port operators’ expansion in the region. In addition to the government’s pursuit of greater transshipment, we expect that a
positive long-term outlook for containerised exports, as well as imports, will support investment in Egypt’s container port
infrastructure.

Ports

Throughout the decade, we expect robust investment in Egypt’s container port infrastructure to increase container
handling capacity at the Mediterranean and Red Sea ports, as the government aims to improve Egypt’s position as a
transshipment hub. In terms of container ship calls, Egypt currently lags behind other Mediterranean markets with major
transshipment ports, such as Spain, Italy, Morocco and France. Investment will likely be focused on expanding existing
Mediterranean container port infrastructure at Dekheila, Abu Quir, and Said - Egypt’s key transshipment port. We also expect
increased development of container handling infrastructure in the Gulf of Suez and the Red Sea, diversifying Egypt’s container
transshipment capacity and reducing pressure on the Mediterranean facilities. Egypt will benefit from UAE-based port operators’
plans to expand within the region.

Egypt Lags Behind Mediterranean Transshipment Hubs

Selected Markets - Container Ship Calls & Avg. Capacity, TEU (H221)

Source: UNCTADstat, Fitch Solutions

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Container Terminal Infrastructure Investments Across Key Mediterranean Ports

We expect significant investment in container terminal infrastructure across all of Egypt’s key Mediterranean ports,
benefitting Egypt’s transshipment hub status and the country’s trade. At Egypt’s Mediterranean ports, we expect
investment in the near-to-medium term in Dekheila Port, neighbouring the Alexandria Port, as well as the East Port Said Port. In
August 2022, Hutchison Ports and MSC-owned Terminal Investment initiated agreements for a concession to develop and
operate a new container port terminal at Dekheila Port. Dekheila currently counts one four-berth container terminal and a
multipurpose terminal that receives a majority of container ships. In 2020, Hutchison Ports signed a long-term agreement to
develop and operate a new container terminal at Abu Qir Port, involving an investment of USD730mn. In August 2022, APM
Terminals agreed to invest USD500mn in the expansion of its Suez Canal Container Terminal at the East Port Said Port. The port
hosts Egypt’s key container transshipment infrastructure. In June 2022, Hapag-Lloyd announced that it would develop a second
container terminal at Damietta Port, with operations expected to start in 2024.

Investment In Suez Gulf And Red Sea Infrastructure To Diversify Container Capacity

Investment in Red Sea port infrastructure will likely reduce pressure on Egypt’s Mediterranean container port
infrastructure, supported by UAE-based port operators’ expansion in the region. In August 2022, a joint venture between
Hutchison Ports and COSCO signed an agreement to develop and operate a new container terminal at Ain Sokhna Port, which
currently hosts one container terminal. Ain Sokhna has been one focus of a UAE-driven push for investment in port infrastructure in
the Red Sea and Gulf of Suez. In March 2022, Abu Dhabi (AD) Ports and the Egypt-based Group for Multipurpose
Terminals agreed that AD Ports would study the operations of Ain Sokhna Port with a view towards the development of additional
infrastructure. In October 2021, Dubai Ports World suggested significant long-term expansion plans for the port, as the company
already operates Ain Sokhna’s existing container terminal. In May 2022, AD Ports agreed to develop, operate and mange a
multipurpose terminal at Safaga Port, and, in September 2022, the company completed the acquisition of a majority stake in
Adabiya Port’s container operator.

Largest Share Of Port Traffic From Container Ships

Egypt - Port Calls By Vessel Type (H221)

Source: UNCTADstat, Fitch Solutions

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We expect that a positive long-term outlook for containerised exports, as well as imports, will support investment in
Egypt’s container port infrastructure. Despite near-term economic challenges, we expect that the government’s plan to
increase the country’s manufacturing capacity, plans to curb population growth, and a more flexible exchange rate regime pose
upsides for long-term export growth. We expect that robust long-term economic growth, forecast to average 4.0% y-o-y between
2026 and 2031, will benefit demand for imports.

Rail

We hold a positive view on the realisation of the Ain-Sokhna - Marsa Matrouh HSR project following the USD4.5bn signed contract
between the Egyptian National Tunnels Authority (NAT) and a consortium comprising Siemens Mobility, Orascom
Construction and Arab Contractors. The project consists of a 660km mainline and freight rail line connecting Ain-Sokhna, on the
Red Sea, and the Mediterranean cities of Alexandria and Marsa Matrouh. The project will be executed under a engineering,
procurement and construction, and finance contract, in which the consortium will be in charge of the design, installation,
commissioning and maintenance of the line for 15 years. It also covers the structuring and financial arrangement for the project.

This type of contract bodes well for the implementation of the project as it will facilitate the financial closure, which is expected to be
in 2022. Some of the risks faced at this stage of the project life cycle are related to difficulties securing financing. Egypt has a track
record of announcing large-scale infrastructure investments that ultimately have been left unrealised. Egypt scores 42.8 out of 100
for Financing in our Projects Risk Index, below the global average of 53.9 and the Middle East and North Africa (MENA) average 49.0

High-Speed Rail Line To Connect Red Sea With Mediterranean

Egypt - High-Speed Rail Planned Network

Source: © OpenStreetMap contributors, Fitch Solutions

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The advancement of the project will likely encourage further development of the Egyptian government’s plans to build a HSR
network, with the potential for additional projects to advance over the coming decade also posing upside risk to our outlook for
Egypt’s rail sector. The Ain-Sokhna - Marsa Matrouh HSR project was the first contract signed following the conclusion of a MoU
signed by the consortium and the NAT in January 2021 to develop the entire HSR network, covering a total of 1,800km. In addition
to the project, the government is also planning to advance the USD9.8bn Alexandria-Cairo-Aswan HSR line, which envisages close
to 1,000km of track between the cities, and the USD4.3bn Hurghada-Luxor HSR line, which would encompass 300km of track. Both
projects are currently at the planning stage, with the consortium and NAT agreeing to discuss and finalise arrangements regarding
system integration, rail infrastructure and rolling stock.

Rail Assumes Dominant Role In Transport Infrastructure

Egypt - Transport Infrastructure Value By Sub-Sector, USDbn

Source: Fitch Solutions Infrastructure Key Projects Database

Roads

Although roads and bridges account for a relatively small fraction of project activity in Egypt's transport sector, we see significant
scope for future growth in the sub-sector on the back of Egypt's National Roads Project, which aims to construct 39 new roadways
throughout the country with a total length of 4,400km. There are 15 major road projects logged in our Infrastructure Key Projects
Database (KPD), with a combined value of USD4bn, indicating that there are contract opportunities to be had in the road sector.

Egypt plans to start building the third stage of its national road project. The third phase, estimated to cost USD524.3mn, involves
improving routes and building roads totalling 1,154km. The under-construction 400km link between Cairo and Assiut will be a
priority and a 37km link road will also be built alongside the Cairo-Suez highway. The plan also covers building the Khatatba Axis
Bridge and Benha Bridge.

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Urban Population Growth Prompting Transport Investment

Egypt - Population & Urban Population (2010-2035)

e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

Public Transport Key For Rapid Electrification Efforts

Demand for electric vehicles (EVs) in Egypt will face limited upside as low incomes, a lack of charging infrastructure and the absence
of consumer-focused incentives intended to stimulate demand remain key impediments. The key to electrifying Egypt’s total
vehicle fleet lies in the public transportation system. Electric buses that could be procured by the government stand to gain an
advantage over passenger EVs, as the government or transport operators would be able to finance such vehicles with revenues
generated from commuters. Signs of electric buses gaining a foothold in Egypt have emerged, as the Egyptian Ministry of Military
Production reportedly partnered with Manufacturing Commercial Vehicles to locally assemble electrified buses. We remain
cautious on the announcement as similar developments have occurred in the past without any meaningful fruition. Taxis are
another possible avenue to introduce EVs in the country, as revenues gained from trips could pay for the higher costs of procuring
EVs. Taxi operators would most likely require some level of financial support through incentives to replace their existing vehicles.

Developments to locally assemble passenger EVs show promise, as Dongfeng Motor and El Nasr Automotive Company will
reportedly begin the local assembly of the former’s E70 sedan model at the latter’s existing vehicle assembly operations in August
2022. We believe the success of launching this EV production plan will rest in the hands of the government to either offer the
automakers generous incentives to reduce vehicle production costs and/or offering local consumers incentives to ease the burden
of the initial high purchase price of EVs. This is due to the relatively low incomes in Egypt that would render the launch of EVs,
without support, an unattainable goal. We estimate that Egypt’s GDP per capita in 2020 reached USD3,608.0. The level of income in
Egypt is below the MENA regional average of USD6,928.0 and some of the more developed economies in the region, such as the
UAE and Qatar. The low levels of income, coupled with inadequate public charging infrastructure, will cap the rise in EV sales,
especially without any form of support for automakers to reduce their production costs and consumers to ease the higher costs
associated with purchasing EVs.

