Saudi Arabia to invest $1b in Branson’s space firms
Saudi Arabia’s primary wealth fund plans to invest about $1 billion (Dh3.67 billion) in British billionaire Richard Branson’s three commercial space companies, including space tourism firm Virgin Galactic.
The Public Investment Fund of Saudi Arabia and Virgin Group said on Thursday that the money comes as part of a new partnership between the two. According to the agreement, the kingdom’s fund also has an option to invest an additional $480 million in “space services”.
In addition to Mojave-based Virgin Galactic, the investment will also go toward Virgin Orbit, a Long Beach firm that plans to launch small satellites from the belly of a modified commercial airliner, and the Spaceship Co., a Mojave firm that is building propulsion systems as well as the space plane and carrier aircraft for Virgin Galactic.
Virgin Group said in a statement that the investment will support human space flight plans, as well as increase Virgin Orbit’s manufacturing and operational capabilities and help develop “commercial supersonic point-to-point travel capabilities”. The statement also teased the possibility of developing a “space centric entertainment industry” in Saudi Arabia.
The investment, which is still subject to regulatory approval, will give the Kingdom of Saudi Arabia’s fund a “significant stake” in the three Virgin space companies. Virgin Group did not disclose how much of the companies the Saudis will hold, but a company spokesman said Virgin Group remains the majority shareholder. Abu Dhabi investment firm Aabar Investments also has a stake in the companies.
Virgin Galactic has been conducting test flights in Mojave of its SpaceShipTwo space plane, which is intended to take paying customers into suborbital space. While the company has not yet released a specific date for its first customer flight, Branson said in the statement that Virgin Galactic was “months away” from going into space with people aboard. this year, the kingdom raised more than $20 billion from international bond and sukuk sales.
Al Jadaan said he doesn’t see the government selling more international bonds in 2017, but local sales are likely.
“We will maintain the local market issuance just to make sure we are developing the debt market,” he said.
Future sales
Future international sales “are not limited to US dollars, but today we don’t see the need to do anything but US dollars,” he said. “There is significant demand on Saudi papers and we just need to make sure we issue at the right price.”
The government is still planning a further round of subsidy cuts later in 2017, he said. Officials propose to start a cash transfer programme called the Citizen’s Account before the cuts to compensate Saudis for the impact on their pockets, he said.
Energy and utility subsidies have long been regarded as a key part of a social pact between the Gulf region’s governments and their citizens. But with oil prices down more than 50 per cent since 2014, governments are looking for ways to save money.
In 2016, the kingdom ordered cuts to allowances for state employees before reversing the decision in April after a surge in public grumbling. King Salman Bin Abdul Aziz later ordered the payments returned retroactively after his son Mohammad was named Crown Prince.
Al Jadaan, seeking to dispel rumours that employees have not received their payments, said the money was given back.
“If it didn’t happen in one department then it is just a technical issue that they need to deal with in their budget, and we are looking at it actually, because I’ve heard this,” he said. “But generally I could tell you that it has, the majority has been paid, including the backdating of allowances.”
The impact of the decision on the budget will be “very negligible” as the additional cost was made up for by extra efficiency in spending, he said.
Reducing the government wage bill “will continue to be a goal,” but rather than cutting salaries, the government will rely on hiring fewer people to replace those who have retired, he said. The government is also saving “a significant amount” of money by not paying the annual raise that civil service employees are typically guaranteed, equal to roughly 3 per cent of the wage bill each year, Al Jadaan said.
Saudi Finance Minister