ARAMCO IPO SET FOR 2021, CROWN PRINCE SAYS

▶ Mohammed bin Salman adamant plan will go ahead and be worth $2tn

Saudi Arabia’s crown prince insisted the stalled plan to sell shares in oil giant Aramco will go ahead, promising an initial public offering by 2021 and sticking to his ambitious view the state-run company is worth $2 trillion or more.

The comments show 33-yearold Mohammed bin Salman’s determination to press ahead with the IPO even after Riyadh’s original timetable was undone by scepticism over the company’s valuation and a plan for Aramco to buy a controlling stake in the country’s biggest chemical producer.

“I believe late 2020, early 2021,” he said, discussing the timing of the IPO at the royal palace in Riyadh. “The investor will decide the price on the day. I believe it will be above $2tn. Because it will be huge.”

The IPO project was first announced in 2016 as the cornerstone of Prince Mohammed’s Vision 2030 plan to modernise the Saudi economy. Officials repeatedly said the deal was “on track, on time” for the second half of 2018, but earlier this year they said it would be delayed into 2019. Soon after, Aramco put the IPO on hold and instead started talks to buy a majority stake in local petrochemical giant Sabic, a deal potentially worth $70 billion.

Speaking on Wednesday, Prince Mohammed said the IPO was “100 per cent” in the nation’s interest.

“Everyone heard about the rumors of Saudi Arabia cancelling the IPO of Aramco, delaying that, and that this is delaying Vision 2030,” he said. “This is not right.”

Prince Mohammed said the IPO’s delay had its origin in mid-2017, when it became clear that Aramco needed a push into petrochemicals. He said it would had been unfair to go ahead with the listing only to surprise investors soon after with a big deal in chemicals.

The Aramco IPO would be a seismic event for financial markets. Prince Mohammed said he hoped to raise a record $100bn by selling a 5 per cent stake, dwarfing the previous record, set in 2014, when Chinese retailer Alibaba Group Holding raised $25bn.

For Wall Street, it would be a money-maker, with banks from JP Morgan Chase to Citigroup already working for Aramco. Yet in a world moving away from oil, the IPO would be a test of global investors’ appetite for fossil fuels.

The most recent statements on when the IPO would take place provided considerable room for manoeuvre. Energy Minister Khalid Al Falih said in August that Saudi Arabia would go ahead with the project “at a time of its own choosing when conditions are optimum”.

Prince Mohammed has now given the company and its advisers a new deadline, requiring the completion of the Sabic deal and acquisition and a giant international share sale in less than three years. Management and bankers will take some solace from the fact they have already made many of the preparations needed for an IPO, but it remains a daunting agenda.

Prince Mohammed said the deal between Aramco and Sabic, which he hopes will close next year, was key for the future of the country’s energy industry. The state-owned company can pull it off easily due to its low debt, he said.

“If we want to have a really strong future for Aramco after 20, 30, 40 years from today, Aramco has to invest a lot in downstream because we know that the new demand for oil 20 years from now, it will be from petrochemicals,” he said.

If Aramco had developed a separate petrochemical business, Sabic would have suffered, Prince Mohammed said, partly because Aramco provides Sabic with the bulk of the fuel it processes into chemicals.

Prince Mohammed said that the Saudi government would keep the Aramco shares after the IPO, rather than transfer them into the sovereign wealth fund as originally planned. Instead, the Public Investment Fund will receive the $70bn from the sale of its stake in Sabic, plus the $100bn aimed for from the Aramco IPO.