Private Equity

Overview

EFG Hermes Private Equity is a regional leader in its field, with a track record that spans more than two decades and a reach that extends over multiple continents. The year just ended saw the division continue its long run of rapid growth, with its experienced management team striving to achieve an asset configuration that offers exposure to the most attractive market opportunities while meeting its investors’ evolving requirements.

EFG Hermes’ Vortex Energy Platform propelled the Firm into the European top rank of renewable investment managers, and 2018 marked a new chapter in Vortex’s growth story and EFG Hermes’ intensive involvement in the clean energy sector.

The year also saw EFG Hermes Private Equity successfully complete the first close of the Egypt Education Fund, which will focus on Egypt’s promising K-12 private education sector. The Fund, which reflects the Firm’s commitment to investing in critical sectors of its Egyptian home market, is a core component of an education platform built by the Firm in exclusive partnership with Dubai-based GEMS Education, one of the world’s oldest and largest K-12 private education providers.

Operational Highlights of 2018

Vortex

In December 2018, Vortex Energy entered into a definitive agreement with institutional investors advised by J.P. Morgan Asset Management to sell its 49% stake in a 998 MW operational wind power portfolio managed and co-owned by EDPR. Assets included in the sale include 56 operational wind farm across Spain, France, Portugal and Belgium.

During the period in which Vortex held the stake, it was able to return attractive cash yields to investors and continuously create value for its shareholders. The sale of Vortex Energy’s wind assets put on clear display the Private Equity Division’s trusted ability to acquire, manage, and exit renewable energy investments in markets spanning the globe.

By year-end 2018, Vortex’s renewable energy assets represented a combined capacity of 822 MW and combined executed transactions in excess of EUR 2.4 billion. Vortex Energy continues to hold its investment in a 365 MW UK solar PV portfolio, which is managed by Beaufort.

Egypt Education Fund

In partnership with Dubai-based GEMS Education, the year saw EFG Hermes take the first step towards building Egypt’s largest institutional education service provider. In December, the Firm’s Private Equity Division successfully completed first close on its DIFC-based Egypt Education Fund. The Fund’s offering was oversubscribed, with total commitments of approximately c. USD 109 million, an inflow far exceeding the initial target of USD 50-100 million. With strong interest from a diverse group of international investors, equity capital for the Egypt Education Fund was raised in just six months. This speed demonstrated investors’ trust in EFG Hermes Private Equity’s ability to construct innovative equity products that offer exposure to untapped opportunities while helping meet their distinctive investment goals. Subscribers to the Fund included high-net worth individuals and institutional investors from Egypt, the GCC, and Southeast Asia.

EFG Hermes Private Equity is targeting a fund IRR exceeding 25% and is working with GEMS to deploy USD 300 million over the next three years for the development of a portfolio of 30 schools with a total of 40,000 students. Egypt’s expenditure on education services continues to lag that of peer countries, and the market presents ample opportunities for growth and development. The platform finalized its first Egyptian investment in May of 2018, acquiring four national and British schools in the Greater Cairo Area from Talaat Moustafa Group in a transaction worth USD 56 million. EFG Hermes’ partnership with GEMS, a best-in class provider of K-12 education services, ensures that on-the-ground management of the platform’s assets will be in the hands of a trusted industry leader.

EFG Hermes’ Egypt Education Fund is the largest Egypt-focused fund to be floated in over a decade. The Private Equity Division’s successful first close of the Fund’s equity financing underscores EFG Hermes’ commitment to investing in core sectors of the Egyptian economy and facilitating much-needed inflows of foreign direct investment.

Key Financial Highlights of 2018

Revenues at the Private Equity Division climbed 12% y-o-y to record EGP 146 million for 2018.

2019 Outlook

In the year ahead, EFG Hermes Private Equity will begin working to reinvest the proceeds from its sale of Vortex assets in new renewable energy opportunities. The division will leverage its extensive experience as a renewable asset manager as it seeks to gauge opportunities in markets further afield, including in the US and Canada. Closer to home, the division expects to complete the second close of equity financing for the Egypt Education Fund during 2019. EFG Hermes Private Equity is in talks with several global financial institutions expressing interest in subscribing to the remaining ticket, and aims to raise an additional USD 40 million in capital.