Drivers brace for Egyptian ride-hailing laws

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Ramez Wagih, an accountant in the morning and Uber driver in the afternoon, poses in his car in the Egyptian capital Cairo, on April 19, 2018. (AFP)
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New legislation regulating ride hailing services in Egypt may have been welcomed by Uber and competitor Careem, but some behind the wheel fear they could be driven out of business. (AFP)
Updated 23 May 2018
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Drivers brace for Egyptian ride-hailing laws

CAIRO: New legislation regulating ride-hailing services in Egypt may have been welcomed by Uber and competitor Careem, but some behind the wheel fear they could be driven out of business.
After various twists and turns, including a ban on ride-sharing as recently as March, Egyptian lawmakers passed a bill in early May, pending approval by President Abdel Fattah El-Sisi.
The laws will require drivers to pay 3,000 Egyptian pounds ($170, 140 euros) for a special license, a huge outlay in a country where the average monthly salary is around $200 and many people take multiple jobs to make ends meet.
“It is too much for an Egyptian,” says Khaled, who has been bolstering earnings from teaching Arabic by working for Uber these past few months.
“As soon as the law is implemented, I will leave Uber,” he adds, since 20 percent of each client’s payment goes to the firm, making it hard to turn a profit.
Another driver, Mohamed, 27, bought a car to work for the firm, so may invest in the license, but only if Uber guarantees earnings and provides support.
“If I have to pay fees without having the security of a normal job, I might as well be a taxi driver,” he says.
But the legislation has been given the thumbs up by the ride-hailing firms, with Uber Egypt managing director Abdellatif Waked describing it as a “historic step,” after years of legal uncertainty.
He says it paves the way for “increased investment, the creation of many jobs” and further Uber expansion in Egypt.
For Ramy Kato, Egypt managing director for UAE firm Careem, the new bill “sends out a strong signal that Egypt continues to be open for business and investment.”
A couple of months ago, the firms feared that would no longer be the case.
In March, a lawsuit brought by conventional cab drivers saw a court ban ride-sharing.
Uber and Careem appealed, securing a suspension of the ruling in April, pending a verdict by a higher court.
Both ride-sharing companies have invested heavily in Egypt.
The country is “one of Careem’s largest markets” where the company has invested $30 million and has more than 100,000 drivers, according to Kato.
With a local customer base of four million people, Uber plans to invest around $100 million in Egypt over the next five years.
The firm says it created 150,000 new job opportunities in the country during 2017 alone, including at one of its largest worldwide customer service centers.
The ride-hailing market is enhancing “investment, development and transport,” said Mohamed Badawi, a businessman and member of parliament’s transport committee.
Demand for the service in this country of around 100 million people is high, amid frustration with traditional taxi drivers, who sometimes refuse to turn on the air conditioning or the meter.
But some fear passage of the bill will not end the political and legal uncertainty, especially since taxi drivers will continue to fight the loss of their turf.
Ramez Wagih, an accountant in the morning and Uber driver in the afternoon, spent weeks tied up in bureaucratic red tape, before officials gave him a temporary license.
And the 36-year-old is buckling up for more mishaps ahead.
“The problem has taken too much time to settle and it will still take more,” Wagih says.


India’s small renewables firms fighting consolidation wave

Updated 21 August 2018
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India’s small renewables firms fighting consolidation wave

  • With many smaller operators being gobbled up or offering themselves for sale, the number of projects being developed could fall
  • Besides loans, other funding options have been dead ends for the smaller companies, further limiting growth opportunities

MUMBAI: Small to mid-sized renewable energy companies in India are starting to look like attractive takeover targets as lenders and investors withhold funds, worried by the stiff competition, weak bond markets, low tariffs and high debt besetting the sector.
The small companies’ difficulty in raising cash is keeping them away from government power project auctions, restricting their growth and crippling their ability to refinance loans, said a consultant from a top global consultancy firm.
With many smaller operators being gobbled up or offering themselves for sale, the number of projects being developed could fall, potentially keeping India from its renewable energy targets, said the consultant, who did not wish to be named as he is directly involved with a company that canceled a bond issue.
“India’s solar industry is becoming a big boys’ club,” said Rahul Goswami, managing director of Greenstone Energy Advisers.
In a few years, there may be only a few big companies and a few regional firms active in India’s renewable sector, he said.
The trend goes back at least to 2016, when Tata Power bought solar and wind company Welspun Renewable Energy, but the pace is expected to pick up.
“Smaller players are being squeezed out ... due to two main factors: cost of equipment and ... financing,” said Alok Verma, executive director at Kotak Investment Banking, an arm of Kotak Mahindra Bank.
One of India’s largest renewables companies, Greenko Group, said in June that it was buying 750 megawatts (MWs) of solar and wind assets from Orange Renewables, because the Singapore-based company saw few opportunities for growth. The deal has yet to be closed.
Essel Infra, with a renewable power capacity of 685 MWs, and Shapoorji Pallonji Group’s 400-MW solar arm are also in talks to sell off their assets, one firm and two banks doing the due diligence for these companies have said.
Besides loans, other funding options have also been dead ends for the smaller companies, further limiting growth opportunities.
ACME Solar postponed an initial public offering (IPO) announced in September last year as the proposed share issue did not generate enough interest from investors, confirmed a banker who was directly involved in the listing attempt.
Mytrah Energy, a major mid-sized renewables company, called off a $300 million to $500 million bond issue earlier this year as that option also went dry for the sector, and it canned IPO plans as well, said a separate banker directly involved there.
The companies have all declined to comment.
This dearth of financing and trend toward consolidation could be a significant threat to India’s target of 175 gigawatts (GWs) of renewables capacity by 2022, up from 71 GWs now, some analysts said.
Others said a concentration of bigger players, with more cash and better financing, could mean things move faster.
“Consolidation in the renewable energy industry augurs well for the overall success of the program ... Large players have access to required capital at reasonable rates and can procure the latest technology,” said Debasish Mishra, head of Energy, Resources and Industrials at Deloitte Touche Tohmatsu India.
Tata Power, one of India’s largest power generators, said in May it plans to invest $5 billion to increase its renewable capacity in India fourfold over the next decade to 12 GWs.
More than doubling India’s renewables capacity by 2022 will require $76 billion, including debt of $53 billion, the Ministry of New and Renewable Energy said in July.
Another problem in India’s renewable sector is debt.
“Many mid-sized firms have taken debt to fund their equity,” the partner of an investment firm said, adding that many such companies will need financial restructuring or have to put themselves up for auction.
This model of financing debt through equity is called mezzanine financing and tends to involve high interest rates and an option to convert debt to equity in future.
Both ACME and Mytrah are funded by Piramal Finance Ltd. via mezzanine financing, according to statements by the companies at the time of funding.
For lending banks, this quasi-equity is seen as debt, making the liabilities of these companies look higher than usual, said the partner, who asked not to be named. The investment firm handles all kinds of financing, including mezzanine.
When companies with mezzanine financing go to banks for funds for upcoming projects, banks ask them for higher collateral or offer less cash in loan, said Kotak’s Verma.
Fitch Solutions said in a note last week that India would likely miss its renewable capacity targets due to “risks stemming from bureaucratic, financing and logistical delays.”