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Low Incomes Inhibit Development Of An EV Market In Egypt

MENA - Nominal GDP Per Capita, USD

Sources: National Sources, Fitch Solutions

We believe EVs have gained an advantage as lower running costs, compared to traditional petrol and diesel-powered vehicles, will
lead to Egyptians favouring EVs in the future. In recent years, the total cost of owning and running traditional internal combustion
engine (ICE)-powered vehicles has ballooned in Egypt, following the removal of generous fuel subsidies as part of an agreement
between the country and the IMF. We believe this will lead to EVs (although still facing high price points) to be more favoured by
businesses, the middle-class population and the government, as charging from home or the workplace reduces the total cost of
ownership of EVs drastically when compared to higher-end traditional ICE-powered vehicles. Compressed natural gas-powered
vehicle sales have risen as a result of rising ICE costs, as the Egyptian government focused on reducing its import bill, while utilising
its large natural gas reserves. The conversion of petrol- and diesel-powered vehicles has also gained traction in the country. The
Central Bank of Egypt launched an initiative to aid owners of petrol- and diesel-powered vehicles to convert their vehicles into
natural gas. Similar interventions for EVs in the country could lead to more rapid adoption of EVs going forward, albeit from a low
base.

Airports

The airports sub-sector is the smallest area of transport construction activity at present, with just one project under construction
and three in the planning stages, according to our KPD. Improvements to the country's airports (expansions and upgrades) have
been made to cater for tourists and business visitors in recent years. Despite concerns about security, the government views
tourism as a long-term driver of economic growth in Egypt and continues to allocate investment to the sub-sector. As with other
infrastructure sub-sectors, external financial support is proving to be critical to develop the airports sub-sector. The government is
pushing ahead with the expansion of Sharm El-Sheikh International Airport, an important tourist transport hub for the Red Sea
coast. This project will add extra capacity of 8mn passengers per annum at a cost of USD671.0mn and will be built by Spain-
based Fairbanks Arquitectos, with financial support from the Islamic Development Bank and the African Development Bank.
There are plans under way for a new passenger terminal at Borg Al-Arab Airport in Alexandria, with the Japan International
Cooperation Agency providing financial support to the project.

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EGYPT - MAJOR TRANSPORT INFRASTRUCTURE PROJECTS

Project Sub- Project Value Size Companies Status
Name Sector Risk (USDmn)
Metric

Alexandria- Rail 4.3 9,779 1,087km Patentes Talgo [Equipment] {Spain}, Egypt Ministry of Transport At planning
Cairo- [Sponsor] {Egypt}, Egyptian National Railways [Sponsor] {Egypt} stage
Aswan
High
Speed Rail

Ain Rail 4.4 9,000 660km Orascom Construction Industries [Construction] {Egypt}, Arab Under
Sokhna Contractors [Construction] {Egypt}, Egypt Ministry of Transport construction
(Suez)- [Sponsor] {Egypt}, Siemens [Construction] {Germany}
Marsa
Matrouh
(Matrouh)
High
Speed Rail
Project

Cairo Rail 7.1 6,164 48km Arab Contractors [Construction] {Egypt}, Egypt Ministry of Transport Under
Metro Line [Sponsor] {Egypt}, Government of Egypt [Sponsor] {Egypt}, Egypt construction
3 Project, National Authority for Tunnels [Sponsor] {Egypt}, Alstom [Equipment]
Cairo {France}, Vinci [Construction] {France}, Bouygues Construction
[Construction] {France}, Systra [Consultant/Project Management]
{France}, NGE Group [Construction] {France}, RATP [Sponsor] {France},
Eurovia [Construction] {France}, French Development Agency
[Financier] {France}, Thales Group [Equipment] {France}, Egis Rail
[Consultant/Project Management] {UK}, Hyundai Corporation
[Equipment] {South Korea}, European Investment Bank [Financier]
{Luxembourg}, EHAF Consulting Engineers [Consultant/Project
Management] {Qatar}, Hill International [Consultant/Project
Management] {US}, Associated Consulting Engineers [Consultant/
Project Management] {Oman}, Orascom Construction Industries
[Construction] {Egypt}

Cairo Rail 4.7 5,000 30km Government of Japan [Sponsor] {Japan}, Government of US [Sponsor] At planning
Metro Line {US}, Bechtel Corporation [Construction] {US}, Bombardier stage
VI, Cairo Transportation [Consultant/Project Management] {Canada},
Government of Canada [Sponsor] {Canada}, China Railway
Construction Corporation [Construction] {MainlandChina}, Egypt
Ministry of Transport [Sponsor] {Egypt}, Government of France
[Sponsor] {France}, Government of UK [Sponsor] {UK}

Hurghada Rail 4.4 4,300 300km Egypt Ministry of Transport [Sponsor] {Egypt} At planning
(Cairo)- stage
Luxor High
Speed Rail

Note: Top five projects by value. Project Risk Metric scores out of 10; higher score = lower risk. Source: Fitch Solutions Infrastructure Key Projects Database

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Energy & Utilities Infrastructure

Key View: Power plants will be the clear outperformer within Egypt's energy and utilities sector, as rapid generation growth
outpaces underlying demand trends. The government will prioritise investment in new cross-border transmission interconnections,
aiming to become a regional electricity supply hub. Plans to build the country's green hydrogen production capacity will offer
significant upside risk to our long-term electricity demand and renewables investment projections. Water infrastructure projects will
also proliferate as the growing urban population demands more water resources.

Latest Developments

• In December 2022, China Energy Engineering Corporation (CEEC) reported that a joint venture with Energy China has
signed a contract for works on Abydos Solar Power's 500MW solar PV power plant in Aswan Governorate, Egypt. The project
scope includes the design, procurement, construction, operation and maintenance of the PV power plant. Construction is
planned to start in Q123, with overall construction due to be complete in 19 months.
• In December 2022, Voltalia and TAQA Arabia signed a memorandum of understanding (MoU) with the Government of Egypt
to develop, finance and operate a green hydrogen production complex. Initially, the complex will feature a 100MW electrolyser
supported with 283MW of renewable power. The proposed green hydrogen production facility, which will come up on a
greenfield site near Ain Sokhna port in the Suez Canal Economic Zone, will produce 15,000 tonnes of green hydrogen per
annum (tpa). The facility will be expanded to 150,000tpa of green hydrogen with an electrolyser capacity of up to 1GW supplied
by an aggregate of 2.7GW of solar and wind power.
• In December 2022, Dubai-based AMEA Power achieved financial close to deliver wind and solar projects worth USD1.1bn in
Egypt. AMEA Power will develop, own and operate a 500MW solar PV plant which will be located in the Aswan governorate. The
International Finance Corporation (IFC), Dutch Entrepreneurial Development Bank FMO and the Japan International
Cooperation Agency are financing the project. The 500MW wind farm, located in the Red Sea governorate, is being developed
in partnership with Sumitomo. A consortium of banks, including the Japan Bank for International Cooperation, the IFC, Standard
Chartered Bank, Commercial International Bank, Sumitomo Mitsui Banking and Sumitomo Mitsui Trust Bank.
The Egyptian Electricity Transmission Company will purchase power from the facilities.
• In November 2022, Russia-based Rosatom started construction for the 1.2GW second unit of 4.8GW El Dabaa nuclear power
plant in the Matrouh governorate of Egypt. The nuclear plant will feature four VVER-1200 units with capacity of 1.2GW each.
Rosatom secured approval for the second unit from the Egyptian Nuclear and Radiological Regulatory Authority. Construction
for the third and fourth unit is likely to start in 2023. The nuclear plant is expected to be fully operational by 2030.
• In November 2022, Egypt-based Natural Gas Holding (EGAS), Seasplit Technologies and GE Gas Power signed a MoU to
develop a 1.5GW offshore wind project in the Gulf of Suez, Egypt. The three partners plan to evaluate the technical and
economic feasibility of developing the offshore wind power and intend to explore how strategic companies in the petroleum
sector can participate in the project's delivery. Under the terms of the MoU, EGAS will provide assistance to interact with other
government authorities and key stakeholders to enable completion of preliminary works.

