QALA For Financial Investments : Annual Report 2021

AFRICAN LEADER IN

ENERGY & INFRASTRUCTURE

R E S I L I E N C E A N D AG I L I T Y F O R

SUSTAINABLE GROWTH

Annual Report

2021

TABLE OF

CONTENTS

Chairman's Note

Our Heritage & DNA

Qalaa Holdings at a Glance

Our Strategy & Investment Thesis

2021 Financial Highlights

Sustainability & Responsible Investing

Corporate Governance

2021 Operational Highlights

Financial Statements

06

08

10

12

16

22

56

70

122

RESILIENCE AND AGILITY FOR

SUSTAINABLE GROWTH

Amid seismic shifts in the global economy and a rapidly shifting operating environment this past year, Qalaa Holdings has continued to respond with resilience and agility. As the world enters into a period of adjustment from globalization, the Group's solid investment thesis will help provide support as the Group navigates upcoming challenges and a new global environment. Qalaa is proud to remain a pivotal player in Egypt's national economic strategy, continuing to be at the forefront of private sector development in Egypt.

ABOUT QALAA

HOLDINGS

About Qalaa Holdings

Chairman's Note

Fellow Shareholders,

This past year saw the Group react to seismic shifts in the global economy and a rapidly shifting operating environment with resilience and agility. This comes as no surprise to me as I have always been optimistic about the future of our businesses and a strong believer in the opportunities in our markets waiting to be harnessed. We have a solid investment thesis with incredible

regulations and cross-border controls, while core policy reforms in the US remain to be seen, changing the rules of the game. The shifting role of China amid its unfavorable demographics is evidenced by successive delistings from the New York Stock Exchange, coupled with a gradual move away from its position as the manufacturing hub for the US and Europe. As a result, we

We are benefitting from a strong competitive advantage across our platforms that have a high percentage of local inputs and resources or high volumes of export sales.

potential that will support us on our path of navigating upcoming challenges and a new global environment.

As the world enters into a period of adjustment from globalization, we see difficult times ahead, especially for emerging markets. Heading into a new phase of increasing protectionism and diminishing interdependence between nations, significant inflationary pressures - which show no signs of slowing down - have impacted every corner of the world, driving sluggish economic growth globally.

A Period of Adjustment and Unprecedented Global Challenges

During the past decade, globalization has been put to the test through a series of significant events that posed serious challenges and offset the benefits it once provided. With tumultuous times bringing structural global issues to the surface, protectionism and nationalism have given way to a less connected world, shifting away from openness and interdependency between national economies. This period will be one of long- term adjustment as nations move to both safeguard and untangle themselves from global value chains, which exacerbated the ripple effect of localized economic and political shocks to uncover systemic vulnerability.

In an uncertain post-COVID recovery, the ongoing US-China trade tensions have sparked further localized

see a dwindling level of access to capital for Asia's largest economy, creating a significant deceleration globally.

To the West, unfunded liability levels are placing US pension funds at a risk of imploding, driving fundamental national policy changes. On the capital markets front, rising interest rates had a substantial negative impact on fixed income instruments in parallel to shaking up company valuations, which witnessed sharp declines. With markets entering repricing mode following interest rate tightening, we can expect an economic slowdown to persist in the fight against global inflationary pressures. In addition, we see increasing yields that result in funding difficulties across emerging markets, leaving record levels of government debt in its wake.

The repercussions of the Russia-Ukraine conflict have further exacerbated adverse market conditions. Its impact on energy and food security has caused supply scarcity across European and emerging economies, leading to energy price hikes. It is more imperative now than ever to continue our path towards diversifying energy supply sources and routes. Qalaa is exceptionally positioned to support the accelerated deployment of renewables and is already solidly rooted in the sector with Taqa Arabia's EGP 1.35 billion solar power plant in Aswan's Benban Solar Park that connects 65 MW of solar energy to the national grid.

Qalaa Holdings has proved more than able to navigate these tough waters in the past couple of years, as inflation shifts pricing power to producers across all sectors, and as local manufacturing gains more support. We are benefitting from a strong competitive advantage across our platforms that have a high percentage of local inputs and resources or high volumes of export sales, and I am proud of our adaptability. We have been able to maneuver difficult macroeconomic dynamics to come out stronger on the other side, and I continue to look to our future optimistically, with big hopes for the progress of our investment strategy.

