Wednesday, June 23, 2010

Egypt Energy Pricing Committee not decided yet on increment in energy prices for non-energy intensive industries in July 2010

The Energy Pricing Committee failed to reach a decision at its meeting yesterday regarding the increment in the prices of natural gas and electricity for the non-energy intensive industries, opting to further negotiate the decision with the concerned ministers to reach a conclusion in the coming days, reported Al Mal and Al Masry Al Youm newspapers.

The committee decided there was no need to further postpone the increase in energy prices for non-energy intensive industries beyond July 2010, but was not able to decide on the increment in prices, with the Ministries of Petroleum and Electricity calling for a 50% rise in prices, while the Ministry of Trade and Industry called for a 10% increase only in July 2010 to support industries.

Following the reaching of a decision, the committee will present its recommendation to the Prime Minister to reach a final decision on the subject.

Comment: While BELTONE had previously indicated that its analysis had shown that a rise in gas prices from USD1.7/mBTU to USD2.65/mBTU in one step in July 2010, the level stated in the 2008 Prime Ministerial decree, would have a negligible impact on the costs and profit margins of non-energy intensive industries, BELTONE note the increasing pressure from industries, especially the chemical industries sector, on the government to reduce the magnitude of the increase in gas and electricity prices in July 2010.
Under a scenario of a lower increment in prices, BELTONE continue to expect an insignificant impact on the companies and virtually no impact on the budget deficit and inflation, considering the limited magnitude of the increments and their impact on the general price level in local markets. BELTONE expect that any savings in subsidies would be redirected to other energy subsidy items, in addition to social items like health, education and wages. BELTONE expect a decision to materialise soon, considering that the rise in prices is scheduled to take effect in July 2010.