BMI View: Egypt’s descent into political turmoil must have serious consequences for the country’s critical infrastructure sectors, with the likelihood that a protracted period of political bargaining will undermine investor confidence in the water sector. The violence that has accompanied the outbreak of renewed protests across Cairo suggests a compromised political outlook for the country in 2012. Major decisions to advance key projects are unlikely to be prioritised, despite the urgings of the various multilateral donors that are funding some of these projects. The privately-funded PPP water projects await a firm political commitment from the top in order to progress and the PPP Central Unit’s future is uncertain. Without that driver, it is hard to envisage the authorities making the necessary moves to award contracts for some of these projects – nor is it evident that investors are ready to re-engage with a country that remains in the midst of revolutionary change.

Key themes to highlight for Egypt’s water sector:

• The ongoing political turmoil in Egypt will undermine ambitions to increase water production up to 2016, and BMI has again revised downwards its projections for output. Whereas we envisaged production of 7,520mn gallons in 2015 under our previous forecast in Q4 2011, the likely retardation of progress on centrepiece wastewater projects will render this target difficult to achieve, and we now see output that year at a slightly lower 7,494mn gallons.
• The next few months should see an intense period of political bargaining between the leading political groups, after which a semblance of a future programme for government should slowly emerge. The chances of this new political settlement being one that is broadly supportive of foreign investors look increasingly slim.
• The government is reported to be seeking a transaction adviser for the Helwan wastewater treatment plant, which has obtained financial support from the African Development Bank. Activity in the next quarter will be driven by political events, with the complex multi-phase election process undermining any moves to orchestrate a coherent political or economic programme. BMI does not expect important decisions on major water projects during Q112, though this may not preclude the appointment of advisors on some of these projects, such as the Helwan water project. By Q212, however, we would expect to see some form of concerted policy to prioritise major infrastructure projects, of which water will form a core component.

Table of Contents

Executive Summary 5

SWOT Analysis 6
Egypt Water Industry SWOT 6
Egypt Political SWOT . 7
Egypt Economic SWOT .. 8
Egypt Business Environment SWOT 9
Market Overview .. 10
Domestic Competitive Landscape .. 10
Pricing Mechanisms And Regulatory Framework .. 14
Sectors .. 16
Irrigation 16
Water Supply . 17
Wastewater Treatment . 17
Desalination .. 18
Major Projects 19
PPP Wastewater Projects .. 19
Water Supply . 20
Irrigation 20
Sanitation 21
Desalination .. 21
Key Projects .. 22
Table: Egypt – Key Water Infrastructure Projects . 22
Industry Forecast Scenario ... 23
Table: Egypt – Water Industry Historical Data And Forecasts, 2008-2016 .. 23
Regional Overview 24
GCC Industry Convergence Broken As Fault Lines Are Drawn .. 24
Table: Middle East Regional Infrastructure Business Environment Ratings . 28
Company Profile .. 29
Holding Company for Water and Wastewater (HCWW) . 29
Suez Environnement .. 31
Veolia Water . 33
BMI Water Forecast Modelling 35
How We Generate Our Industry Forecasts 35
Infrastructure Business Environment Ratings .. 35
Table: Infrastructure Business Environment

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