Saudi Ara­bia set for US$11bil as­set sale

Busy year seen for king­dom if it sticks to plans

The Star Malaysia - StarBiz - - Foreign News -

RIYADH: Saudi Ara­bia could be in for a busy year of as­set sales if the king­dom sticks to its plans.

The gov­ern­ment hopes to gen­er­ate about US$11bil by 2020 through its pri­vati­sa­tion pro­gramme that in­cludes the sale of stakes in util­i­ties, soc­cer clubs, flour mills and med­i­cal fa­cil­i­ties. The sales are key to the coun­try’s ef­forts to wean the econ­omy off oil, but so far have been dogged by de­lays – most no­tably the IPO of oil gi­ant Aramco.

“With the cur­rent sta­tus of the ini­tia­tives and the progress the pri­vati­sa­tion su­per­vi­sory com­mit­tees are mak­ing, we see these as at­tain­able tar­gets,” ac­cord­ing to the Na­tional Cen­ter for Pri­vati­sa­tion (NCP) and PPP, which is re­spon­si­ble for most of the pri­vati­sa­tions ex­pect cer­tain deals like Aramco and the stock ex­change.

“Progress in most cases is go­ing ac­cord­ing to sched­ule.”

Saudi Ara­bia plans to com­plete the sale of four flour milling com­pa­nies and Sau­dia Med­i­cal Ser­vices fa­cil­i­ties this year, ac­cord­ing to the NCP.

The king­dom’s pri­vati­sa­tion process “has been one of the ar­eas of the long-term re­form agenda that has missed ex­pec­ta­tions, and has done so re­peat­edly,” said Jean-Paul Pi­gat, head of re­search at Dubai-based Light­house Re­search.

“Rel­a­tive to last year I don’t think macro or fi­nan­cial mar­ket con­di­tions at the start of 2019 are in any way sug­ges­tive of an ac­cel­er­a­tion in pri­vati­sa­tions.”

Here’s a look at where some of the king­dom’s big­gest pri­vati­sa­tions are up to:

Saudi Aramco

Crown Prince Mo­hammed Sal­man (pic) told the world in 2016 that he meant busi­ness when an­nounc­ing the sale of shares in Aramco in what would be the world’s big­gest IPO. But it was pushed out from 2018 to late 2020 or early 2021 so the com­pany, known for­mally as Saudi Ara­bian Oil Co, could com­plete a deal to buy a US$70 bil stake in the king­dom’s big­gest petro­chem­i­cal com­pany Sabic.

Stock ex­change

Tadawul, the Mid­dle East’s largest stock ex­change, un­veiled plans for a pub­lic of­fer­ing in 2014, hir­ing HSBC Hold­ings Plc as fi­nan­cial ad­viser in 2016. It was meant to take place in 2018, but sources said in April that it’s been pushed back to this year at the ear­li­est. That’s on hopes that the in­clu­sion of Saudi stocks in in­dexes com­piled by FTSE Rus­sell and MSCI Inc could boost the com­pany’s value.

Riyadh air­port

Plans to sell a stake in King Khalid In­ter­na­tional Air­port were said in Septem­ber to have been put on hold. The Saudi Civil Avi­a­tion Hold­ing Co was said to have asked lo­cal and in­ter­na­tional in­vest­ment banks in 2017 to pitch for the role of ad­viser on the sale.

Flour mills

Plans to sell four flour milling com­pa­nies by Saudi Grains Or­gan­i­sa­tion this year will come three years af­ter the idea was an­nounced, and well past the ini­tial tar­get of the end of 2016. Po­ten­tial buy­ers had un­til Novem­ber to sub­mit bid­ding qual­i­fi­ca­tion ap­pli­ca­tions. HSBC Saudi Ara­bia is ad­vis­ing on the deal.

Power plant

The sale of the US$7.2 bil Ras Al Khair power plant on the east coast is ex­pected to be done by 2020. BNP Paribas SA was hired to ad­vise on the deal in Septem­ber 2017. The sale is part of a broader strat­egy to pri­va­tise Sa­line Wa­ter Con­ver­sion Co by sell­ing some of its as­sets and de­vel­op­ing plants.

Soc­cer clubs

Plans to pri­va­tise soc­cer clubs started in 2016. There are cur­rently no “ob­sta­cles” that could de­rail the time­line to sell the clubs by 2020, the NCP said. Turki Al Al­shikh, for­mer head of the Saudi Sports Au­thor­ity, pre­dicted in June that the 16 clubs could raise US$800 mil to US$1.5 bil.

The NCP spent the past year de­vel­op­ing the le­gal and com­mer­cial frame­work to cover the use of ad­ver­tis­ing, spon­sor­ship deals and broad­cast rights, it said.

Up for grabs

The NCP said it will also open ten­ders for mu­nic­i­pal as­sets re­lated to com­mer­cial-land for devel­op­ment, re­new­able en­ergy PPP projects in so­lar and wind, park­ing cen­tres; a se­cond cargo li­cence sta­tion at King Khalid In­ter­na­tional Air­port, the es­tab­lish­ment of an agri­cul­ture com­pany and a PPP for in­de­pen­dent schools, as well as school build­ings on a build-main­tain-trans­fer ba­sis.

In the health sec­tor, the NCP will also open PPP ten­ders in ra­di­ol­ogy, lab­o­ra­to­ries, hos­pi­tal com­mis­sion­ing and hous­ing for health fa­cil­i­ties staff. The cen­tre is eye­ing as much as 28 bil­lion riyals (US$7.5 bil) in pub­lic-pri­vate part­ner­ship in­vest­ments.

“The main ob­jec­tive is to launch bank­able trans­ac­tions that will be ac­cepted by the mar­ket and at­tract lo­cal and in­ter­na­tional best-in­class op­er­a­tors and in­vestors,” the NCP said.

“Over the last 18 months we’ve been work­ing dili­gently to re­in­force the le­gal and com­mer­cial base for these ini­tia­tives.”

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