JEDDAH: Saudi Arabia’s market for initial public offers of shares has been the strongest in the Gulf for the last two years, and with the fifth new listing of 2012 coming up next week, analysts expect a bullish reception despite weak global equity markets.
A surge by Saudi Arabia’s stock market early this year showed confidence in the local economy. The benchmark rallied 31 percent between November and April while daily trading turnover soared, hitting levels not seen since 2007, as investors shifted money from other asset classes.
Although the stock market has now dropped 14 percent from this year’s peak, tracking recent weakness in global equities and oil prices, investors are still positive about corporate earnings growth in coming months, and this should support appetite for new listings.
“As long as we have a positive outlook for corporate results, there will be over-subscription to IPOs,” said Hesham Tuffaha, head of asset management at Riyadh-based Bakheet Investment Group.
“We’ve seen 10 to 20 percent growth (in corporate earnings) on average recently, and people are assuming that the growth will continue for the coming year.”
Tokio Marine Saudi Arabia, an affiliate of the Japanese insurance firm, will start trading on June 24 as Alinma Tokio Marine. The IPO was nearly 12 times oversubscribed during the six days of the offer, raising SR 690 million, lead underwriter Alinma Bank said in March.
Meanwhile the catering unit of Saudi Arabian Airlines is seeking to raise SR 1.3 billion by floating 30 percent of its shares, becoming the first part of the Saudi flag carrier to be listed on the stock market. The IPO will close on June 24; a date for listing the shares has not yet been announced.
A worsening global growth outlook, and its impact on oil prices, are the biggest potential threat to the appetite for IPOs. Brent crude oil is around $95 per barrel, near its lowest level since January 2011 and down from levels above $120 early this year.
But while Saudi economic growth may slow from last year’s red-hot 6.8 percent, oil remains far above the price at which Riyadh can balance its state budget, which analysts estimate at around $ 76 per barrel. So the government is expected to be able to continue spending heavily to support growth, which some economists think may be in the 4 percent area this year — still a healthy level.
“Saudi Catering should be oversubscribed based on the current situation...but we don’t know how much the market will deteriorate amid the global conditions,” said Tuffaha.
“The main impact is from oil prices but even if we see a bit more decline there, it’s manageable because they skyrocketed since 2008.”
Late last month, Saudi Arabia’s Al-Tayyar Travel raised SR 1.37 billion from an IPO of 30 percent of its shares, which priced at the top of their indicative range. The offer was 6.1 times oversubscribed.
“Al-Tayyar’s IPO did not do too badly and it came at a rough time,” said Tariq Alalaiwat, equity research analyst at Riyadh-based NCB Capital.
“The coming IPOs will depend on pricing but the Saudi market still looks attractive. As long as they (new listings) focus on the domestic economy, they’ll do well.”
He added, “If a new petrochemical company goes public, people would be worried to buy into the exposure to global growth concerns. A local-driven company, despite what’s happening in China or Europe, stands a good chance.”
The share prices of new listings this year have generally enjoyed big jumps on their debuts, large enough to offset any subsequent weakness.
Takween Advanced Industries, a packaging firm whose shares were sold at 26 riyals apiece in its IPO, closed at 58.50 riyals on its first day of trade in February, up more than 100 percent. Since then it has dropped 26 percent, compared to a 1 percent gain by the benchmark index.
Najran Cement also more than doubled on its debut in May, even though conditions in the broad market had worsened considerably by then. The shares were sold at 10 riyals in their IPO and ended their first day of trade at 22.35 riyals. Since then they have fallen 4 percent, compared to the index’s 5 percent loss.
Potential IPO candidates in coming months include Construction Products Holding Co, Saudi Arabia’s largest maker of building materials and a unit of Binladin Group. It has mandated the investment banking arms of Gulf International Bank and Samba Financial Group for an IPO in 2012 or 2013, industry sources said.
Health Water Bottling, held by Olayan Group, has picked Morgan Stanley and is planning to go public by issuing 30 percent of its shares in a flotation in the first quarter of 2013.
Additionally, private equity investor Carlyle Group plans to sell its investment in Saudi Arabia’s General Lighting Co. through an IPO.
Under market rules, foreign investors could theoretically obtain access to Saudi IPO shares through swap agreements with Saudi financial institutions, but this is an expensive and cumbersome method.
Saudi authorities have been preparing to open the stock market to direct investment by foreign institutions, but the opening did not occur in the first half of this year as many investors had hoped. Analysts now think that because of volatility in global markets, the opening may be postponed until next year.
