Italian shipbuilding giant floats Saudi Arabia partnership plan

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CEO of Fincantieri, Pieroberto Forgiero, during his speech at the event. (AN photo/Huda Bashatah)
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CEO of Fincantieri, Pierroberto Folgiero, during his speech. (AN photo/Huda Bashatah)
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Saudi decisionmakers from related sectors in Riyadh joined Italian officials in a range of sessions at the forum. (AN photo/Huda Bashatah)
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Her Excellency Maria Tripodi, Undersecretary of State for Foreign Affairs, and His Excellency Khalil Ibrahim Bin Salamah, Deputy Minister for Industry Affairs. (AN photo/Huda Bashatah)
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Updated 25 May 2024
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Italian shipbuilding giant floats Saudi Arabia partnership plan

  • Fincantieri stands out in the shipbuilding industry for its innovation, says CEO

RIYADH: One of the world’s biggest shipbuilders will work in partnership with Saudi Arabia to strengthen the Kingdom’s maritime sector, with a focus on sustainability and the development of “green shipping.”

Fincantieri, an Italian company and Europe’s largest shipbuilding group, highlighted its commitment to Saudi Arabia’s Vision 2030 agenda at a conference under the theme “Where Vision Meets Maritime Excellence” held in Riyadh on Wednesday.

Saudi decisionmakers from related sectors in Riyadh joined Italian officials in a range of sessions at the forum.

During the event, Fincantieri CEO Pierroberto Folgiero outlined the shipbuilder’s plans to collaborate with Saudi companies in line with Vision 2030.

“Our commitment to the Kingdom of Saudi Arabia is steadfast,” he said.

Fincantieri stands out in the shipbuilding industry for its innovation, and has a leading role in the naval, cruise, and oil and gas sectors, Folgiero said.

The CEO highlighted the importance of developing green ships, designed to minimize the environmental impact of maritime operations, as part of Saudi Arabia’s commitment to achieving net-zero emissions by 2060.

Digitizing shipyard operations through innovations such as AI also aligns with the goals of Vision 2030, Folgiero said.

“Today, the shipping industry and the maritime industry, in general, is coping with environmental regulation. For us, it is not only a source of compliance, but also a source of distinctiveness. So, we believe that in the maritime sector, in the shipbuilding sector, mastering energy transition and new technologies will be a source of competitiveness and distinctiveness,” he said.

“That is why we are engaged in all the solutions (regarding) energy transition at sea. We are a new engine. We are in biofuels. We are in methanol. We are in LNG. We are in ammonia. We are in hydrogen. We are everywhere there is innovation at sea.”

Maria Tripodi, undersecretary of state for foreign affairs at the Italian Ministry of Foreign Affairs and International Cooperation, discussed the significance of keeping operations and businesses sustainable.

Fincantieri’s ships are built to produce zero carbon emissions, which helps to protect the environment and marine ecosystem, she said.

Khalil Ibrahim bin Salamah, deputy minister for industry affairs at the Saudi Ministry of Industry and Mineral Resources, said: “Localization for us is a key factor. Key components are crucial, but the whole supply chain is equally important.”


Saudi Arabia’s M&A volume hits $955m in Q1, fueled by chemicals sector

Updated 21 June 2024
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Saudi Arabia’s M&A volume hits $955m in Q1, fueled by chemicals sector

RIYADH: Saudi Arabia led the Middle East in mergers and acquisitions in the chemicals sector in the first quarter of 2024, with $500 million worth of deals, according to recent data.

Figures from financial markets platform Dealogic showed that the Kingdom’s total M&A deal volume during this period reached $955 million, with the chemicals sector accounting for 52.4 percent of the total. 

Saudi Arabia was the only country in the region to show activity in this sector, and a report from management consulting firm Kearney earlier this month suggested that chemical executives are expecting more M&As led by strategic investors such as national oil companies.

“Recent deals by major players like Aramco and ADNOC underscore the region’s commitment to leveraging M&A as a key growth lever, setting the stage for a dynamic and transformative period ahead,” said Jose Alberich, partner, Middle East and Africa at Kearney at the time.

The figures from Dealogic revealed that the professional services sector was the second targeted sector, with deals worth $160 million, accounting for a 16.8 percent share of the Kingdom’s total.

Technology was close behind with $138 million in deal value, capturing a 14.5 percent share. 

Retail and insurance sectors represented 7 percent and 4.1 percent of the total, respectively.

Across the region

The figures revealed that during the first three months of the year, the Middle East targeted M&A volume reached $6.21 billion, with technology being the leading sector with 42 total deals worth $1.56 billion. 

Finance followed with 9 deals amounting to $1.3 billion, while the oil and gas sector, which topped the list a year ago with deals valued at $3.5 billion, fell to the eighth place with just $273 million in deals.

