CAIRO: Egypt s Orascom Construction Industries (OCI) has formed a 50/50 joint venture with Morgan Stanley to develop and invest in infrastructure in the Middle East and Africa, the companies said on Tuesday.
Governments across the region, particularly of oil-rich Gulf states, are pouring billions into infrastructure to battle the global downturn. OCI has focused on projects such as transport and water treatment since Egypt unveiled its stimulus packages.
The firms have put up hundreds of millions of dollars for the venture, and plan to boost that to billions through debt and taking other partners, OCI Chief Executive Nassef Sawiris told Reuters, declining to give specifics because of legal regulations.
Sawiris said that Morgan Stanley would bring a great deal to the venture in terms of its networking, putting structure into the venture, as well as financing. They will support us in deal initiation through some of their global partners.
The deal could help OCI, Egypt s biggest listed builder, juggle more work by providing a partner willing to absorb some of the risk that comes with long-term projects. Morgan Stanley would benefit from OCI s regional expertise, analysts said.
From Morgan Stanley s side it s obvious they want to get in with someone who is pretty strong in execution, with a lot of relationships in the region, with a big workload, said Beltone analyst Ismail Sadek. It s a good deal for Morgan Stanley.
The venture is studying investments in power generation, port construction, waste water management and other projects, Sawiris said.
Obviously the countries where we are strongly present will probably have the larger deals, he added, listing Egypt, Algeria and Gulf Arab countries.
As of September 2009, infrastructure projects represented 60 percent of OCI s $7.2 billion backlog of outstanding projects, the construction firm said. Morgan Stanley Infrastructure, an investment platform, manages $4 billion of investments.
The coming decade will require higher investment rates in infrastructure to sustain economic growth in the Middle East and Africa, Global Head of Morgan Stanley Infrastructure Sadek Wahba said in a statement.
Shares in OCI traded down 0.1 percent by 1055 GMT, less than the benchmark index, which shed 1.4 percent in a broad sell-off.
OCI, which lists its shares in Cairo and London, has interests in construction and fertilizer production. Many analysts predict it will do well this year as fertilizer prices continue to rise.
2010, as expected, is proving to be a stronger global fertilizer demand year. Prices are moving up and demand is picking up, Sawiris said. We think 2010 will be a solid year, and will continue in 2011.