DUBAI: As Saudi Aramco ponders the venue for what will be the biggest share offering in history — the planned $100 billion of equity due to be listed in a $2 trillion valued company — it has had no shortage of offers.
At least five leading stock exchanges around the world, from Toronto to Hong Kong and Singapore, have shown an interest in being Aramco’s host, alongside the Tadawul in Riyadh.
The leading two contenders are thought to be the New York Stock Exchange (NYSE), and the London Stock Exchange (LSE).
New York, by virtue of its size, prestige and closer ties between Saudi Arabia and the US under President Trump, is generally reckoned to be in pole position. But there have been suggestions that some advisers to Aramco have warned against an NYSE listing, mainly on grounds of risk to Saudi assets in the highly-litigious New York legal community.
In the course of a recent US visit, Arab News tested the nature of informed American opinion regarding Aramco with three of the most prominent thought leaders in the area of US-Saudi business relations.
The idea was to gauge how Aramco is viewed by the key constituencies it will have to deal with in the course of an NYSE listing: The American political establishment; its peer groups and partners in the global oil industry; and the professional investing community on Wall Street.
The overall lesson is that, while there may be some regulatory and legal risks to a New York listing, Americans at virtually every level would welcome the Saudi oil giant to the NYSE and would look forward to closer business ties with the Kingdom.
Ellen Wald is an historian and journalist who specializes in Middle East energy policy. She teaches at the Jacksonville University in Florida and her forthcoming book “Saudi, Inc.” will be published next year.
On official policymakers’ attitude to Aramco, she said: “Aramco has long had interests in the United States, including ownership of the largest refinery, and no policymakers have made an issue of it. The most significant time that Aramco drew the ire of US policymakers was in the 1970s, when it was still a predominantly American company and legislators called US executives to Washington DC to answer for the oil shocks.”
Wald does however warn of the possibility of lawsuits under the Justice Against Sponsors of Terrorism Act passed under the Obama administration. “It’s still an open question of whether an NYSE listing would expose Aramco to liability under JASTA. In a more long-term stance, policymakers may take an interest in Aramco after it goes pubic, if it lists on the NYSE,” she said.
Washington-based Jean Francois Seznec is a political scientist specializing in business and finance in the Middle East, and an adjunct professor at three prestigious East Coast universities.
“I think the relationship with the American political community is good. People with long memories in America recall that when Aramco was nationalized by the Saudi government the shareholders were paid compensation, unlike in some other parts of the world. The Democrats see Aramco as a force toward modernization and progress in Saudi Arabia; the Republicans see it as a good commercial partner,” he said.
Jim Krane, an award winning journalist and author, currently fellow for energy studies at Rice University’s Baker Institute in Houston, Texas, said Aramco currently keeps a “low profile” in the US.
“Aramco’s Motiva affiliate is one of the biggest US refiners and suppliers of gasoline. Motiva owns the biggest refinery in the country, in Port Arthur, Texas, but most Americans have never heard of it. When Americans fill up with Motiva gasoline, they buy it at their local Shell station.
Very few Americans realize that Shell gasoline — at least in some states — is refined by a Saudi company largely from Saudi crude oil,” he said.
On Aramco’s standing with its peers in the oil business, Seznec said Aramco was regarded as “respected competition.”
He added: “It’s regarded as a well-managed company that can handle its own market, and certainly not seen as a pushover. Oil services companies like Halliburton and Schlumberger are extremely happy with Aramco because they get a lot of business from them. Companies like Exxon might say they’re not as good or as efficient as we are, but they have to respect them, not least because they are so big and want to be bigger.”
On how American energy companies would see an Aramco IPO on the NYSE, Wald said: “It’s an interesting event for them because for the first time they will be able to see the financials of this major competitor. It’s also important to remember that Aramco is positioned differently from the independent oil companies (IOCs) — Aramco has proven oil reserves that vastly outnumber any of the IOCs by several orders of magnitude.”
Krane agreed. “Aramco is a respected name in oil and gas — period. Our research puts it at the top of the list of state-owned oil companies in terms of revenue efficiency. Peer companies understand the sophisticated engineering and strategy research that Aramco brings.
“They know Aramco is unlike most other national oil companies (NOCs), which find their host government undermining their business models. Instead, the Saudi government has ring-fenced Aramco from most government interference,” he added.
Political clout and peer-group respect are essential, but if and when the bell rings on an Aramco IPO on the NYSE it will be the reaction of professional investors that will decide its fate.
Krane said: “Many investors seem to be excited, though some are quite skeptical because they tend to not know much about Saudi Arabia or Aramco, until now a private company. For exchange-traded funds and mutual funds, Aramco will be a necessary purchase because it can be a bell-wether for the oil industry and the movements of OPEC.
