Pagano sees contribution of TRSDC-AMAALA tourism projects to Saudi GDP at $9bn

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Updated 11 May 2022
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Pagano sees contribution of TRSDC-AMAALA tourism projects to Saudi GDP at $9bn

  • TRSDC is on track to open three new hotels this year and receive its first guests in early 2023.
  • There will be 13 more hotels inaugurated by the end of next year.

DUBAI: The Red Sea Development Co. is on a bigger mission now after it added AMAALA to its portfolio with the two projects expected to contribute around SR33 billion ($8.8 billion) to the Saudi economy in five years.

TRSDC is on track to open three new hotels this year and receive its first guests in early 2023. There will be 13 more hotels inaugurated by the end of next year.

What’s more? The archipelago of 90 islands in the Red Sea, which houses the fourth largest barrier reef globally, will focus on sustainable tourism with a twist of luxury. The giga-project has already signed up nine global brands, and more will follow suit.

What’s interesting about what we’re doing is that it’s not a built-up urban area; it’s a part of Saudi that is untouched.

John Pagano

“What’s interesting about what we’re doing is that it’s not a built-up urban area; it’s a part of Saudi that is untouched,” said John Pagano, CEO of TSDRC and AMAALA, in an interview with Arab News at sidelines of the Arabian Travel Market, the international travel trade show in Dubai.

“Our first guests can choose between two luxurious island resorts or a desert resort next year,” he added.

The two island hotels are in the hyper-luxury segment, both boutique hotels with 80 rooms in one and 90 in the other.

Positioned like high-end Maldives offerings, they will be highly serviced and attract discerning luxury travelers.

Pagano revealed that the St. Regis brand would operate one of the hotels, while the other island resort will be announced soon. The desert resort will be managed by the Six Senses group, which shares a commitment to green practices.

High sustainability standards

Sustainability is a crucial offering for TSRDC, both in terms of catering to consumer demand and as a differentiator in a crowded regional tourism market.

The Red Sea covers an area the size of a country like Belgium; however, Pagano confirmed that the company would only develop less than one percent of that to respond to an ecological ceiling based on what the environment can handle without incurring damage.

“Rather than overdevelop simply because we can, we actively monitor the environment using artificial intelligence and data to watch out for warning signs if something we are doing is not going according to plan,” he said. “We do not want to cause any lasting damage.”

Sustainable travel is in demand now, with 81 percent of 30,000 travelers in a Booking.com survey released this year saying that sustainable travel is essential to them. Fifty-nine percent of travelers wanted to leave the places they visited better than when they arrived.

“Luxury doesn’t mean what it used to. We have moved away from luxury being ostentatious: It’s about experiences and the traveler today wants more sustainable experiences,” said Pagano. “So we give people a choice to go to a destination that puts nature first. We aim to be the biggest tourist destination in the world powered 100 percent by renewable energy.”

Even the company’s financing efforts were green; last year, The Red Sea Development Company secured an SR14.120 billion green loan, marking the first-ever Riyal-denominated Green Finance credit facility.

“We are fully capitalized at the moment for phase one of the development and have a good track record in the market if we need to raise more for other projects, including AMAALA,” said Pagano.

Sea change in development

Merged under the TRSDC brand, AMAALA is a megaproject along the Red Sea coastline that is now managed under the Red Sea Development umbrella. The project plans to award $319.9 million in contracts in the second quarter of this year to create a new wellness-focused tourism destination. There are currently eight hotels under construction for AMAALA, aiming for completion by the end of 2024.

A new international airport is being built to cater to expected rising demand in the Red Sea area. Designed by award-winning, sustainability-focused architecture firm Forest + Partners, the airport will have a 3.7-kilometer runway and can handle up to one million passengers per year.

“The air site is virtually complete now,” said Pagano. “We will have a temporary terminal at the beginning of next year. We will also have operational seaplanes for our first guests on the island resorts.”

Working closely with the Ministry of Tourism, Pagano said TRSDC is part of a dozen similar projects planned along the Red Sea coastline. This will have a positive trickle-down effect on the economy; The two current projects, TRSDC and AMAALA alone, will generate 120,000 new jobs and contribute SR33 billion to GDP within the next five years, according to Pagano.

Though tied together by a commitment to sustainability, each development is distinct. For example, Sheybarah Island, the furthest from the mainland in the south of the Red Sea, is currently under construction with futuristic, shiny stainless-steel pod-like villas manufactured in the United Arab Emirates. The island resort will open at the end of 2023.