Structural Trends

Investment In Power Infrastructure To Surge

We expect that Egypt's power supply surplus will remain high over our 10-year forecast period, which can be attributed to rapid
growth in net electricity generation that significantly outperforms the underlying demand trend. The country's economic recovery
after the Arab Spring saw rapid and sizeable growth in new power capacity under the el-Sisi government, with total power capacity
rising by nearly 14GW between January 1 2018 and December 31 2019. While this injected 25TWh of new electricity supply into the
power grid, total electricity demand grew by only 21TWh over the period, bringing about a significant surplus of electricity
generating capacity. With a power project pipeline in excess of 22GW and a strong track record of recent project completion, we
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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expect this electricity surplus to last the duration of our forecast period to 2031.

In order to support ongoing power sector growth and capitalise on its rising excess generation, we expect Egypt to prioritise
investment in new cross-border transmission interconnections, with the aim of becoming a regional electricity hub.

While proposals to expand Egypt's interconnections with the East African Power Pool and Maghreb Electricity Committee region,
with both offering significant future export potential for Egypt, we expect the Egypt-Saudi and EuroAfrica interconnectors to take
priority over the near-to-medium term. By expanding its electricity trading capacity, Egypt will be able to avoid mandatory power-
downs. This will be essential in maintaining income stability and investor interest in its power sub-sector. We expect Egypt's overall
electricity exports to rise steadily through our forecast period to 2031.

Attractive Market For Solar Power

Rapidly falling solar costs across the globe amid technological improvements, intensified competition for new projects and
increasing access to financing have heightened the attractiveness of Egypt's solar market and offer grounds for cautious optimism
that investment in solar infrastructure is set to accelerate.

From a fundamental perspective, Egypt's power market generally, and the solar market in particular, remains attractive. With rapidly
growing urban and youth populations stoking robust structural demand, Egypt's government will be compelled to invest
aggressively in new power capacity over the next decade in order to forestall potential civil unrest.

In light of these considerations, there has been an uptick in investment pledges in Egypt's solar sub-sector. For instance, the Ministry
of Electricity and Renewable Energy of Egypt has approved AMEA Power's plan to expand the Kom Ombo solar plant in Aswan. The
approval will allow the project to be expanded to 500MWp capacity from 200MWp. Sterling and Wilson is the engineering,
procurement and construction contractor for the project. AMEA has a 20-year Power Purchase Agreement with the Egyptian
Electricity Transmission Company. The European Bank for Reconstruction and Development (EBRD) has provided USD54.0mn for
the project. Agence Française de Développement and the Japan International Cooperation Agency will also provide funds for
development of the solar facility.

Green Hydrogen Presents Upside Risk To Long-Term Electricity Demand

Plans to build the country's hydrogen production capacity will also hold significant upside potential for Egypt's domestic electricity
consumption over the coming years. In July 2021, Egyptian Minister of Electricity and Renewable Energy Mohamed Shaker
announced plans for the government to invest USD4.0bn in the construction of a green hydrogen production plant, which will use
renewable electricity to power electrolysers. While the plans were not discussed in further detail, the government's commitment to
establish a large-scale green hydrogen project highlights its long-term commitment to energy transition. We highlight that its vast
solar and wind power potential, robust economic growth, close proximity to Europe - which we highlight as an emerging green
hydrogen demand centre - and easy access to global trade routes make Egypt ideally suited to become a major market for global
green hydrogen production. While we are not yet factoring this demand into our forecasts, given the early stage of the country's
green hydrogen plans, we highlight robust upside risk to our power consumption and renewables growth forecasts over the
medium-to-long term. A significant rise in renewables-specific electricity demand would have a sizeable impact on solar and wind
power investment in the country, presenting further upside risk to our long-term renewables capacity growth outlook.

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Green Hydrogen Industry Poses Upside Risk To Long-Term Renewables Capacity Growth
Egypt - Electricity Consumption Growth & Capacity By Type (2021-2031)

e/f = Fitch Solutions estimate/forecast. Source: IRENA, EIA, Fitch Solutions

Sanitation And Treatment Key Areas For Egypt's Water Infrastructure

Investment in water infrastructure in Egypt will increase over the short-to-medium term, as persistent water stress and plans to
support domestic agricultural production intensify water sanitation and reuse demand. As a predominantly arid country with only
one major source of freshwater, the Nile River, Egypt is at high risk from water shortages. The Egyptian water sub-sector is relatively
well developed concerning extraction and distribution. However, the wastewater and sanitation sub-sectors need more investment.
We expect water consumption to increase steadily over the medium term, driven by a rising population and increased per capita
consumption, as well as the corresponding need to expand agricultural production to feed the growing population. Investment in
desalination projects and improving water infrastructure will need to be stepped up to mitigate the risk of shortages.

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Growing Urban Population Necessitates Water Infrastructure Investment

Egypt - Population & Urban Population (2010-2050)

e/f = Fitch Solutions estimate/forecast. Source: UN, Fitch Solutions

We expect that public-private partnerships (PPP)s will play a larger role in Egypt's water infrastructure sub-sector. Egypt benefits
from a strong PPP framework that has supported water infrastructure projects, such as the Hurghada Seawater Desalination Plant, a
USD46.0mn project awarded to Metito and completed in July 2019, providing 80,000 cu m of drinking water per day. This robust
PPP framework, coupled with the government’s commitment to bolster domestic agricultural production, will further support
demand for water-related infrastructure.

An example of how demand for water infrastructure is translating into project opportunity is the El-Hamman wastewater treatment
plant, which, according to reports, is set to be the world's largest. In February 2021, the government awarded a design, supply,
construction, operation and maintenance contract to a joint venture composed of OC, Hassan Allam Construction, Arab
Contractors and Metito for an agricultural wastewater treatment plant. The project's value is estimated to be around USD739mn,
with a capacity of 6mn cu m of water per day, delivering treated water for irrigation to 2,100sq km of land on the west of the Nile
Delta. The project reaffirms the confidence on the market’s PPP framework due to its high value and comprehensive coverage
across all the stages of the project's life cycle, from pre-construction to operation and maintenance. The participation of
experienced and technically capable developers illustrates strong private sector interest in the market and strengthens the
likelihood of other projects being developed in the future.

We note the presence of multilateral funding agencies in Egypt's PPP landscape, with the involvement of the EBRD and the
European Investment Bank in the Kitchener Drain Depollution project, which is worth EUR408.0mn (USD488.6mn). In March 2021,
the government secured a USD129.0mn loan from the African Development Bank to support and improve water sanitation
infrastructure for rural communities in the Upper Nile region, specifically at the Luxor governorate.

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Desalination To Enhance Water Security

We expect the Egyptian government to intensify its focus on developing desalination infrastructure amid the risk that Nile River flow
will be further constrained by upstream projects, such as the Grand Ethiopian Renaissance Dam. The Nile River is Egypt's traditional
source of fresh water for agriculture, industry and household consumption. However, the river struggles to meet demand imposed
by agriculture, industry and the growing population. Our Agribusiness team highlights that the government has already acted
regarding this water shortage to reduce the production of water-intensive crops, such as rice. In terms of household consumption,
demographic pressures dramatically increase demand for the use of Nile water. We expect the combined populations of Egypt,
Sudan and Ethiopia to have increased by 25.7% from 2010 to 2020, accelerating to 52.7% by 2030 and more than doubling by
2050.

Egypt Highly Dependent On Neighbouring Markets For Water

Select Rice-Producing Markets – Water Dependency Ratio, %

Source: FAO, Fitch Solutions

Egypt's government will prioritise and accelerate the development of desalination infrastructure as a means of hedging against the
looming uncertainty surrounding its future water supply. For example, a partnership with a Russian innovation development
institution RUSNANO Group will support the government's plan to build at least 19 reverse osmosis plants by end-2022, reach the
target of 47 plants by 2030, and construct 20 more by 2050.

