AN INTERVIEW WITH HAZEM SHAWKI, MD &

BAKR ABDEL-WAHAB, VP

OF EFG HERMES PRIVATE EQUITY

CO-SPONSOR OF

HAZEM SHAWKI
HEAD OF EFG HERMES
PRIVATE EQUITY
Prior to joining EFG Hermes in 2008, Mr. Shawki
was a Managing Director in Investment Banking
with Goldman Sachs, covering the MENA region.
He joined Goldman Sachs in 1999 as an associate
in the Telecommunications, Media and Technology
12 – 15 DECEMBER 2010 group within Investment Banking in London. In
CAIRO EGYPT 2004, he moved to the European Financing Group
in London, where he focused on Equity Capital
Markets (ECM) for the European New Markets
area and in 2007 he moved to Dubai to take on
coverage responsibility in the MENA region. Mr.
Shawki earned his MBA from the Stanford
Graduate School of Business and a BA First Class
Joint Honors in Economics and Finance from
McGill University.

With the focus of the investment market in Egypt getting fixed on the new PPP
law ratified in May 2010, many questions arise regarding transparency, project
pipelines, private exposure and opportunities and the ramifications of the law on
existing regulations.

IQPC’s interview with one of the leaders in PPP investments in Egypt gets to the
heart of the issues at hand.

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.
 IQPC: We welcome Hazem Shawki, Managing Director for EFG Hermes Private
Equity and Bakr Abdel-Wahab, Vice President. EFG Hermes is a sponsor for the
PPP Investment Summit, which will be taking place in Egypt this December, from
the 12th to the 15th.

First of all, could you please tell us something about EFG Hermes and its work
with PPPs?

Hazem: EFG, as you may know, is a leading investment bank in the region. It has
over 1,000 employees now, with a presence in Egypt and beyond Egypt in the Levant,
and as such we engage with infrastructure investing in two ways: through our
investment banking advisory capability, as well as through the private equity arm, and
as you may have heard, that was evident recently when we did the first closing of an
infrastructure fund targeting certain PPPs and Greenfield projects in the
Mediterranean Region.

IQPC: And how long has EFG Hermes been working with infrastructure projects?

Hazem: Our involvement with infrastructure dates back to the original fund
distribution companies that were started in Egypt over ten years ago, and some of the
telecom licences that were issued back then as well, so it probably counts for about
ten years.

IQPC: Could you elaborate on these? Just possibly an outline of the work that
you have done with infrastructure projects to date?

Hazem: We have been involved in the recent round of projects, that have come to the
fore, we were an active participant and a bidder in a consortium to bid for waste
water, the project that was tendered and awarded last June, and we’re also engaged in
the two follow-on projects on waste water in 6th October, as well as the PPP that’s
being offered for the Valley Homes projects, and the roads projects as well, so here in
all the pipeline of projects that have been recently coming forth in the PPP initiatives I
think we are very glad actually that these things are, that these projects are being put
through, because it indicates a commitment of the government to follow through on
this PPP initiative, and it is for that reason that we are obviously investing time and
effort to establishing a platform to direct the appropriate infrastructure investing, for
Egypt’s platform, that we are in the process of putting together right now.

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.
 IQPC: In May this year, Egypt ratified the PPP law. How do you feel that this has
made a difference for entities like EFG Hermes?

Hazem: I think, for us, the biggest difference here was the fact that came after the
passage of the law, which was the preference of the government to allowing a broader
role for the private sector, for the private sector to get involved in infrastructure
development, and establishing rules and regulations for that sort of activity, because
previously some of these initiatives were ad hoc, coming from various pockets within
the government.

It was very difficult for someone like EFG, for example, to establish a dedicated
platform and invest in developing an infrastructural platform, and also it would have
been difficult for us to channel capital and investor funds in a consistent and direct
way into infrastructure, because you had no certainty on the level of projects or of the
pipeline, and the strength of the programme that was going to come to Egypt.

Today, with the law and the pipeline that’s being communicated to us, we are able to
invest and establish the platform, as well as convince investors to deploy capital to
support this platform, and hopefully to invest in these projects.

IQPC: Until now, there have been sector specific PPP laws or regulations that deal
with PPPs in a particular sector, and you mentioned that EFG has been involved in
infrastructure projects in various sectors over the years. How do you see a unified
law, such as the one that has been passed, affecting these sector specific laws?