According to Dealogic, domestic transactions were the dominant contributor, making up 55 percent of the Middle East’s M&A volume across 91 deals. In contrast, outbound transactions accounted for 45 percent with a total of 38 deals.

Kuwait emerged as the top contributor to GCC nations’ total M&A deal volume, amounting to $1.12 billion, all of which were outbound deals.

The UAE followed closely with a deal value of $988 million, of which 58 percent were domestic.

Saudi Arabia secured the third position with 18 deals valued at $955 million, of which 60 percent were outbound.

Compared to the same quarter of 2023, the Middle East’s deal volume declined by 27 percent. 

Global slowdown

In its report, Dealogic explained that global M&A activity experienced a significant decline during this period, with the number of transactions falling by 31 percent to 7,162, marking one of the quietest quarters for dealmakers in nearly two decades.

The slowdown was largely attributed to high capital costs, with Switzerland being the only major economy to cut interest rates in 2024. 

Additionally, geopolitical tensions, including the emergence of the Middle East as a new trouble hotspot alongside ongoing conflicts involving Russia and Ukraine, and tensions between Washington and Beijing over Taiwan, further contributed to the subdued activity in deal making.

Drivers of activity

In a paper published in September, the Boston Consulting Group said government support has been a driving force behind significant M&A activities among emerging market players in recent years, particularly in the Middle East, as firms aim at expanding their global presence.

Saudi Arabia’s SABIC acquired a 31.5 percent stake in Clariant, nearing the 33.3 percent threshold for a mandatory takeover bid under Swiss law. 

The UAE’s state-owned ADNOC purchased a 24 percent interest in OMV, increasing its indirect stakes in Borealis and Borouge, and is in talks to merge them.

ADNOC also made an $11 billion offer for Covestro, which was rejected, and expressed interest in Brazil’s Braskem. These moves highlight a trend of leveraging government support to enhance regional footprints and integrate into global value chains

Additionally, Saudi Aramco acquired Valvoline Inc.’s global products business for $2.7 billion in 2023. This acquisition, according to BCG, enhances Aramco’s lubricant portfolio by integrating Valvoline’s manufacturing and distribution network and its research and development capabilities.

The research highlighted three additional key reasons driving changes in macro trends in M&A, portfolio diversification, vertical integration, and technology acquisition.

Companies are increasingly expanding their portfolios through acquisitions to enter new markets and product segments, often over extended periods. Additionally, the focus has shifted from traditional feedstock-focused acquisitions to sustainable diversification of petrochemical value chains, prioritizing higher-margin and less cyclical businesses.

In essence, this means that rather than primarily acquiring companies to secure raw materials, the emphasis is now on achieving sustainable and balanced growth across the petrochemical value chain. The current priority is to invest in businesses that generate higher profits and are less affected by market fluctuations. This shift aims to create a more resilient and profitable business model in the long term.

This strategic emphasis on specialties is fostering vertical integration into downstream segments, as evidenced by significant acquisitions by industry leaders such as Saudi Aramco, SABIC, Thailand’s PTT, and Malaysia’s PETRONAS.

According to the BCG paper, gaining or retaining technology leadership is a key driver for M&A activity. Acquisitions and joint ventures are crucial for positioning companies as major suppliers in the e-mobility segment and the related electronic chemicals and battery industry.

As demand for sustainable solutions grows, companies are increasingly recognizing the potential of e-mobility. Through strategic M&A, including technology acquisitions and research and development investments, they aim to secure competitive advantages in this rapidly expanding market.

According to Dealogic, technology-focused deals accounted for 21 percent of the global M&A activity in the first three months of 2024. This was followed by healthcare at 14 percent and finance at 11 percent. 

Oil and gas stood at 9 percent, with utility and energy at 7 percent, and real estate and property sectors representing 5 percent of the total M&A activity.

AI attracting funds

Dealogic’s report highlighted that the largest global technology deals were driven by artificial intelligence. The surge in AI has significantly boosted Nvidia’s market capitalization to $2.4 trillion, with the company making investments in seven AI-related firms during this period.

Saudi Arabia also plans to establish a $40 billion fund dedicated to investing in artificial intelligence, according to a report from the New York Times in March. 

Set to launch in the second half of 2024 and spearheaded by Saudi Arabia’s Public Investment Fund, it aims to attract partnerships with US venture capital firm Andreessen Horowitz and other financiers, according to the report.

It will focus on supporting various AI-related ventures in Saudi Arabia, including chip makers and large-scale data centers, NYT wrote at the time.


Middle East has 1,400 GW of offshore wind potential: GWEC

Updated 21 June 2024
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Middle East has 1,400 GW of offshore wind potential: GWEC

RIYADH: Significant investment is needed to unlock the potential 1,400 gigawatts of offshore wind energy in the Middle East and North Africa, an analysis has found.