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EGYPT - MAJOR ENERGY AND UTILITIES INFRASTRUCTURE PROJECTS

Project Name Sub- Project Value Size Companies Status
Sector Risk (USDmn)
Metric

New El-Dabaa Nuclear Power Power 3.9 30,000 4,800MW Hassan Allam [Construction] {Egypt}, At planning
Plant, Matruh plants and Petrojet [Construction] {Egypt}, stage
grids Government of Egypt [Sponsor] {Egypt},
Nuclear Power Plant Authority [Operator]
{Egypt}, Rosatom [Sponsor] {Russia},
Government of Russia [Sponsor] {Russia},
Ministry of Electricity and Renewable
Energy of Russia [Sponsor] {Russia}, Arab
Contractors [Construction] {Egypt}

FourWinds Coal Fired Power Plant, Power 0.0 11,000 6,000MW Government of Egypt [Sponsor] {Egypt}, Under
Sharm El Sheikh, South Sinai plants and Egyptian Electricity Holding Company construction
grids [Sponsor] {Egypt}, FourWinds Group
[Sponsor] {Switzerland}

Samalout Thermal Power Plant, Power 7.8 2,900 3,167MW Siemens [Equipment] {Germany} Egypt Under
Minya plants and Ministry of Electricity [Sponsor] {Egypt}, construction
grids Siemens AG [Construction] {Germany}

Ataka Mount Hydropower Plant Power 4.4 2,700 2,400MW Artelia Group [Consultant/Project At planning
plants and Management]{France}, Export-Import stage
grids Bank of China [Financier] {Mainland China},
Egypt Ministry of Electricity [Sponsor]
{Egypt}, Sinohydro Corporation
[Construction] {China}, AF Consult
[Consultant/Project Management]
{Sweden}

Armant Hydroelectricity Project, Power 4.4 2,500 2,000MW Egypt Ministry of Electricity [Sponsor] At planning
Qena plants and {Egypt} stage
grids

Note: Top five projects by value. Project Risk Metric scores out of 10; higher score = lower risk. Source: Fitch Solutions Infrastructure Key Projects Database

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Residential/Non-Residential Building
Key View: In the near term, we expect a hawkish monetary policy to weigh on private investment, and residential and non-
residential construction growth in Egypt. In the medium-to-long term, government reforms and divestiture plans, as well as an
expected IMF programme, will likely support investor sentiment and investment in the buildings industry. We highlight a strong
project pipeline in the country's nascent hydrogen industry.

Latest Developments

• In December 2022, Honeywell signed a memorandum of understanding (MoU) with Environ Adapt for Recycling
Industries to develop a chemical recycling facility in Egypt. The proposed facility will be able to convert plastic waste into
valuable recycled polymer feedstock. Under the MoU, Environ will conduct a feasibility study to explore trends, feedstock
availability, potential markets and technical studies along with the overall project schedule, financial modelling and analysis, while
Honeywell will provide technical and commercial information along with analysis and broader project support.
• In November 2022, Wadi Degla Developments unveiled plans for the construction of a EGP1.5bn (USD61.2mn) residential
project in Cairo, Egypt. The Club Town project will come up on 283,279.95sq m area in New Degla, Maadi. It will feature 550
residential units and a commercial space. The project will be executed in three phases with the first phase, named Breeze,
scheduled for delivery between 2024 and 2026.
• In November 2022, Anchor Developments unveiled plans for the construction of a EGP3.0bn (USD122.5mn) mall, called Rivoli,
in the New Administrative Capital (NAC), Egypt. The three-storey strip mall, which will come up on 10,815sq m area, will feature
retail and office units. Medad Consultant Engineers will be responsible for the design of Rivoli, while MRB will provide project
management services and Saudi Egyptian Construction Company will serve as contractor. Construction for the project is
likely to start in December 2022, with completion expected by June 2025.
• In November 2022, Turkey-based Arçelik unveiled plans to build a new USD100.0mn household appliances manufacturing
facility in Egypt. The facility is expected to produce around 1.5mn devices per annum. The firm plans to dedicate 60% of its
output for exports.
• In November 2022, Ora Developers Egypt awarded an EGP2.5bn (USD103.0mn) construction contract to Orascom
Construction to build the first phase of the Silver Sands integrated residential project in Egypt. The 2.0sq km project
includes villas, twin houses, townhouses, chalets, condos, a boutique hotel, a lagoon clubhouse, a health spa, sports facilities and
a retail strip.
• In October 2022, IHD Developments laid the foundation stone for the construction of the Vivid Business Tower in the New
Administrative Capital (NAC), Egypt. The 15-storey mixed-used building, estimated to cost EGP700mn (USD35.4mn), includes
offices and retail spaces. The overall project is due to be completed in 2025.

Structural Trends

In the near term, we expect a hawkish monetary policy to weigh on private investment, and residential and non-residential
construction growth in Egypt. In the medium-to-long term, government reforms and divestiture plans, as well as an expected IMF
programme, will likely support investor sentiment and investment in the buildings industry.

Robust Long-Term Housing Demand

Although residential housing remained subdued in 2020 due to the effects of the Covid-19 pandemic, the long-term fundamentals
of Egypt's residential construction market remain favourable. The key underlying factors informing our long-term view are an
economic diversification agenda allied to strong population fundamentals and an urbanisation rate growing at 2.0% a year. With a

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young and growing population of around 91mn, Egypt is the most populous market in the Middle East and North Africa region and
offers a level of housing demand that is sustainable over the medium-to-long term.

Factors, such as the soaring rate of marriages in the country and rising levels of rural to urban migration, add to this. Despite the
potential, only 10.0% of Egypt's housing is supplied by professional property developers, with the rest built informally. While mid- to
high-end property developments continue to spring up around the country, particularly around Cairo, developers have been largely
unable to exploit pent-up demand from Egypt's poor.

Inability to match supply with demand has resulted in a housing shortage estimated at 500,000 units a year. A major factor behind
the limited supply is the lack of low-income housing expertise among the country's largest housing developers as well as
inadequate incentives to undertake low-income projects over more lucrative mid- to high-end developments. With an
underdeveloped mortgage market (the share of mortgages to GDP is only 0.5%), there is little to attract private developers to the
affordable housing sector.

The government is taking steps to address the issue. Egypt's residential sector will continue to derive support from government
policy that aims to deliver social housing as a means to address the country's persistent housing shortage. As a point of reference,
the governorate of Cairo provided 7,380 housing units to slum-dwellers in the Mokattam district as part of the third phase in the Al
Asmarat slum-dweller project. The project, estimated to cost about EGP14.0bn (USD769.1mn), aims to relocate citizens from slum
areas to residential units. Then prime minister of Egypt Sherif Ismail Mohammed unveiled plans for a USD1.6bn project to develop
the Sinai, Portsaid, Ismailia and Suez governorates. The Sinai Development Authority, together with the Ministry of Housing, plans to
build 5,000 houses. The water reserve network in El-Arish and electricity networks in Rafah and Sheikh Zuweid will also be replaced.

Housing Demand Driven By Demographic Growth

Egypt - Population & Urban Population (2000-2040)

e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

The rise in investment in manufacturing industries and key infrastructure projects through the development of special economic
zones is one emerging area of investment for the country. Infrastructure development continues to gain traction. Egypt
established an economic area in the Suez Canal Zone (SCZone), with business-friendly regulations (such as more liberal and more
efficient administration), tax incentives, the facilitation of registration and customs procedures, as well as better infrastructure.

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The SCZone has four unique zones and six strategically located ports. The four zones are:

• Ain Sokhna: set aside for heavy industry and renewable energy manufacturing (being near Egypt's windiest region).
• East Port Said: allocated to light industry and logistics.
• Qantara West: a coastal area reserved for logistics.
• East Ismailia: targeted at agri-business, textiles and ICT industries.

Main incentives include:

• Reduced income tax rates for businesses and individuals.

• A one-stop shop for completing bureaucratic procedures.
• Special customs services.
• Proximity to ports.

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Industry Risk/Reward Index

Egypt Infrastructure Risk/Reward Index
Key View: Egypt currently ranks sixth regionally and 25th globally on our Infrastructure Risk/Reward Index. Egypt’s score of 59.9 is
well above the regional and global averages of 51.4 and 50.0 respectively. However, key challenges remain regarding the legal
environment, the labour market and the country's ability to complete large announced projects, which will continue to weigh on its
score.