Hazem: For us, obviously the direct impact here is it reduces uncertainty and
obviously the automatic corollary of that is it increases investor appetite, or gives
more confidence to the investor coming into the sector, to have a more predictable
investing environment in which to operate.

Anything that increases uncertainty or influences difficulties between different sectors

or different departments issuing projects hampers, I think, the investors for us, so the
direct benefit for us is really having a uniform platform which
a) allows us to gain certainty on the growth from a contractual standpoint, but
also at the same time
b) reduces the transaction costs of needing to investigate and go to a ground level
every time you’re engaging on a project, and we talk about the very basic
fundamentals of the PPPs, guarantors and counter parties and things of that
nature. I don’t know if Bakr has anything to add to that?

Bakr: It also gives us probably a better visibility of the pipeline, because previously
you needed to look in various pockets within the government authority for projects
that are being studied or being discussed, whereas now, under this unified law, the
pipeline is clear. Unfortunately, it’s not too strong at the moment, but I think its early
days, and with a fact finding project or so, we start to see a stronger pipeline.

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.
 IQPC: Yes, that’s actually a very good point. I think we have heard the same
thing, that while the pipeline is not as strong as it should be now, it is in the
infancy stage, and everybody is very, very positive on the unification aspect of this
law. Being an entity like EFG Hermes and having worked in the various sectors,
I’m sure you appreciate the value of the private sector when it comes to PPPs. In
your experience, Hazem & Bakr the question is to both of you, what needs to
change in the private sector for them to really reap the potential economic benefits
of PPPs in Egypt? And, while we’re on that question, I want to also ask if you
could tell us more about the same question, but with regard to another economy,
like for example Kuwait or Jordan?

Hazem: I think investing in infrastructure and primarily infrastructure, because that’s

what we’re talking about here, is increasing the net capital stock of infrastructure in
these economies, the involvement of the private sector needs to come in a guise that
facilitates the profile of the investment that’s possible to be reached here, which is
once you have project executioners, analogous to utility, it’s a very stable, long term
profile, and the key question for us for the private sector to be involved here is, how
do you package this product and channel the traffic efficiently to these projects? And,
what is the ultimate form of ownership?

It has been the case previously for family groups and conglomerates that own some of
these assets, it has also been the case that strategic investors, primarily foreign,
because they had the technical know how and they were the operational owner, that
established these entities, and now what we’re talking about is bringing some of these
capabilities back home for domestic institutions to establish these entities, but then in
a way, that was for some of the private sector entities trying to engage in this because
it differentiates in a way the types of business that they engage in, the capital
structure, their value proposition, especially if they’re publicly listed, and that
transition needs to be clearly articulated for the markets, that there is a very clear
understanding as to what a company is trying to do, and the risk profile is taken on,
and the synergies of the organisations that are involved or participate in this sort of
infrastructure work.
Bakr, what would you say? Do you have anything to add on this?

Bakr: No, I agree with what you’ve mentioned, and I guess relating to Egypt and even
some of the Middle Eastern countries, one of the things that needs to change is
probably to see sponsors taking on more of a leadership role, because what we have
been seeing to date is predominantly global companies going into a region and
sponsors taking more of local partner, which is good and it needs to be maintained,
but we would also like to see more leadership on taking on big regional contracts, and
taking on the operation and maintenance of the roads and the power plants, and to
start to see themselves regional and national champions, and I think this will come
with time.

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.
Further, also the network around an infrastructure transaction, as you both know,
advisors play a huge role. Again, one of the things that need to change is project
finance advisories and infrastructure legal advisories taking on more of a, being at the
forefront, and strengthening the region’s capabilities.

IQPC: Egypt is quite easily one of the strongest financial economies in the Middle
East. Obviously foreign investors and foreign capital is important, because when
foreign investors do come into a PPP role, they look at a long term multi-billion
dollar exposure and benefit, because you’re talking about something that could
take up to 10, 15, maybe 20 years, depending on the project of the infrastructure,
but at the same time, you mentioned that the local sponsors, while they are
involved, there should be more involvement and they should take up a leadership
role. Who do you see leading the way, in terms of this?

Hazem: I think that I’ll give you a perspective and later expand on that. I think there
are two sides to this equation. There is a side that, as you mentioned about the direct
benefits of the economy in terms of know how and building up skills and establishing
a sponsor that then is in its own right is capable of growing regionally and trading a
regional or a multinational platform for the sort of business it does, and there are
already in Egypt successful companies that aim to do that leveraging their strength in
Egypt, and EFG is one of these companies.