A Reengineered World Order Benefits Emerging Markets

The reengineering of the international economic order will in essence create a trade divide akin to the Cold War era. It is amid the turbulent global landscape that emerging markets will need to identify unique opportunities to bridge the divide and overcome their struggle to seek funding and investment support in the absence of carry trade and timid appetites for long-term bond issuances. To drive GDP growth and nurture trade and investment, emerging markets will be pushed to seek structural solutions from within and to harness their own competitive advantages. Emerging markets will forge key positions for themselves among the ranks of the realigned economic order through the successful

and advantageous deployment of natural resources and capital. The ability to buoy up cross-trade efforts will unlock huge potential for non-aligned markets.

In a world plagued by misallocated resources resulting from conflicts and disruptions, we see trade bottlenecks and rising prices bringing about supply shortages for critical inputs to European markets. With these shortages come abundant opportunities for emerging markets to fill in supply gaps and ramp up productivity, acting as regional hubs and exporters. Qalaa Holdings is particularly well positioned, geographically and operationally, to fill the gap of much needed energy resources in developed markets as well as African countries.

While this is a period characterized largely by adjustment, it is also one of massive opportunity. With Europe looking less viable as a manufacturing hub, Egypt is uniquely positioned to benefit from

97.7 EGP

bn

total revenues FY21

6 Qalaa Holdings Annual Report • 2021

2021 • Qalaa Holdings Annual Report 7

About Qalaa Holdings

the changing dynamic of the global economy. The Egyptian government continues to strongly encourage the private sector on all fronts, as the country grapples with energy and food security threats as a result of a historic FX disequilibrium.

Qalaa is proud to play a pivotal role in Egypt's national economic strategy, as we meet its challenges with determination and resolve, and continue to be at the forefront of private sector development in our home country. ERC, Africa's largest privately-led infrastructure project and Qalaa's leading energy subsidiary, increased its contribution to national demand for quality and cost- efficient fuel in 2021. ASCOM was able to penetrate new international markets and grow export sales volumes on the back of global supply chain disruptions, and Dina Farms stepped up local sales to meet rising food demand leveraging facility enhancements and a diverse offering.

Looking Ahead

Aided by decentralization, Egypt stands to benefit from the trend of "reverse immigration", which will create new pools of talent across a diverse range of local industries. As a nation, the influx of expertise and talent can help us act as a springboard granting international access to new and untapped African markets abound with potential.

We will continue to leverage our presence across various sectors that show promising growth opportunities in line with our appetite for calculated risk. With an already diversified portfolio, Qalaa will focus on expanding and growing investments within our existing portfolio. In line with this strategy, we successfully invested in TAQA Arabia and more than doubled the number of CNG stations at TAQA Gas in 2021. Similarly, a new state- of-the-art facility was inaugurated at National Printing, which has already shown significant potential for export.

Growing responsibly and positioning sustainability at the core of our investment strategy gives me great pride, and we remain steadfast in our mission to reduce our carbon footprint and contribute to Egypt's transition to clean energy. It was a great moment for us in 2021 when we inaugurated our 6MWp solar plant at Dina

Farms to reduce Co2 emissions generated by our 4,000 acre project, as well as when we were recognized by the Financial Regulatory Authority as a pioneer in the field of sustainability and responsible investment in its Inaugural Publication: "Sustainability Champions: Leading the Way Forward". Moreover, both TAQA and ERC are on the path to eliminate a substantial volume of the country's emissions, contributing to sustainable economic growth.

We have been shielded from the shocking impact of the local currency devaluation by a solid portfolio structure. Leveraging the same management of 30 exceptional professionals that helped bring us to where we are today, our strategy is to continue humming on all four cylinders across Qalaa, especially as energy prices and a strong USD play in our favor. Risks will decline as we focus on deleveraging and prudent - yet lucrative - investments, in parallel with executing strategic large investments over the few years. I'm very pleased that the debt restructuring at Qalaa Holdings is nearing an agreed term sheet, which is making me more and more optimistic about the coming medium-term results for the Group.

I see this as a time of countless opportunities for progress for Qalaa Holdings. We will continue on our investment path, safe with the knowledge of a secure and favorable risk return trade-off. As we near the tail end of our 15-year restructuring journey, we look forward to unlocking the inherent value of our existing portfolio in the near term.

The incredible progress that we have achieved could not have been possible without the commitment, inno- vation, and forward thinking of our employees, Board of Directors, and shareholders. Their contribution is key to our continued success, and I am confident in our ability to achieve future accomplishments and milestones together.

Ahmed Heikal

Founder and Chairman

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