Risk/Reward Snapshot
Egypt & Middle East & North Africa Region - Infrastructure Risk/Reward Index

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Infrastructure Risk/Reward Index

Global And Regional Ranks

• Global rank (out of 104): 25th

• Regional rank (out of 15): 6th

Key Features And Latest Updates

• With a young, growing and increasingly urban population, Egypt's construction sector will benefit from robust structural demand
for investment across the infrastructure spectrum over our 10-year forecast period to 2031.
• We see significant scope for Egypt to continue its success in attracting international investment in infrastructure projects in the
Suez Canal region, particularly from Mainland China-based companies looking to cement geopolitical influence.
• Persistent security risks, evidenced by a series of bombings and sectarian attacks in recent years, will continue to weigh on
Egypt's Risk profile. Ongoing government efforts to rein in subsidies may result in popular backlash, stoking the possibility of
social unrest and worsening the already volatile political risk outlook.
• Broader weakness of Egypt's institutions renders the country a substantially riskier environment in which to invest and operate
infrastructure assets, relative to regional outperformers (such as Qatar and the UAE). This weakness will continue to weigh on the
strength of its legal framework, the clarity and enforceability of contracts and regulations, and the market's ability to combat
pervasive corruption in its construction sector.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Risk/Reward Matrix Breakdown

Egypt & MENA Region - Infrastructure Risk/Reward Index By Component

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Infrastructure Risk/Reward Index

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Middle East And North Africa Infrastructure Risk/Reward Index: Solid

Long-Term Rewards Prospects
Key View

• Markets within the Middle East and North Africa region score an average of 51.4 in our Infrastructure Risk/Reward Index, slightly
above the global average of 50.0, with the region standing as the third-strongest scoring region globally.
• The region features several markets with robust Rewards scores, particularly Gulf Cooperation Council markets, Israel and Egypt,
amid strong long-term economic growth prospects and substantial early-stage project volumes.
• The overall range of scores in the region is significant, with scores ranging from 69.4 to just 20.6 among 15 markets in the Middle
East and North Africa.

GCC Markets Scoring Strongest

MENA - Infrastructure Risk/Reward Index

Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index

Main Regional Features And Latest Developments

• Markets within the Middle East and North Africa (MENA) region exhibit an average Infrastructure Risk/Reward Index (RRI) score of
51.4 this quarter, placing the region slightly above the global average of 50.0 and making it the third most attractive region in our
RRI, behind Asia, and North America and Western Europe.
• Israel, the UAE and Saudi Arabia are the highest scoring markets in the region, with scores all well above both the regional and
global averages.
• Alongside these strong scoring markets, which rank among the highest scoring markets globally, are the likes of Yemen, Libya
and Algeria, which rank among the lowest scoring markets globally, amid continuous economic risk and social unrest.

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Numerous High Rewards Markets

MENA - Infrastructure Risk/Reward Index

Note: The Rewards and Risks components are weighted 60% and 40% respectively in the final RRI score. Scores out of 100. Source: Fitch Solutions Infrastructure Risk/Reward
Index

Upside For Rewards From Nascent Industry Developments

MENA markets exhibit above-average performance in the Rewards component of our RRI, with an average score of 54.7 compared
to the global average of 50.0, which is reflective of substantial early-stage project volumes across the likes of Saudi Arabia, Egypt and
the UAE. Weighted 60% in the final RRI score, the Rewards component encompasses Industry Rewards and Country Rewards; the
former evaluates an industry's size and growth potential, and the latter quantifies a market's macroeconomic characteristics that
directly impact the size of the market's business opportunities.

Higher revenue for the region's oil exporters amid elevated global energy prices will lead authorities to frontload higher capital
spending, which will benefit infrastructure activity due to its importance for many markets' long-term strategic frameworks. Our
Country Risk team expect that higher energy prices will boost oil exporters' external positions and public finances, which will enable
their ability to increase capital spending in the non-oil economy. In Saudi Arabia, this will provide greater liquidity for
the government’s investment arms, namely the Public Investment Fund, to accelerate the development of megaprojects related to
the market's Vision 2030. Similarly, in Kuwait, higher oil revenue will provide a basis for the government to accelerate projects
involved in Kuwait's Vision 2035.

Offering upside for the Rewards component in MENA, we note overall potential for the development of hydrogen infrastructure in
the long term. Growing global demand for low-carbon fuels is beginning to offer a strong basis for diversification to support non-oil
economic activity in the region. Though Russia's invasion of Ukraine has reinvigorated demand for MENA's oil and gas output in the
near term, the region's long-term investment thesis will remain in favour of reorienting export capabilities toward hydrogen over
greater oil and gas investment. The near-term upheaval to global energy markets brought about by Russia's invasion of Ukraine has
seen hurried efforts by authorities, particularly in Europe, to reduce their reliance on Russian energy supplies, while broadly
maintaining their existing overall energy usage. As a result, authorities across Europe have sought to secure their continuing energy
export arrangements with authorities across MENA, particularly Qatar and Saudi Arabia. While authorities in Europe have become
willing to countenance greater carbon-intensive energy usage in the near term, it has reaffirmed the region's commitment to the
low-carbon energy transition in the long term. Within MENA, a substantial first-mover advantage exists for the first markets that are
capable of rapidly increasing the scale of their hydrogen production, establishing trading arrangements to export the fuel and
capitalising on the low-carbon energy transition.

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Substantial Range Of Performance On Risks

MENA – Infrastructure Risk/Reward Index

Note: Scores out of 100; higher score = more attractive market. Source: Fitch Solutions Infrastructure Risk/Reward Index

Risks Remain Elevated Across Several Markets

MENA markets score an average of 46.5 in the Risks component of our RRI, largely in line with the region’s performance in the
previous quarter. The Risks component of the RRI is weighted 40% in the final RRI score. It encompasses Industry Risks and Country
Risks in a given market by considering factors including the openness of a market's competitive landscape, the risk of project delays,
its broader legal environment, as well as political, economic and operational risk. MENA's average Risks component scores
underperform when compared with the global average of 50.0 in all aspects of the Risks component. The scores are particularly
weak for the Short- and Long-Term Economic and Political Risk Index subcomponents.

Contract enforcement remains a deterring factor when assessing the attractiveness of the MENA region. Markets such as Iraq, Egypt
and Algeria underperform in this regard. Issues such as the perception of opaque tender processes with the awarding of
government contracts, which are often giving preference to entities with longstanding relations with authorities, heightening the
risks for foreign contractors trying to obtain contracts for publicly funded infrastructure projects.

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MIDDLE EAST AND NORTH AFRICA - INFRASTRUCTURE RISK/REWARD INDEX

Industry Country Industry Country Regional Global
Rewards Risks RRI
Rewards Rewards Risks Risks Rank Rank

Saudi Arabia 70.6 64.7 68.2 71.3 71.0 71.1 69.4 1 4

UAE 64.4 52.0 59.5 81.6 77.9 79.7 67.6 2 6

Israel 61.5 60.6 61.1 71.0 73.1 72.1 65.5 3 13

Oman 58.9 50.3 55.5 72.9 67.8 70.4 61.4 4 22

Qatar 52.8 58.4 55.0 76.8 65.1 71.0 61.4 5 23

Egypt 83.8 58.8 73.8 41.3 36.7 39.0 59.9 6 25

Bahrain 65.4 46.8 57.9 70.2 55.0 62.6 59.8 7 26

Kuwait 60.8 51.9 57.3 58.2 61.3 59.7 58.3 8 33

Jordan 53.1 45.8 50.2 55.4 44.4 49.9 50.1 9 54

Iran 62.8 73.4 67.0 17.7 27.8 22.8 49.3 10 57

Morocco 48.9 39.6 45.2 52.4 35.4 43.9 44.7 11 69

Iraq 58.6 49.3 54.9 15.6 16.7 16.1 39.4 12 85

Algeria 37.5 56.9 45.3 24.3 27.3 25.8 37.5 13 87

Libya 29.1 46.4 36.0 11.6 12.6 12.1 26.5 14 100

Yemen 21.4 50.5 33.0 3.1 0.6 1.9 20.6 15 103

Global average 50.0 50.0 50.0 50.0 50.0 50.0 50.0 ~ ~

Regional
55.3 53.7 54.7 48.2 44.9 46.5 51.4 ~ ~
average

Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index

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MIDDLE EAST AND NORTH AFRICA - INFRASTRUCTURE INDUSTRY REWARDS

Construction Industry Construction Industry Real Project Pipeline, % of Industry Industry
Value Growth Value Rewards

Saudi Arabia 82.5 53.4 75.7 70.6

UAE 77.7 32.0 83.5 64.4

Israel 74.8 67.0 42.7 61.5

Oman 28.2 56.3 92.2 58.9

Qatar 67.0 25.2 66.0 52.8

Egypt 71.8 95.1 84.5 83.8

Bahrain 21.4 81.6 93.2 65.4

Kuwait 19.4 66.0 97.1 60.8

Jordan 11.7 51.5 96.1 53.1

Iran 85.4 79.6 23.3 62.8

Morocco 42.7 54.4 49.5 48.9

Iraq 37.9 47.6 90.3 58.6

Algeria 62.1 43.7 6.8 37.5

Libya 5.8 75.7 5.8 29.1

Yemen 4.9 19.4 39.8 21.4

Global average 50.0 50.0 50.0 50.0

Regional
46.2 56.6 63.1 55.3
average

Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index

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MIDDLE EAST AND NORTH AFRICA - INFRASTRUCTURE COUNTRY REWARDS

GDP Per Urban Population, % of Population GDP Per Capita Country
Population
Capita Total Growth Growth Rewards