“We are privileged to build sensitively around nature,” said Pagano. “Sustainability will set us apart.”

 


Moody’s affirms credit ratings of key Saudi companies

Updated 26 February 2024
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Moody’s affirms credit ratings of key Saudi companies

RIYADH: Several prominent Saudi companies received affirmation on their credit ratings from Moody’s Investor Services, a leading global provider of financial assessments, research, and risk analysis.

Following the agency’s recent update to its Government-Related Issuers Methodology, several firms, including Saudi Basic Industries Corp., Saudi Telecom Co., and Saudi Electricity Co., have maintained their A1 ratings, while Saudi Arabian Mining Co., also known as Ma’aden, continues to hold a Baa1 rating.  

For SABIC, the A1 rating acknowledges its strong global presence in the petrochemicals market, competitive cost structure, and robust financial health.  

Moody’s also highlights the cyclical nature of SABIC’s operations and its concentration in Saudi Arabia as considerations. 

stc’s A1 rating reflects its dominant position in the Saudi telecommunications sector, strong financial metrics, and substantial government support. Challenges include market competition and the capital intensity of the telecom industry, Moody’s stated. 

SEC’s rating considers its integrated electricity operations, market dominance, and regulatory support balanced against the company’s growing debt burden due to significant infrastructure investments. 

Ma’aden’s Baa1 rating is supported by its diversified production, low-cost operations, and strategic importance to Saudi Arabia’s economy. 

The company’s exposure to commodity price volatility and its expansion plans are areas of focus. 

The positive outlooks for SABIC, stc, and SEC align with Moody’s view on the government of Saudi Arabia, indicating a high likelihood of state support.  

Furthermore, Ma’aden’s stable outlook reflects its solid financial policies and liquidity management. 

The ratings of the Saudi companies could potentially be upgraded or downgraded based on several factors outlined by Moody’s.  

For SABIC, an upgrade could be on the horizon if the ratings of the Saudi government or Saudi Aramco are elevated or if the company itself demonstrates improved revenue and profitability and maintains strong credit metrics and liquidity.  

Conversely, SABIC’s ratings might face a downgrade if the company experiences a significant downturn in operating performance or engages in heavy debt-financed investments, pushing its deficit to earnings before interest, taxes, depreciation, and amortization ratio toward a multiple of 1.5. 

Similarly, stc could see its scores positively impacted if the ratings of the government or the Public Investment Fund are upgraded, given its status as one of the highest-rated telecom operators globally.  

However, an escalation in competition, debt-financed acquisitions, or sustained negative free cash flow could apply downward pressure on stc’s ratings. Any decrease in the government’s or PIF’s ratings would also likely result in a downgrade for stc. 

SEC’s situation mirrors that of the aforementioned entities, with the potential for an upgrade if the sovereign rating of Saudi Arabia or the PIF improves, contingent upon the company maintaining strong operational and financial performance.  

A downgrade could occur if there is a notable decline in the company’s liquidity profile or its financial metrics weaken significantly. 

Ma’aden’s ratings could be elevated if the company successfully reduces its debt relative to EBITDA and boosts its retained cash flow to net debt ratio while maintaining strong liquidity. 

Conversely, an increase in debt and EBITDA ratio beyond certain thresholds or a significant weakening of liquidity could trigger a downgrade.  

Adjustments in the perceived likelihood of support from PIF or the government in times of financial stress could also influence Ma’aden’s ratings.


Closing Bell: TASI drops to 12,532, records $2.4bn trade volume  

Updated 26 February 2024
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Closing Bell: TASI drops to 12,532, records $2.4bn trade volume  

RIYADH: Saudi Arabia’s Tadawul All Share Index closed at 12,531.76 points on Monday, marking a decrease of 72.83 points or 0.58 percent.   

The parallel market Nomu concluded at 25,592.61, registering a fall of 109.54 points, or 0.43 percent. Alongside, the MSCI Index also descended by 3.81 points to settle at 1,616.76, a drop of 0.24 percent.   

By the day’s end, the main index posted a trading value of SR9.15 billion ($2.4 billion) with 42 stocks advancing and 186 declining. On the other hand, Nomu reported a trade volume of SR47.1 million.   

TASI’s top performer was Saudi Arabian Amiantit Co., which saw a 7.69 percent jump to SR31.50.