But, I think you need to be cognisant of the fact that we need to also ensure that the
building of all the skills happens over a period of time, gradually and we cannot take
risks on the quality of the infrastructure that is ultimately being provided to the end
user, and ultimately the people in Egypt, because the first part is just to ensure that the
quality of service that is being procured through the PPP for the country is of the right
standard and quality.

So, you can perhaps look at that, but I think it’s…the most important direction here is
first to enable the quality to be delivered.

IQPC: Bakr?

Bakr: I think Hazem is right. I don’t extend support, for example, opening up the
procurement sources at tenders for regional or local companies first and then going
internationally. I think it should be open to everyone, similar to what we’ve seen in
the power sector in Egypt, but what I would like to see, just elaborating from this, my
previous answer, is regional leaders competing on the same level ground as some of
the global leaders, and I think this will come with time, and it’s an evolution.

To say a company can participate in the bid, as more of a local partner and then the
second bid, perhaps a bigger interest in the project, more participation and then by the
third project, we can see that company having their actual skills, the credentials and
the required experience to pre-qualify and enter the tender as a consortium leader, and
also the benefits of the economy can be produced, if you’re open to the international

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.
partnerships, because again on how it stands today, on probably the tough contractor
level and the local employment level in a lot of situations, with large infrastructural
projects, jobs will still be created and the skills will still be transferred, even if it’s
international, and if local companies are taking the lead on some of the fact finding
projects. So, I guess the conclusion is to open up to international tenders.

IQPC: EFG Hermes is the Co-Sponsor for the PPP Investment Summit, and it’s a
pleasure to have you on board. There’s going to be a lot of expertise at this event.
Being under the patronage of the Ministry of Finance, we have very high level
people from the government, the private sector and from the capital and
investment banking sector. What do you think will be the major talking point
among people when they are networking at this event?

Hazem: I can tell you what our main concern is, which I think is a concern that
perhaps others will share, and something that they will want to communicate and
impress upon the Ministry representatives, which is: we, to deliver on the ambitious
investment pipeline and what is required in terms of infrastructure upgrade, we need
to really strengthen the pipeline and increase the throughput capacity and processing
capacity within the government to enable it to tender and deal with multiple projects
at the same time, and that obviously with them embarking on a new set of regulations
and a new construct, we just need to avoid any bottlenecks, as to the capacity of
essentially the people on the government side to manage and handle many of these
projects, because there are problems that I think we’ve known and we’ve seen from
other PPP projects and infrastructure initiatives around the world, that the tendering
process and the qualification and the financial close takes time, and we need to be
able to deliver on the initiatives, the pipeline that’s been put forward by the various
Ministries and sectors, to create enough of a capacity for investment on behalf of the
government to enable that programme to really succeed and to in a way meet the high
expectations that we as investors and others, I’m sure, are expecting that this will
deliver.

IQPC: Bakr?

Bakr: Actually, I completely agree with Hazem. One of the concerns is that the
pipelines, if you look at the detail of, for example, the UK, it’s a little bit slow, the last
few years, but at its peak, in its first seven or eight years, by the end of that, there
were about 600 projects signed and about 25 billion GBP worth of capital funding
those projects aggregated, so what we’re seeing at the moment is a good start, but we
really need to see a stronger pipeline, so entities like EFG or others may be main
sponsors from the industrial side of things, would engage in more than one at the
same time. So, this is our main point. I think we hope that will be communicated to
the authorities and through PPP.

IQPC: Definitely. We will make sure that this query goes through the ranks and
of course, there will be various panel sessions, and in the various sessions with
them, I’m sure companies such as EFG Hermes and the others, who are coming
to this Summit, will bring this up and I hope to see a very dynamic dialogue

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.
 taking place, and I also hope to see you receiving the answers that you’re looking
for, when you attend.

Thank you, gentlemen, for a great and educating conversation here, it was really
eye opening and I’m sure our audience will appreciate the insight that you’ve
given in your capacity as one of the leaders in investment banking in the region.

I look forward
FOR MORE GREAT CONTENTto see
OREFG
TO Hermes at theFOR
REGISTER PPPTHIS
Investment Summit EVENT,
EXCLUSIVE in Egypt CALL
in US ON +9714 364
December. 2975 OR EMAIL US ON ENQUIRY@IQPC.AE

All opinions and statements in this interview are of the interviewee themselves and do not
reflect the opinion(s) of IQPC and/ or its personnel.