Saudi Arabia 69.9 62.1 78.6 69.9 42.7 64.7

UAE 81.6 35.9 82.5 47.6 12.6 52.0

Israel 90.3 33.0 93.2 72.8 13.6 60.6

Oman 59.2 19.4 86.4 76.7 9.7 50.3

Qatar 93.2 8.7 97.1 75.7 17.5 58.4

Egypt 27.2 87.4 16.5 81.6 81.6 58.8

Bahrain 64.1 2.9 88.3 77.7 1.0 46.8

Kuwait 74.8 13.6 98.5 58.3 14.6 51.9

Jordan 34.0 37.9 91.3 24.3 41.7 45.8

Iran 68.0 85.4 61.2 57.3 95.1 73.4

Morocco 23.3 65.0 42.7 60.2 6.8 39.6

Iraq 35.9 68.0 51.5 89.3 1.9 49.3

Algeria 29.1 69.9 58.3 73.8 53.4 56.9

Libya 25.2 28.2 70.9 59.2 48.5 46.4

Yemen 1.0 56.3 14.6 86.4 94.2 50.5

Global average 50.0 50.0 50.0 50.0 50.0 50.0

Regional
51.8 44.9 68.8 67.4 35.7 53.7
average

Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index

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MIDDLE EAST AND NORTH AFRICA - INFRASTRUCTURE INDUSTRY RISKS

Infrastructure Competitive Construction - Construction - Legal Labour Industry
Landscape Timeliness Contracts Environment Market Risk Risks

Saudi Arabia 71.8 71.8 64.1 72.8 75.7 71.3

UAE 71.8 99.0 68.9 80.6 87.4 81.6

Israel 33.5 59.2 87.4 78.6 96.1 71.0

Oman 33.5 86.4 99.0 74.8 70.9 72.9

Qatar 95.6 88.3 53.4 77.7 68.9 76.8

Egypt 71.8 27.2 37.4 46.6 23.3 41.3

Bahrain 51.0 80.6 91.3 64.1 64.1 70.2

Kuwait 33.5 68.9 81.6 56.3 50.5 58.2

Jordan 33.5 63.1 48.5 67.0 65.0 55.4

Iran 2.9 35.9 4.9 8.7 35.9 17.7

Morocco 71.8 49.5 57.3 55.3 28.2 52.4

Iraq 33.5 9.7 1.9 22.3 10.7 15.6

Algeria 8.7 20.4 25.2 35.9 31.1 24.3

Libya 2.9 22.3 0.5 0.0 32.0 11.6

Yemen 2.9 1.9 8.7 1.0 1.0 3.1

Global
50.0 50.0 50.0 50.0 50.0 50.0
average

Regional
41.3 52.3 48.7 49.4 49.4 48.2
average

Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index

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MIDDLE EAST AND NORTH AFRICA - INFRASTRUCTURE COUNTRY RISKS

Long-Term Short-Term Long-Term Political Short-Term Political Operational Country
Economic Risk Index Economic Risk Index Risk Index Risk Index Risk Index Risks

Saudi Arabia 77.7 100.0 38.8 75.7 67.0 71.0

UAE 61.2 63.6 75.7 96.1 85.4 77.9

Israel 94.2 97.1 62.1 32.0 76.7 73.1

Oman 44.7 69.4 67.0 89.8 68.0 67.8

Qatar 43.7 48.1 59.2 94.2 72.8 65.1

Egypt 49.5 27.2 33.0 27.2 41.7 36.7

Bahrain 34.0 31.1 40.8 74.8 74.8 55.0

Kuwait 52.4 73.8 55.3 81.6 52.4 61.3

Jordan 17.5 21.8 63.1 51.5 56.3 44.4

Iran 30.1 35.9 20.4 28.2 26.2 27.8

Morocco 18.4 12.6 58.3 34.0 44.7 35.4

Iraq 15.5 55.3 5.8 3.9 9.7 16.7

Algeria 19.4 54.4 28.6 20.4 20.4 27.3

Libya 29.1 35.0 0.0 1.9 4.9 12.6

Yemen 0.0 1.9 1.0 1.0 0.0 0.6

Global
50.0 50.0 50.0 50.0 50.0 50.0
average

Regional
39.2 48.5 40.6 47.5 46.7 44.9
average

Note: Scores out of 100; higher score = lower risk. Source: Fitch Solutions Infrastructure Risk/Reward Index

Note: Our Risk/Reward Indices are updated frequently; as a result, scores in this section may not match scores in the rest of the
report.

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Competitive Landscape
We expect Egypt's competitive landscape to remain diverse, with strong competition for contracts between domestic and foreign
firms, and the formation of joint ventures common. Leading local firms Orascom Construction Industries (OCI) and Arab
Contractors have the strongest presence in construction roles, but this is not at the expense of international companies, with
European and Asian contractors having considerable opportunities in the transport and power sectors. Infrastructure projects are
funded through a relatively balanced mix of government spending, development finance and foreign investment. We expect the
latter to increase in importance as the government moves forward with fiscal consolidation efforts and the use of public-private
partnership (PPP) contracts grows.

Egypt will retain a diverse construction competitive landscape over the short term, with a strong mix of domestic and foreign firms
competing for contracts. An analysis of our Key Projects Database (KPD), including all major infrastructure projects in the transport,
and energy and utilities sectors over USD30.0mn in value, shows that Egypt has the most even balance of local and foreign
contractors in the Middle East and North Africa region. This reflects the appeal of Egypt's construction sector for international firms,
with considerable opportunities in the transport, and energy and utilities sectors in one of the largest markets in the region. This
shows the presence of well-established domestic construction companies and the country's developed local construction sector, in
contrast with other markets in the Middle East.

Egypt Has Strongest Balance Of Local And Foreign Firms

Middle East & North Africa - Share Of Construction Roles By Market, %

Source: Fitch Solutions Key Projects Database

According to our KPD, Egypt-based firms take 45.0% of construction roles in the country, with an even spread across transport, and
energy and utilities projects, although local firms have a particularly strong presence in road and power plant developments. Within
the domestic construction sector, OCI and Arab Contractors are the dominant firms, with nearly 60.0% of construction roles for
Egypt-based contractors going to these two companies. Both companies were founded in the 1950s and have a strong track record
in residential, commercial, industrial, transport, and energy and utilities infrastructure. The two firms often work in partnership with
each other and foreign contractors on major projects, including the Aswan Dam and the Cairo Metro.

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France- And Mainland China-Based Firms Lead International Contractors

Egypt - Share Of Construction Roles By Company Origin, %

Source: Fitch Solutions Key Projects Database

A wide range of foreign companies are present in the Egyptian construction market, with firms from 19 different markets
represented, largely from Europe and Asia. France-based firms lead the way, taking 14.0% of total construction roles (according to
our KPD) followed by Mainland China-based firms with 10.0% and then Spain-based (6.0%) and US-based (5.0%) companies. France-
based firms are predominantly involved in rail projects, with 16 roles, largely in the various projects associated with expanding and
extending the Cairo Metro. These roles are generally taken by major contractors, such as VINCI and Bouygues, which have a strong
track record in rail projects and experience operating in high-risk African markets. There are a number of other foreign firms
involved in the transport sector, but these are spread over a diverse range of nationalities and few firms currently take multiple
construction roles. Other major international contractors present in the transport construction sector include China Railway
Construction Corporation, Netherlands-based Royal Boskalis Westminster and UK-based Colas Rail.

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Orascom And Arab Contractors The Largest Players

Egypt - Top 10 Construction Contractors By Number Of Roles

Source: Fitch Solutions Key Projects Database

In the energy and utilities sector, the competitive landscape is somewhat more diverse, with companies from a number of markets
taking multiple construction roles. China-based, Spain-based and US-based firms are more active in power plant projects. US-based
power firm General Electric has a particularly significant presence in Egypt's power sector as a contractor and equipment provider.
The company has been involved in a number of gas-fired power plants, such as the North Giza Power Plant and the New West
Damietta Simple Cycle Power Plant. Germany-based Siemens and its subsidiary Siemens Gamesa Renewable Energy are also
involved in thermal and wind power projects in Egypt respectively. The role of China-based companies, such as Chint Group, is
growing in solar projects and large-scale thermal plants, such as the USD10.0bn Hamrawein coal-fired power plant.

