Confident Al-Falih holds out hope for early Saudi Aramco IPO

Khalid Al-Falih: ‘When the Aramco-SABIC acquisition is consummated it will not only be the largest oil company and gas company, it will be a very large company in refining and petro-chemicals.’ (AFP)
Updated 25 April 2019

Confident Al-Falih holds out hope for early Saudi Aramco IPO

  • Speaking at the Financial Sector Conference in Riyadh, Al-Falih said that preparations for a listing of Aramco shares — an initial public offering (IPO) — could happen ‘sooner than you think’
  • The listing has been slated for 2021 according to government and company announcements, but Al-Falih’s comments raise the possibility that it could be brought forward to next year

RIYADH: Khalid Al-Falih, the Kingdom’s energy minister and chairman of Saudi Aramco, held out the tantalizing prospect that the giant oil company’s long-planned stock market listing could happen ahead of the previously announced schedule.
Speaking at the Financial Sector Conference in Riyadh, Al-Falih said that preparations for a listing of Aramco shares — an initial public offering (IPO) — could happen “sooner than you think” and that a prospectus for the listing could come “in the not too distant future.”
The listing has been slated for 2021 according to government and company announcements, but Al-Falih’s comments raise the possibility that it could be brought forward to next year, though the minister added the caveat that it could also be later. “That’s the announced date but it could slip a little bit, it could come forward a little bit,” he said.
The successful completion of a $12 billion international bond by Aramco, which attracted more than eight times that amount in interest from investors, has given Aramco a new confidence in international capital markets, in equity as well as bonds.
Al-Falih also said that the intended acquisition of petrochemicals giant SABIC from the Public Investment Fund would also increase its capital-raising ability.
“When the Aramco-SABIC acquisition is consummated — we hope by the end of this year — it will not only be the largest oil company and gas company by a large margin, but also with the combined company will be a very large company in refining and petrochemicals. So its capital base is going to grow and I think right that its balance sheet has an appropriate level of debt.
“Even if Saudi Aramco stays at the lower end of gearing among its peers, it still has the capacity to offer a lot of debt instruments going forward. So I can tell you for sure that the $12 billion is only the beginning, not the end. It establishes Aramco’s presence in the market,” he added.

 

Al-Falih also indicated that the large amount of disclosure required for the bond issue would be used in the IPO preparation.
“Now that the company has been exposed, investors have reacted so enthusiastically to the company and its quality. We’ve seen the reserves, we’ve seen the financials, we’ve seen the quality in terms of its departmental performance and its safety performance, human capital capability and technology, all of this is appealing.
“It’s been exposed and documented in the prospectus for the bonds and it will be exposed even more in the equity prospectus to come in the not-too-distant future.”
Al-Falih made it clear, however, that the IPO had to await full completion of the merger with SABIC: “Once we’ve done that, the financials are consolidated and exposed to the investors, essentially all the practical steps for
the IPO have been taken both by the company and by the government. So I think we can hit the ground running once we close on SABIC.”
He added that he hoped for speedy approval from regulators for the merger. Finance experts at the conference said that Al-Falih’s comments showed that Aramco and the Saudi government were committed to listing the company, but were skeptical over whether the IPO could happen next year, given the need for full incorporation of SABIC.
“Given the express desire to complete the SABIC deal, it will be challenging to accelerate the time line of the IPO before 2021,” Jamal Al-Kishi, chief executive of Deutsche Bank in the Middle East and Africa, told Arab News. “But I have very little doubt the company will be floated,” he added.
Tarek Fadlallah, chief executive officer of Nomura Asset Management in the region, said: “It seems unlikely that it can take place in 2020 because they’ll want to demonstrate a full year of integration and collaboration with SABIC.”

FASTFACTS

The completion of a $12 billion international bond by Aramco has given it a new confidence in global capital markets.


Oman’s sultan says government will work to reduce debt

Updated 23 February 2020

Oman’s sultan says government will work to reduce debt

DUBAI: Oman's Sultan Haitham bin Tariq al-Said said on Sunday the government would work to reduce public debt and restructure public institutions and companies to bolster the economy.
Haitham, in his second public speech since assuming power in January, said the government would create a national framework to tackle unemployment while addressing strained public finances.
"We will direct our financial resources in the best way that will guarantee reducing debt and increasing revenues," he said in the televised speech.
"We will also direct all government departments to adopt efficient governance that leads to a balanced, diversified and sustainable economy."
Rated junk by all three major credit rating agencies, Oman's debt to GDP ratio spiked to nearly 60% last year from around 15% in 2015, and could reach 70% by 2022, according to S&P Global Ratings.
The small oil producing country has relied heavily on debt to offset a widening deficit caused by lower crude prices. Also, the late Sultan Qaboos, who ruled Oman for nearly 50 years, held back on austerity measures.
The country has delayed introducing a 5% value added tax from 2019 to 2021, and economic diversification has been slow, with oil and gas accounting for over 70% of government revenues.
Last week, rating agency Fitch said Oman was budgeting for a higher deficit of 8.7% for 2020 despite its expectation of further asset-sale proceeds and some spending cuts.
"We are willing to take the necessary measures to restructure the state's administrative system and its legislation," Haitham said in his first speech since the mourning period for Qaboos ended, without elaborating.
He said there would be a full review of government companies to improve their business performance and competence.
Oman observers have said that if Haitham moves to decentralise power it would signal willingness to improve decision making. Like Qaboos, he holds the positions of finance minister and central bank chairman as well as premier, defence and foreign minister.