Appetite strong for Saudi IPOs despite global woes
Appetite strong for Saudi IPOs despite global woes
Saudi Arabia’s oil sector skills to help Kingdom evolve as a green hydrogen hub, experts say
- Saudi Arabia, having set its net-zero target for 2060, has been heavily investing in the renewable energy sector
RIYADH: Saudi Arabia’s long-proven expertise in the oil industry could help the Kingdom emerge as a global leader in green hydrogen production as the world marches toward a sustainable future, experts told Arab News.
Saudi Arabia, having set its net-zero target for 2060, has been heavily investing in the renewable energy sector, and with the world’s largest green hydrogen plant, located in Neom, set to become fully operational in 2027.
The plant will rely entirely on solar and wind energy to power a 2.2 gigawatt electrolyzer, designed to produce hydrogen continuously.
Speaking to Arab News, Paul Sullivan, an energy and environment expert at Johns Hopkins University, said that Saudi Arabia could use its vast experience in project management and execution in the traditional energy sector to become a leader in green hydrogen production.
“Many skills could be transferred from traditional fuels, such as oil and gas, to green hydrogen. Experience and skills in project development could be transferred,” said Sullivan.
He added: “The knowledge gained from developing traditional energy projects at Saudi Aramco and its contractors puts Saudi Arabia at an advantage as it advances its hydrogen projects. AI expertise can be used across energy types and uses. AI could help optimize current and future energy systems, regardless of their nature.”
Samuele Bellani, managing director and partner at Boston Consulting Group, shared similar views, and said that Saudi Arabia has access to advantageous solar and wind renewable energy, which could help the Kingdom emerge as a global powerhouse in green hydrogen production.
“This strong competitive advantage, together with Saudi Arabia’s commercial and marketing capabilities, and decades of experience in large-scale gas processing, refining, and project execution can position the country as a key producer and exporter of low carbon hydrogen in the future,” said Bellani.
The BCG official added that the Kingdom’s expertise in managing complex, capital-intensive projects at scale in the traditional fuel sector provides an invaluable foundation for hydrogen development, where similar skills in engineering, logistics, and international energy trading are essential.
Green hydrogen, created through electrolysis powered by renewable energy, is seen as a critical component in reducing global carbon emissions, because it produces no greenhouse gases in the production process.
In December, speaking to Al-Eqtisadiah on the sidelines of the Absher Conference, Saudi Arabia’s Minister of State for Foreign Affairs and Climate Envoy Adel Al-Jubeir said that the Kingdom is making steady progress in advancing the circular carbon economy and green hydrogen production as part of broader efforts to address climate challenges through technology and investment.
The minister added that the Kingdom has made tangible progress in deploying new technologies that support more efficient energy use while expanding the production of alternative and renewable energy sources.
Upgrading existing systems
Sullivan said that infrastructure used in the traditional energy sector, such as pipelines, can be repurposed for the renewable industry, with some required changes to ensure safety and affordability.
“A wide range of legal, administrative, managerial, engineering, supply chain, policy development, governance, finance, safety and risk management, and economic skills could be transferred. Plumbers, electricians, pipefitters, welders, and other skilled craftspeople can be repurposed and used directly,” said Sullivan.
He added: “Furthermore, the oil and gas industries already produce hydrogen for their own needs. They have experience in developing ports, pipelines, and other logistical systems, as well as international trading and supply chain networks. That experience will not go to waste.”
Bellani said that Saudi Arabia can adapt existing gas, power, and industrial infrastructure to support blue hydrogen with carbon capture and storage, and green hydrogen powered by renewables.
The BCG official added that export infrastructure — including ports, storage tanks, and shipping — could be upgraded to handle hydrogen carriers such as ammonia.
Carbon capture and storage is central to Saudi Arabia’s blue hydrogen strategy.
Samuele Bellani, managing director and partner at Boston Consulting Group
Industrial zones and pipelines can be repurposed or expanded to integrate hydrogen production, conversion, and export at scale provided materialization of demand and ability to secure long term offtake agreements.
“This adaptive approach maximizes the value of existing investments while minimizing development timelines. The Kingdom’s world-class port facilities and industrial complexes provide a strong foundation that can be enhanced rather than rebuilt, offering significant cost and time advantages over competitors starting from scratch,” he added.
According to Bellani, carbon capture and storage is central to Saudi Arabia’s blue hydrogen strategy, enabling production from natural gas while significantly reducing lifecycle carbon dioxide emissions.
“The Kingdom’s large geological storage potential and experience with CO2 injection support the development of high-capture-rate projects at scale. This technology serves as a crucial bridge, allowing Saudi Arabia to leverage its existing natural gas resources while building toward a fully renewable hydrogen economy,” said Bellani.