We see scope for greater involvement of foreign power companies and equipment providers in Egypt as the government presses
ahead with renewable power plans, with many projects set to be delivered through PPP contracts. According to our KPD, there are
10 renewable power projects under construction or in the planning stages in Egypt that are set to be delivered as PPPs, including a
mix of solar, and offshore and onshore wind. The government's plans to expand its renewable energy capacity in order to help meet
rapidly growing electricity demand will provide opportunities for international construction and energy firms as well as equipment
providers. PPP projects that are supported by development financiers and that share risks between the government, multilateral
institutions and companies will prove attractive. We have already seen positive momentum on the Ras Ghareb Wind Farm, the first
phase of which is being developed by Siemens Gamesa and which is supported by a mixture of development financiers, such as the
International Bank for Reconstruction and Development and private banks, including France-based Societe Generale.

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Share Of Foreign Investment And Development Finance To Grow

Egypt - Share Of Project Finance & Sponsorship Roles, %

Source: Fitch Solutions Key Projects Database

We expect mixed financing arrangements to remain prominent in infrastructure funding in Egypt. Financing roles are largely divided
between the government and its various departments, foreign private banks and development financiers, with domestic private
sources playing a more limited role. Government spending is the primary source of infrastructure funding, but the country also
remains reliant on the funding provided by development financiers, which comprise the most active non-governmental financiers in
the Egyptian infrastructure market. The Kuwait Fund for Arab Economic Development is the largest foreign financier, with 16 finance
or sponsorship roles, largely in the power plant and water sub-sectors. The European Bank for Reconstruction and Development has
13 roles, and the Islamic Development Bank and the African Development Bank are also heavily involved in infrastructure financing.
Private European banks, including Deutsche Bank, HSBC and BNP Paribas, are also present, often supporting projects being
carried out by international contractors. We expect this situation to continue, with a growing prominence of foreign investors as the
government seeks to pare back spending in order to tackle a large fiscal deficit.

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Company Profile
Arab Contractors
Strengths Weaknesses
• Arab Contractors has long been established in the Egyptian • The company operates across three regions and is exposed to
construction industry and has built up a sterling reputation. currency volatility.
• The company is state owned, allowing it to draw on the • The company lacks a presence in East Asia, which precludes it
resources of the Egyptian state. from capturing the high growth rates in the region.
• The company has an extensive footprint in Sub-Saharan Africa,
one of the fastest-growing regions globally in terms of
construction.
• The company is highly diversified across the infrastructure
spectrum, from dredging and marine construction to
residential building.

Opportunities Threats
• Arab Contractors has opened new offices in Iraq, which will help • Future growth in the domestic market and the MENA region is
capitalise on reconstruction opportunities. highly dependent on political stability.
• Strong government support for infrastructure development in • Large fiscal deficits and low oil prices will limit public
Egypt should open up multiple project opportunities for the investment in housing and infrastructure projects in the region.
company.
• Robust structural demand for infrastructure driven by a rising
population and economic diversification initiatives will sustain
construction growth in Egypt and in the Middle East and North
Africa (MENA).

Company Overview

Arab Contractors is Egypt's largest state-owned construction company and a major player in the MENA region. It has been present
for almost 70 years in the regional market and is also active in Asia.

The company's experience covers a wide spectrum of the construction industry and its ancillary services include public buildings,
bridges, roads, tunnels, airports, housing, water and sewage projects, power stations, dams, hospitals and sports buildings. They also
involve the restoration of monuments, irrigation, the production of ready-mix concrete, shipbuilding, electromechanical projects,
engineering consultancy, manufacturing and the assembly of steel structures.

Strategy

Arab Contractors has a strong presence domestically and is active in 29 markets in total. The firm plans to become one of the top
five construction companies in the Middle East and Africa in the next five years.

One of the latest targets for the company's international expansion is Iraq. Arab Contractors opened two offices in Iraq, following a
four-year absence. The conpany is hoping to capitalise on its experience in building affordable housing to win contracts for
affordable homes in Iraq, where there is substantial demand and where the government has been awarding numerous contracts.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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Domestically, the company has substantial contract opportunities, driven by Egypt's growing population and the country's
attendant demand for improved infrastructure. Its experience across the infrastructure and construction sectors means that it is
well positioned to capitalise on opportunities in water infrastructure, transport and continued investment in housing. We
expect Arab Contractors to benefit from the government's ongoing commitment to infrastructure projects and anticipate that (as a
state-owned enterprise) it will have an inside track on contract tendering.

Activities And Projects

• In May 2019, a consortium involving Arab Contractors, Orascom Construction and Bombardier was named as the preferred
bidder for two monorail lines linking Cairo to the New Administrative Capital and 6th of October City.
• Kuwait's Ministry of Public Works awarded a KWD170.0mn (USD561.4mn) contract to Arab Contractors to develop Nuwaiseeb
Road. Under the contract, the firm will build a 37km-long road with three lanes in each direction.

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Orascom Construction Industries

Strengths Weaknesses
• Following the divestment of its cement operations, Orascom • The company operates internationally, and has subsidiaries in
Construction Industries (OCI) is now concentrating its efforts on Europe and the US. It is vulnerable to global currency volatility.
its construction operations. • High exposure to the Middle East increases political and
• OCI is one of the most prominent and reputable construction security risk for the company.
contractors in the Middle East and North Africa (MENA). • A lack of significant exposure to burgeoning Asian markets,
such as Mainland China, will dampen growth potential.

Opportunities Threats
• The separation of the engineering and construction business • The growing spectre of political instability in Egypt threatens
from the fertilisers and chemical operations will facilitate the the expansion of the company in its home market.
pursuit of a more coherent strategy. • The increasing fiscal deficits in some MENA markets and weak
• Strong government support for public-private partnerships will oil prices will limit public investment in housing and
open numerous contract opportunities for OCI in Egypt. infrastructure projects over the short-to-medium term,
• Partnership with HCC offers entry to lucrative Indian market. reducing project opportunities.
• Strong construction growth trends in Egypt and MENA
generally should provide ample contract opportunities in the
next few years.

Company Overview

Orascom Construction Industries is a sub-division of the Orascom Group. The company is a leading construction contractor
specialising in industrial, commercial and infrastructure projects. It is active in Europe, Asia, the Middle East and Africa. It operates
through three divisions: Orascom Construction (based in Cairo), BESIX Group (Brussels-based group in which Orascom Construction
Industries has a 50.0% stake) and Contrack International (based in Virginia).

Orascom Construction deals with large industrial and infrastructure projects focusing on MENA. BESIX is concerned with major
commercial, industrial and infrastructure projects in Europe, North and Central Africa, and the Middle East. Contrack International is
focused on institutional projects in the Middle East and Central Asia.

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Strategy

In order to reduce its exposure to the volatile home market, OCI has been actively diversifying into new markets, with encouraging
results. A growing presence in attractive Middle Eastern markets, such as Abu Dhabi and Saudi Arabia, bodes well for the company
and offers some hope of offsetting potential instability in Egypt. OCI has announced plans to continue investing heavily in Egypt.
The announcement came after the tax authority ruled in OCI's favour in a long-standing tax dispute. The company's decision to
cement investment ties with Egypt aligns with our view that Egypt will experience robust construction sector growth in the coming
years.

OCI decided to spin off its construction and engineering business, listing it on stock markets in Egypt and Dubai from March 2015.
The new company, OC, comprises all construction assets and subsidiaries of OCI in addition to its 50.0% stake in BESIX Group.
Following the demerger, OCI's fertiliser and chemicals division constitutes the company's core business and remains listed in the
Netherlands. We believe that OCI will significantly benefit from the spin-off given the lack of clear synergies between the two
businesses, geographically and industry-wise. Operating as entirely separate entities will enable both companies to pursue a more
coherent and transparent growth strategy, tailored to the specific demands of its sector and investors.