Maharah Human Resources Co. and Wataniya Insurance Co. also recorded notable gains, with their shares closing at SR7.21 and SR22.56, marking an increase of 6.19 percent and 5.82 percent, respectively. The Co. for Cooperative Insurance and Saudi Paper Manufacturing Co. also fared well.   

On the announcement front, Saudi German Health successfully concluded the offering of its Saudi Riyal-denominated sukuk, reaching a total value of SR1 billion.  

The offering comprised 1 million sukuk, each with a nominal value of SR1,000, and a fixed annual yield of 7.20 percent, paid out quarterly over a maturity period of five years.  

The company has specified that under certain conditions detailed in the base prospectus and the final terms, the sukuk may be redeemed before their maturity date.

Investors can review these final terms, which will be available on Al Rajhi Capital’s website starting Mar. 6, 2024, the entity overseeing the subscription management for this issuance.  

The allocation of sukuk to investors will be finalized by the end of Feb. 29, with the settlement process concluding on Mar. 6, 2024.   

Furthermore, Saudi German Health plans to list the sukuk on Saudi Stock Exchange once all regulatory procedures necessary for the listing are completed, with an announcement to be made at the appropriate time.  

Moreover, Alinma Bank is set to bolster its Tier 1 capital through a strategic move to issue additional sukuk denominated in US dollars.   

This initiative, aimed at enhancing the bank’s capital base and supporting its general banking operations, follows a board resolution authorizing the CEO to manage the issuance process.  

The planned issuance will be executed by a special-purpose vehicle, targeting qualified investors both within Saudi Arabia and internationally.   

Participating as joint lead managers, Abu Dhabi Islamic Bank, Alinma Investment Co., and Emirates NBD, have been appointed to oversee the issuance, as well as J.P. Morgan Securities, MUFG Securities EMEA, and Standard Chartered Bank.


Saudi Arabia records 10% surge in number of factories

Updated 26 February 2024
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Saudi Arabia records 10% surge in number of factories

RIYADH: The number of industrial units in Saudi Arabia recorded a 10 percent surge year on year in 2023 to reach 11, 549, according to the Ministry of Industry and Mineral Resources.

A spokesman for the minister, Jarrah bin Mohammed Al-Jarrah, revealed that the new industrial establishments were set up with an investment of SR1.54 trillion ($48.4 billion).

The rise in the number of factories falls in line with the Kingdom’s plan of boosting industrialization and achieving a target of 36,000 plants by 2035.

Moreover, the number of new industrial licenses issued in 2023 reached 1,379, with investments amounting to more than SR81 billion.

On the other hand, production began in a total of 1,058 factories during the same year with investments amounting to SR45 billion.

In addition, Al-Jarrah noted that the new licenses were distributed among 25 industrial activities, led by food products manufacturing with 244 permits, followed by the manufacturing of non-metallic mineral products (176) and the manufacturing of formed metal products with 165. A total of 123 licenses were issued to factories engaged in the manufacturing of rubber and plastic products.

With a vision to increase the number of factories to 36,000 by 2035, including 4,000 which will be fully automated, Saudi Arabia is poised to create a dynamic and innovative production landscape.

The adoption of advanced technologies, including artificial intelligence, 3D printing, and robotics, positions Saudi industries as global leaders of this revolution.

The Kingdom’s industrial sector is experiencing sustained growth, with investments in manufacturing reaching $132 billion since the launch of the economic diversification strategy Vision 2030 in 2016.


Houthi Red Sea strikes affecting half of UK retailers: Research

Updated 26 February 2024
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Houthi Red Sea strikes affecting half of UK retailers: Research

  • British Chambers of Commerce: Commercial container prices up as much as 300%
  • Moody’s: Retailers could face ‘material impact on profitability by end of 2024’

LONDON: Disruptions to global trade caused by the Houthi campaign against shipping in the Red Sea is affecting more than half of all retailers in the UK.

Research conducted by the British Chambers of Commerce across more than 1,000 companies in the UK found that container shipping prices have jumped as much as 300 percent, while goods have been delayed for up to a month, prompting supply shortages and cash flow problems.

The Houthis launched their campaign against commercial vessels in November in a bid to end Israeli military strikes on Gaza, which began in the aftermath of the Oct. 7 Hamas attack.

Air and sea strikes against the Houthis in Yemen by US and UK forces have so far failed to curtail the attacks. Eighteen Houthi targets were hit in airstrikes over the weekend.

The average cost of shipping goods from China to Europe has more than doubled, with most ships preferring to travel around Africa rather than risk attack by approaching the Suez Canal.