He added: “The Kingdom’s geological advantages — including extensive underground formations suitable for CO2 storage — provide a natural competitive edge in blue hydrogen production that few other nations can match.”
The strategic Vision 2030 agenda
According to Sullivan, Saudi Arabia’s Vision 2030 economic diversification program, as well as the initiatives taken by the Kingdom’s sovereign wealth fund, is playing a crucial role in materializing the nation’s hydrogen goal.
Sullivan said that Vision 2030 is the umbrella for strategic policies, including building new supply chains and new visions toward trade and commerce, as well as economic, financial, and employment diversification.
The Public Investment Fund is funding such activities, including the giant Neom and Yanbu green hydrogen projects, as well as the development of green hydrogen hubs.
“PIF green bonds help reduce costs and make financing green hydrogen projects cheaper than they would otherwise be. The Saudi Green Initiative provides direction and policy developments on climate and environmental policies that could help advance green hydrogen in tandem with Vision 2030 and the PIF’s work,” said Sullivan.
He added: “Without a proper strategic confluence of all three, many of today’s and future green hydrogen projects could face a more difficult future.”
Bellani shared a similar opinion and said that the Vision 2030 program’s strategic framework ensures that hydrogen development receives the highest levels of government support and investment priority.
The BCG official added that Saudi Arabia can reduce its dependence on oil revenues while developing new industrial capabilities and contributing to global decarbonization efforts by building a valuable hydrogen economy.
“Vision 2030 promotes economic diversification, industrial localization, and energy transition. All these three objectives align with low carbon hydrogen value proposition,” said Bellani.
Target countries
According to Sullivan, Europe will be one of the priority markets for Saudi Arabia as it ramps up green hydrogen production.
“Saudi Arabia’s green hydrogen has better economics than many other countries’, given the costs of electricity production and offtake contracts under concessional regimes, as well as its natural endowments for green energy,” said Sullivan.
He added: “Even with shipping costs included, Saudi green hydrogen could be competitive in Europe in many circumstances.”
Bellani echoed similar sentiments and said that the demand for Saudi Arabia’s green hydrogen will be driven by demand for both blue and green hydrogen to meet decarbonization targets and energy security needs.
East Asian countries such as Japan and South Korea are also key markets due to their limited domestic energy resources and strong interest in hydrogen and ammonia imports.
The BCG official further said that additional demand may emerge from other Asian and emerging economies seeking affordable, low-carbon fuels in the future.
Potential challenges and combat measures
Speaking to Arab News, Safak Yucel, associate director of business of sustainability initiative at McDonough School of Business Georgetown University Dubai, said finding buyers could be one of the obstacles Saudi Arabia faces in its hydrogen journey.
“The biggest challenge is driving the cost down sufficiently so that there would be a meaningful scale of buyers. This would require significant investments not only in the infrastructure but also research and development,” said Yucel.
Bellani said that the challenges Saudi Arabia could face include ensuring global demand certainty, securing long-term offtake contracts, and remaining cost-competitive as international hydrogen markets evolve.
The BCG official added that scaling CCS for blue hydrogen and renewable capacity, water supply, and electrolysis for green hydrogen requires significant coordination and capital.
Regulatory alignment, certification complexity, and infrastructure build-out timelines also pose execution risks.
“These challenges highlight the complexity of transforming an entire energy system while building new international markets simultaneously. However, Saudi Arabia’s experience managing large-scale energy projects and its substantial financial resources position the Kingdom well to address these implementation hurdles systematically,” added Bellani.
Yucel said that Saudi Arabia could explore international collaboration, to evolve as a market leader in the hydrogen energy ecosystem.
“Many companies are interested in investing in green hydrogen and several research groups across the globe are working on further advancing the technology. Such collaborative efforts would be vital in driving costs down,” said Yucel.
Bellani elaborated and said that there are strong opportunities for collaboration across the value chain, including joint ventures for blue and green hydrogen projects, offtake agreements, and infrastructure development.
According to him, international energy companies, technology providers, and engineering firms can contribute expertise in CCS, electrolysis, ammonia, and logistics, while partnerships with research institutions can accelerate innovation in hydrogen technologies, cost reduction, and sustainability standards.
“Saudi Arabia’s transition from oil giant to hydrogen superpower represents one of the most significant energy sector transformations of our time. By systematically addressing each aspect of hydrogen economy development — from leveraging existing expertise to building new international partnerships— the Kingdom is positioning itself at the forefront of the global energy transition,” said Bellani.