Activities And Projects

• In May 2020, OCI signed a contract with Ora Developers to build the first phase of the ZED Sheikh Zayed residential-led mixed-
use scheme in Egypt. The first phase covers the construction of nearly 600 houses, a garage, a mall and four apartment
buildings. The overall project, to be executed in six phases, will offer more than 4,500 residential units and an administrative
commercial complex.
• OC forms part of a consortium, alongside Arab Contractors and Bombardier, which was selected as the preferred bidder for two
monorail lines in Cairo in May 2019.
• Projects include a joint venture (JV) between OC and UAE-based Al Sahraa Group, worth around USD180mn, for the expansion of
Fujairah International Airport in the UAE. OC's share in the JV is 60.0%. The JV will undertake major infrastructure works for the
airport expansion. The scope of work includes a new air traffic control tower, the extension of the existing runway, a new
emergency runway, rapid exit taxiways and the installation of airport systems.

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Infrastructure Methodology
Connected Thinking

We use a simple and transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert
judgement to ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe
analyst expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our
customers.

Our Connected Thinking approach to forecasting and analysis integrates macroeconomic variables from Fitch Solutions Country
Risk to provide our customers with unique and valuable insight on all relevant macroeconomic, political and industry risk factors
that will impact their operations and revenue-generating potential in the industry/industries they operate in.

Infrastructure Methodology

Our data and forecasts capture the entire spectrum of construction activities, including all areas of civil engineering and building
construction, as defined under the ISIC Rev.4.

Our data and forecasts for Infrastructure are broken down into: transport (road, rail, ports and airports) and energy & utilities (power
plants & transmission grids, water, oil & gas pipelines). Our building data and forecasts are broken down into residential and non-
residential construction.

Construction Industry

Construction Industry Value

Our construction data is derived from national accounts from each market's national statistics office (or equivalent). Specifically, it
measures the gross value added of the construction industry over the reported 12-month period in nominal values.

It is a measure of net value added within the industry, ie, the output of the construction industry, less the value of all inputs,
including labour and capital. The value metric here should not be equated with spending or with gross output, which for most
markets would significantly increase the overall figure. Furthermore, it is important to note that the data does not provide an
indication of the total value of a market's buildings, only the construction sector's output in a given year.

This data is used because it is reported by virtually all markets and can therefore be used for comparative purposes.

Construction Industry Value Real Growth

Our construction industry value forecasts are based on a regression model, using a market's own historical time series and key
macroeconomic variables, such as gross fixed capital formation, from Fitch Solutions Country Risk.

In addition, we will also apply analyst expert judgement to refine and finalise our construction industry value real growth forecast,
based on exogenous and endogenous variables or events, not captured by our regression model. Real growth is defined as industry
value nominal growth adjusted for sector-specific inflation (construction deflator).

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Bearing in mind that other factors need to be taken into consideration, both quantitative and qualitative, our analysts also factor in
sector-specific issues in deriving our forecasts:

• Political risk - potential change in leadership, policy continuity

• Regulatory outlook - pricing structures of specific markets, bureaucracy, red tape
• Currency outlook - currency volatility, cost of imports
• Funding availability - fiscal health of the government, openness to private/foreign investment
• Fitch Solutions Key Projects Database - indication of a market's infrastructure project pipeline by sector
• High Frequency Data – construction permits, starts, confidence etc
• Company developments - reflective of market dynamics and competitive landscape

Construction Industry, % Of GDP/Construction Value (USD)

These are derived indicators. We use the Fitch Solutions Country Risk team's GDP and exchange rate forecasts to calculate these
indicators.

Cement Forecast

Fitch Solutions forecasts Portland cement production (including imported clinker), consumption and net exports, in millions of
tonnes.

Our historical national production data is sourced from the United States Geological Survey (USGS), while trade data is sourced from
TradeMap by the International Trade Centre. By calculating production and net exports, we are able to determine historical
consumption levels.

These consumption levels are then forecast over our 10-year forecast period using our construction growth forecasts, reflecting the
changing demand picture for cement from the industry.

Construction Sector Employment

Total Construction Employment

This data is sourced from either the national statistics office or the International Labor Organization. It includes all those employed
within the sector.

Our total construction employment forecasts are based on a regression model, using a market's own historical time series and key
macroeconomic variables from Fitch Solutions Country Risk.

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Infrastructure Data Sub-Sectors

Source: Fitch Solutions

Fitch Solutions infrastructure data examines the industry from the top down and bottom up in order to calculate the industry value
of infrastructure and its sub-sectors. Our construction industry value is broken down into transport, energy and utilities, residential
building and non-residential building. We use a combination of historic data as reported by the central banks, national statistics
agencies and other official data sources, and Fitch Solutions' Infrastructure Key Projects Database, a comprehensive catalogue of
the major power, transport, utilities, residential and non-residential projects in each market.

Where possible we source historic data for the relative portion of either infrastructure spend or value generated by the various sub-
sectors we classify as infrastructure. There is no industry standard set of definitions for infrastructure classifications. Therefore, we
segment official infrastructure data into consistent and proprietary categories to compare industry value across sub-sectors.

In those instances where historic data is not available, we use a top down and bottom up approach incorporating full use of
the Fitch Solutions Infrastructure Key Projects Database, in most cases dating back to 2005. This allows us to calculate historical
ratios between general infrastructure industry value and its sub-sectors, which we then use for forecasting. Our Key Projects
Database is not exhaustive, but it is sufficiently comprehensive to provide a robust foundation for our calculations.

Our infrastructure sub-sectors industry value forecasts are based on a regression model, using a market's own historical time series
and key macroeconomic variables, such as fixed capital formation, from Fitch Solutions Country Risk.

In addition, we will also apply analyst expert judgement to refine and finalise industry value real growth forecast, based on
exogenous and endogenous variables or events, not captured by our regression model.

The residential and non-residential industry values are a function of construction minus infrastructure industry value. We further rely
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

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on national sources and our Key Projects Database to further estimate the separation between the two areas of building when
historic data is not available.

Infrastructure Risk/Reward Index

Our Infrastructure Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness within the context of the Infrastructure
industry, based on the balance between the Risks and Rewards of entering and operating in different markets.

We combine industry-specific characteristics with broader economic, political and operational market characteristics. We weight
these inputs in terms of their importance to investor decision-making in a given industry. The result is a nuanced and accurate
reflection of the realities facing investors in terms of 1) the balance between opportunities and risk; and 2) between sector-specific
and broader market traits. This enables users of the index to assess a market's attractiveness in a regional and global context.

The index uses a combination of our proprietary forecasts and analyst assessment of the regulatory climate. As regulations evolve
and forecasts change, so the index scores change providing a highly dynamic and forward-looking result.

The Infrastructure Risk/Reward Index universe comprises 104 markets.

Benefits Of Using Fitch Solutions' Infrastructure RRI

• Global Rankings: One global table, ranking all the markets in Fitch Solution's universe for Infrastructure from least (closest to
zero) to most attractive (closest to 100).
• Accessibility: Easily accessible, top down view of the global, regional or sub-regional Risk/Reward profile.
• Comparability: Identical methodology across 105 markets for Infrastructure allows users to build lists of markets they wish to
compare, beyond the confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the market profile.
• Quantifiable: Quantifies the Rewards and Risks of doing business in the Infrastructure sector in different markets around the
world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic and
operating risks.
• Entry Point: A starting point to assess the outlook for the Infrastructure sector, from which users can dive into more granular
forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.
• Methodology is a combination of proprietary Fitch Solutions forecasts, analyst insights and globally acceptable benchmark
indicators (example: Transparency International's Corruption Perceptions Index).

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Weightings Of Categories And Indicators

Source: Fitch Solutions

The RRI matrix divides into two distinct categories:

Rewards: Evaluation of an industry's size and growth potential (Industry Rewards), and macro characteristics that directly impact
the size of business opportunities (Country Rewards).

Risks: Evaluation of micro, industry-specific characteristics, crucial for an industry to develop to its potential (Industry Risks) and a
quantifiable assessment of the political, economic and operational profile (Country Risks).

Our matrix is deliberately overweight on Rewards (60% of the final RRI score for a market) and within that, the Industry Rewards
segment (60% of final Rewards score). This is to reflect the fact that when it comes to long-term investment potential, industry size
and growth potential carry the most weight in indicating opportunities, with other structural factors (demographic, labour statistics
and infrastructure availability) weighing in, but to a slightly lesser extent. In addition, our focus and expertise in emerging and frontier
markets has dictated this bias towards industry size and growth to ensure we are able to identify opportunities in markets where
regulatory frameworks are not as developed and industry sizes not as big (in USD terms) as in developed markets, but where we
know there is a strong desire to invest.

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Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com

IS SN: 1752-5330
ISSN:

Copy Deadline: December 2022

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