In 2023, around 22 percent of all commercial shipping containers passed through the canal, according to the UN Conference on Trade and Development. That total has since fallen by 82 percent, with 586 ships rerouting around Africa.

The BCC’s head of trade policy, William Bain, urged the UK government to provide more support to British retailers ahead of its budget next week.

“There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time. And recent (government) data also indicates the impact has yet to filter through to the UK economy, with inflation holding steady in January,” he said.

“But our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build.”

Bain said new post-Brexit laws “adding to costs and delays” had made it “a difficult time for firms.”

Credit ratings agency Moody’s warned this month that retailers would experience a “material impact on profitability by the end of 2024” if the situation in the Red Sea did not significantly improve.

Bain said: “The UK economy saw a drop in its total goods exports for 2023 and, with global demand weak, there is a need for the government to look at providing support in the March budget.”

The crisis has also led to an increase in pressure on air freight companies, with delivery aggregator ParcelHero noting an uptick of 8 percent on spot rates between Europe and China, and 14 percent between China and the US.

Supply issues are expected to worsen in March as Chinese exports increase following the country’s New Year holidays, which concluded over the weekend.

David Jinks, head of consumer research at ParcelHero, said: “Initially, there was a scramble for aviation services as businesses rushed to get products out before the festivities began.

“Now the continuing demand for air freight on this route is because many ships are berthed for the duration and containers are stuck firmly in Chinese ports until manufacturing ramps up enough to restore full services.

“Air freight enables those companies manufacturing and operating in Asia to leapfrog the Chinese bottleneck.”


High 5G coverage shows Saudi Arabia is ‘technically advanced,’ says Nokia CEO

Updated 26 February 2024
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High 5G coverage shows Saudi Arabia is ‘technically advanced,’ says Nokia CEO

RIYADH: Saudi Arabia’s 5G coverage is almost double the global average of 42 percent thanks to “really good operators that have high demands,” according to a senior industry executive.

Speaking to Arab News, Pekka Lundmark, CEO of telecommunications firm Nokia, underlined how the Kingdom’s 77 percent coverage rate marks it out compared to several parts of Europe which are not as well connected.

Lundmark also discussed the upcoming deployment of 5G Advanced technology – expected to enter the market around 2025 – noting that this shift is a step towards the development of 6G.

Reflecting on the connectivity progress in the Kingdom, the CEO said: “Saudi market is technically advanced. There are really good operators that have high demands, which is good, and then there are some particular characteristics, which you don't have (anywhere) else and just one example would be the Hajj season where the pilgrims do their rituals.” 

He added: “This is an enormous stress test for the network when they take their videos and pictures and want to be connected and you have millions of people in the same place ... the Saudi market is driving us from a global perspective for innovations in network performance.”

Lundmark also stated that 5G Advanced has significant capabilities including supporting emerging technologies such as augmented reality and virtual reality devices. These services require high bandwidth, extremely low latency, high quality of service, and reliability from the network.

“Then on the industrial side, one example is that it will include support for drones, drones will have many applications in different types of physical industries,” Lundmark stated.

Additionally, 5G Advanced will support digital twins, a concept where a digital replica of an industrial site is created.

“There’s a lot it's going to add. That's really good because sometimes I hear that, now 5G is ready and now we can start waiting for 6G which will come at the end of the decade. That is completely untrue. There is so much still to do on 5G,” Lundmark stressed.

Furthermore, he further discussed the significance of the Saudi market in this sector and its expected growth in the future, highlighting that despite a weak global performance in 2023, the Middle East and Africa, including the Kingdom, experienced 8 percent growth in the industry.

The focus is on collaborating with key operators and developing enterprise customers for industrial digitalization and other initiatives.

“The market is attractive for investment, the population is young which is not the case in most other parts of the world. There's a lot of capital available and the ambition level of the actors is very high,” Lundmark said.

He added: “You definitely have the right conditions for investment, and again, when I look globally, of course, there are also other places where there is a lot of reasons to invest.”

During the interview, Lundmark further discussed the importance of safety, productivity, and material efficiency, especially in industries like oil and gas.

An integral aspect of the Vision 2030 agenda involves diversifying the Saudi economy, establishing entirely new industries, and embracing the new generation of networks and extensive digitalization.

Lundmark believes this presents a significant opportunity for the Kingdom to “to leapfrog directly into digital industries” as the Kingdom is starting from scratch in many areas as opposed to modernizing established systems.

He added: “That is exactly why we feel that the Saudi market is so exciting.”