“Also, in as far as Aramco will be included in developing country funds, its size will automatically make it an important component. There is a segment of Wall Street that will be uninterested in Aramco, particularly activist investors who will have no real say in the company because the Saudi government will still own 95 percent,” he added.
Seznec agreed that the appeal would vary according to the type of investor. “The big US pension funds will like it. They see it as a traditional oil company but also one which is diversifying into other areas.
“The hedge funds will probably like it less. It will not be a stock where they can make millions just trading in and out of it, it will be less volatile. So the big NY financiers may not be as happy as the more staid pension fund managers,” he added.
Wald said there was another reason for US interest in the IPO. “Wall Street is intrigued, but I’m not sure whether investors are more excited by the prospect of owning a piece of the world’s biggest company, or by the forthcoming trove of data on Saudi reserves. Probably both,” she said.
The three experts agreed, however, that the JASTA legislation was a potential negative that had to be factored into any calculations on an NYSE listing.
“I’m not sure JASTA is an enormous risk. Aramco and other Saudis already have large investments in the US and they have not been targeted. But it is still there as a risk,” Seznec said.
What America thinks of Saudi Aramco
What America thinks of Saudi Aramco
Saudi Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.
Closing Bell: Saudi main index slips to close at 12,565
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 42.09 points, or 0.33 percent, to close at 12,565.89.
The total trading turnover of the benchmark index was SR10.53 billion ($2.8 billion) as 54 stocks advanced, while 170 retreated.
Similarly, the Kingdom’s parallel market, Nomu, dropped 385.72 points, or 1.43 percent, to close at 26,622.88. This comes as 20 stocks advanced while as many as 42 retreated.
Meanwhile, the MSCI Tadawul Index rose 7.54 points, or 0.47 percent, to close at 1,599.02.
The best-performing stock of the day was Modern Mills for Food Products Co. The company’s share price surged 9.46 percent to SR68.30.
Other top performers include the Mediterranean and Gulf Insurance and Reinsurance Co. as well as Al Yamamah Steel Industries Co.
On the announcements front, Red Sea International Co. announced its annual consolidated financial result for the period ending Dec. 31.
According to a Tadawul statement, the entity’s revenues reached SR1.37 billion in 2023, reflecting an increase of 241 percent when compared to 2022 figures.
The rise in sales is mainly attributed to the strategic acquisition of a 51 percent stake in Fundamental Installation for Electric Work Co., or First Fix, with the recognition in RSI’s consolidated financial statements starting in the final quarter of the year.
Additionally, the company has tactically increased its focus on enhancing its supply chain and adopting competitive pricing strategies while advancing procurement techniques.
On a similar note, the firm’s net profits during the same period hit SR2.17 million, up from a net loss of SR198 million, which was recorded in the same period in 2022.
This rise is mainly linked to positive impact of the First Fix acquisition, in addition to the improvement in revenues and operating performance.
Moreover, Riyadh Steel Co. has also announced its annual financial results for 2023.
A bourse filing revealed that the firm’s net profit reached SR11.14 million in the period ending on Dec. 31, reflecting an increase of 118.8 percent compared to the corresponding period a year earlier.
The increase in net profit is primarily attributable to a reduction in the cost of revenue and secondarily to a rise in other income in comparison to the previous year.
Furthermore, Al-Baha Investment and Development Co. also announced its annual financial results for the period ending on Dec.31.
According to a Tadawul statement, the company’s net profit hit SR4.94 million in 2023, up from the net loss of SR8.09 million that was recorded in 2022.
The increase was owed to a 39 percent surge in the group’s revenues and reduced financing costs by 73 percent, among other reasons.
Saudi Arabia leads the charge toward energy transition: report
RIYADH: Saudi Arabia is emerging as a proactive leader, pioneering green initiatives to mitigate economic challenges posed by the transformation toward sustainability, according to the International Monetary Fund.
A recent report by the IMF highlighted the intricate dynamics at play and underscored the Gulf Cooperation Council and Saudi Arabia’s strategic positioning in this evolving scenario.
Titled “Key Challenges Faced by Fossil Fuel Exporters during the Energy Transition,” the study discussed climate change mitigation efforts in many fossil fuel exporting countries.
As Saudi Arabia and its GCC counterparts continue to lead the charge toward sustainability, they set a precedent for the global community.
By embracing green initiatives, investing in renewable energy, and fostering economic diversification, these nations are paving the way for a sustainable future, balancing economic prosperity with environmental responsibility.
The report emphasized that the Saudi Green Initiative launched in 2021 aimed at combating climate change and reducing carbon emissions.
It explained: “The Green Initiative is centered around three objectives, including targets for increasing the share of renewable energy in electricity generation up to 50 percent by 2030 and the deployment of circular carbon economy technologies, including carbon capture utilization and storage.”
Key challenges
The IMF stressed the need for economic diversification to effectively mitigate the impact of declining fossil fuel revenues.
