Aramco IPO on track for second half of ’18: CEO
RIYADH: Saudi Aramco’s initial public offering will take place in the second half of 2018, CEO Amin Nasser said yesterday, dismissing reports that the oil giant’s plans could be shelved. “We have always said that we will be listing in 2018, and to be more specific, in the second half of 2018,” Nasser said in an interview with CNBC television. “The IPO is on track. The listing venue will be discussed and shared in due course,” Nasser told the channel in Riyadh.
The Aramco chief also said Saudi authorities were not in talks with Chinese or other investors to sell a stake in the firm, estimated to be worth around $2 trillion. Aramco, which controls Saudi Arabia’s massive energy assets, plans to list nearly five percent of its shares in the stock market. The IPO is expected to be the largest in history, raising around $100 billion in much-needed revenue for the kingdom, which has posted $200 billion in deficits in the past three fiscal years.
Saudi billionaire Prince Alwaleed bin Talal, whose Kingdom Holding Co rivals the stateowned Public Investment Fund, has also hinted that Aramco might be headed for even more stock sales in the years to come. “If you go five percent, there’s nothing that prohibits you from going another five percent next year, and five percent the third year and fourth year, and so forth, depending on the situation,” he told CNBC yesterday.
The potential Aramco listing is a cornerstone of an ambitious economic reform program launched by powerful Crown Prince Mohammed bin Salman last year. The program, known as Vision 2030, aims to balance the Saudi budget after the OPEC kingpin lost hundreds of billions of dollars because of the slump in oil prices. Doubts have been swirling around the viability and ambitious timeline of the Aramco IPO. Saudi Arabia had laid out plans for a dual listing on the Saudi stock market and an international exchange for 2018, with markets in New York and London vying for the offering. But the company has struggled to select an international venue for its listing.
Analysts point out the practicality of a private placement of Aramco shares, which they say could give Saudi Arabia an immediate cash injection and more flexibility to consider various listing options. “A private placement of a small stake in Aramco would solve a lot of headaches with the current efforts to list the company in global platforms,” said Karen Young, a scholar at the Arab Gulf States Institute in Washington. “The price can be more directly negotiated, and help its original motivation to relieve some fiscal pressure in the short term. A direct placement can also be closed quickly,” Young told AFP.
“A private placement... could increase the likelihood of a delay in the IPO beyond 2018,” said analysis firm Eurasia Group. It added, however, that the move would offer Saudi Arabia the flexibility to list on an international exchange when oil prices perk up. Unlike the IPO, a private sale would also spare the kingdom’s leadership from the eagle-eyed scrutiny of global investors. Investors have long debated whether Aramco could really be valued close to $2 trillion, as the Saudi leadership claims.
“Domestic politics in Saudi Arabia right now do not need a scandal” surrounding Aramco’s finances, said Young. For the IPO to succeed, Aramco’s oil reserves would have to be independently verified and its internal finances reliably audited - a kind of transparency that the company is unaccustomed to. “Saudi Arabia will have to disclose a great deal of facts and figures that it has traditionally viewed as state secrets,” said Hossein Askari, a professor of business and international studies at George Washington University.
While options exist for Aramco, the kingdom’s crown jewel, it would be difficult to abandon the international IPO, which would be seen as a major setback for Prince Mohammed’s reform plan.