Kingdom to finalize $533 million privatization deals this year
RIYADH: Saudi Arabia remains committed to selling shares in national oil conglomerate Aramco through an initial public offering but only at the right time, Crown Prince Mohammed bin Salman has said.
“We are committed to the IPO of Saudi Aramco based on appropriate conditions and at the right time,” Prince Mohammed told the pan-Arab daily Asharq Al-Awsat in an interview published yesterday. He reiterated his earlier expectations that the IPO of Saudi Aramco “will take place in (late) 2020 or the start of 2021,” almost two years later than expected.
Saudi Arabia plans to sell up to five percent of the world’s largest energy firm and hopes to raise up to $100 billion. Prince Mohammed said it was still premature to announce where the IPO will be held, adding that many requirements for the sale to go through had been successfully completed. Riyadh has taken a number of key procedures in preparation for the IPO including issuing a law for hydrocarbons tax, appointing a new board for Aramco and allowing an independent auditing of the kingdom’s oil reserves, the crown prince said. Aramco has also opened its accounts books for the first time to international ratings agencies, declared the size of its profits and transformed into a public shareholding company, he said. The IPO-expected to be the world’s largest stock sale-forms the cornerstone of a reform program envisaged by Prince Mohammed to wean the Saudi economy off its reliance on oil.
The crown prince said that the government will finalize privatization deals worth 2 billion riyals ($533 million) before the end of this year, according to an interview with the Saudi-owned Asharq Al-Awsat newspaper.
The privatization drive is part of Vision 2030, a package of reforms led by Crown Prince Mohammed bin Salman that is intended to wean the economy off oil and create jobs for young Saudis. The expected deals will be in sectors that include rain silos, medical and shipping services. The government will next year offer privatization projects in the education sector with investments worth around 1 billion riyals, according to the interview. The government’s aim to attract investment into everything from education to sports, a cornerstone of its effort to trim dependence on oil revenues, has been mired by some holdups and fallout from the murder of journalist Jamal Khashoggi.
Riyadh had previously set a goal of aiming to generate 35 billion to 40 billion riyals ($9.3 billion to $10.0 billion) of non-oil state revenues from its privatization program by 2020. Some of that money would come from asset sales, while the rest would come from public-private partnerships. But that drive has had some false-starts. The most high-profile was the shelving of proposals to float shares in oil giant Aramco. The crown prince, known as MbS, said the government remains committed to Aramco IPO, expecting it to take place between 2020 and early 2021.
He added that recent Aramco acquisition of a majority stake in petrochemical giant SABIC would help its growth potentials and profitability amid usual oil market volatility. He said the kingdom’s sovereign wealth fund (PIF) is playing a major role in the economic diversification process and that its assets has doubled in two years to 1 trillion riyals. – Agencies