Highlighting Saudi Arabia’s progress in economic diversification, the report explained: “The non-oil sector growth has accelerated since 2021, reaching 4.8 percent in 2022 spurred by strong domestic demand, especially in the wholesale, retail trade, construction, and transport sectors.”
Similarly, Bahrain, Qatar, and the UAE are diversifying their economies away from hydrocarbons, the study added.
In the UAE, non-hydrocarbon GDP was expected to grow by 5.3 percent in 2022, driven by tourism and FIFA World Cup impacts.
Progress on the Comprehensive Economic Partnership Agreements will further boost trade, attract foreign direct investment, and enhance integration with global value chains, according to the report.
The IMF highlighted that in Saudi Arabia, “the share of high-skilled jobs has increased to more than 40 percent in 2022, and female labor force participation doubled in four years to reach 37 percent in 2022.”
In its report, the Washington-based lender said the governments heavily reliant on revenues from fossil fuel exports face challenges in maintaining fiscal sustainability as these revenues decline.
“Countries with significant exposure to the fossil fuel industry may experience higher financial sector risks, including balance sheet effects, asset devaluation, and increased vulnerability to international market fluctuations,” it said.
The report added that transitioning away from fossil fuels may result in job losses in the fossil fuel industry, necessitating retraining programs and support for affected workers.
It called for structural reforms to address all the issues. “Accelerating structural reforms to diversify export bases and develop alternative industries is critical for mitigating the adverse macroeconomic effects of the energy transition,”the report said.
The IMF stressed the need for coordinated global efforts to overcome all these challenges. “Collaborative efforts can help ensure a smooth transition, mitigate transition costs, and support affected countries in diversifying their economies,” the report said.
New service at Jeddah port to boost Saudi-India trade
RIYADH: Saudi and Indian traders are set to benefit from Jeddah Islamic Port’s new service, bolstering trade connectivity between the nations.
The Saudi Ports Authority, also known as Mawani, on Thursday said that Unifeeder, a Danish logistics company, has introduced the “RGI” shipping service at the Saudi port. This initiative connects the Kingdom to Indian checkpoints, facilitating trade between the two nations and offering expedited and secure solutions for exporters and suppliers.
In a statement, Mawani affirmed that this undertaking showcases investors’ confidence in the Kingdom’s terminals, bolsters maritime transport and logistics services, and solidifies Jeddah Islamic Port’s status.
It added that the seaport is the Kingdom’s first dock for exports and imports, and the first re-export point in the Red Sea, with 62 multipurpose berths and a capacity of 130 million tonnes.
The new shipping service connects the Jeddah terminal to the ports of Mundra and Nhava Sheva in India, Jebel Ali in the UAE, and Sokhna in Egypt through regular weekly trips, with a capacity of up to 2,824 twenty-foot equivalent units, Mawani noted.
Mideast sets record in renewable energy capacity, Saudi Arabia reaches 2.6 GW: IRENA
RIYADH: Renewable energy capacity in the Middle East soared to a record high in 2023, with the addition of 5.1 gigawatts, marking a 16.6 percent increase from the previous year.
According to the latest data released by the International Renewable Energy Agency, this new addition brought the region’s total renewable energy capacity to 35.54 GW, with Saudi Arabia accounting for 2.68 GW.
The data showed that global green power capacity reached 3,870 GW in 2023, marking a 13.9 percent increase over the previous year. This represents the largest surge in sustainable energy capacity to date, with the addition of 473 GW.
Green sources constituted a record-breaking 86 percent of global power additions, primarily driven by substantial expansions in solar and wind energy.
Solar power alone contributed nearly three-quarters of renewable additions, totaling a record 346 GW, while an additional 116 GW of wind energy was incorporated, the report added.
Francesco La Camera, director general of IRENA, said: “Despite these unprecedented renewable additions in 2023, the world is still falling short of what is required to achieve the goal adopted at COP28 to triple installed renewable power capacity by 2030 to reach 11 TW.”
With one less year to meet the goal, he emphasized that the world now requires additions of approximately 1,050 GW each year for the remainder of this decade to align with the World Energy Transitions Outlook scenario and maintain a trajectory toward limiting global warming to 1.5 degrees Celsius.
The growth of sustainable energy is unevenly distributed globally, with Asia leading the expansion with a 473 GW increase, primarily propelled by China’s 63 percent surge to 297.6 GW. This highlights a notable discrepancy with other regions, particularly developing countries. While Africa saw some growth, it was modest at 4.6 percent, reaching 62 GW.
By the end of 2023, Camera said, renewable energy sources comprised 43 percent of the global installed power capacity.
“Yet, as we draw closer to a world in which renewable energy accounts for half of total capacity, many energy planning questions still need to be addressed to establish renewables as the most significant source of electricity generation - including in the context of grid flexibility and adaptation to variable renewable power,” he added.