In its latest report, the Global Wind Energy Council said Saudi Arabia, Morocco, Egypt, and Oman could lead the way in developing this sector, which is still at a nascent stage as offshore activities in the region are mostly connected with oil and gas. 

This mode of power generation is considered crucial in the energy transition journey, as offshore wind is good for the environment because it generates electricity without burning any fuel or emitting any carbon dioxide.

Moreover, wind at sea is stronger, more consistent and less turbulent than on land, which helps generate energy in a reliable manner. 

“The significant potential of offshore wind indicates that there may (and should) be development in the Middle East. However, this depends greatly on the investment environment, national regulations, and permitting procedures, as well as the availability of a skilled workforce with experience in this industry,” said the GWEC report.

The document added that the Middle East is yet to see any major developments in the production of offshore wind energy due to the massive investments involved and readily available onshore locations. 

“However, trends are shifting in the Middle East. Efforts to diversify energy sources, potential development of subsea interconnectors to Europe, and the potential of green energy/green product exports may encourage MENA countries to reconsider their original stance on offshore wind,” said GWEC. 

Saudi Arabia to become a key player

In its report, GWEC projected that Saudi Arabia has an overall offshore capacity of 106 GW along its eastern and western coasts. 

The analysis further noted that Saudi Arabia’s increasing attention to renewable energy sources will catalyze the growth of wind power generation in the future. 

“The oil-rich Kingdom currently has only one onshore wind farm in operation (Dumat al Jandal) but has ambitious further renewable energy plans. By 2030, the country aims to generate half of its energy supply from renewable energy sources and to reach net zero by 2060,” said GWEC. 

According to the report, Saudi Arabia’s renewable energy targets combined with the launch of massive green hydrogen projects and the vision to export clean products are expected to propel the development of both onshore and offshore wind projects. 

Morocco considering offshore wind projects

GWEC noted that the government of Morocco is seriously considering developing offshore wind projects as the nation is heavily reliant on energy imports, with over 91 percent of its power coming from external sources. 

Moreover, the Moroccan government has made significant progress in the field of renewable energy, and currently has a target of reaching 51 percent of power coming from green sources by the end of this decade. 

“Although there are no set targets for the development of offshore wind, the government is taking serious steps in considering the possibility of this technology in the region,” said GWEC. 

Additionally, the European Investment Bank recently awarded the Moroccan Agency for Sustainable Energy a $2 billion grant to conduct a feasibility study for offshore wind in Morocco. 

A previous study conducted by GWEC had projected Morocco’s offshore wind potential at 200 GW. 

Global outlook

According to the report, the industry connected 10.8 GW of offshore wind to the grid in 2023 representing a 24 percent year-on-year rise, bringing the total capacity to 75.2 GW globally. 

China led the world in annual offshore wind developments for the sixth year in a row with 6.3 GW added last year. 

On the other hand, Europe added 3.8 GW of new offshore wind capacity from 11 wind farms commissioned across seven markets accounting for most of the new capacity. 

However, In North America, offshore wind turbines were installed at two utility-scale offshore wind projects in the US before the end of last year, but no offshore turbines were commissioned in 2023. 

The report further noted that the offshore wind energy sector will witness a compound average annual growth rate of 25 percent until 2028 and 15 percent up to the early 2030s. 

GWEC Market Intelligence added that at least 410 GW of new offshore wind capacity will be added between 2024 and 2033, of which more than two-thirds is likely to be added in the second half of this forecast period. 

“The growth of offshore wind is now so much more than a European, Chinese, or American story. This global industry must now ‘chart a course’ for the tremendous growth that lies ahead,” said Rebecca Williams, chief strategy officer, offshore wind, at GWEC. 

She added: “It’s important to note the offshore wind industry and its partners in government, institutions, and civil society are now coalescing and driving momentum in anticipation of the industry’s impending growth and importance as a clean energy technology.” 

The report highlighted that the Membership of the Global Offshore Wind Alliance, a diplomatic, multi-stakeholder initiative founded by GWEC, the International Renewable Energy Agency, and Denmark has swelled to over 20 governments. 

GWEC noted these 20 nations have pledged to collaborate toward installing 380 GW of offshore wind by 2030 and 2000 GW by 2050.

“GWEC is seeing widespread recognition across industry and governments that the key drivers for offshore wind are now in place — from government commitments and sustainable economic growth, to increased consumer demand and industrial decarbonization,” added Williams. 

The report also outlined the progress made by various nations in the offshore wind energy sector. 

In Brazil, offshore wind is seen as the clean power source of the future for its heavy industry, while in the Philippines, the government is embracing offshore wind to meet its fast-growing domestic demand and sustainable economic development agenda. 

“Poland sees offshore wind as a route to stimulate industrial growth, whilst Ireland has set out an ambitious future framework for offshore wind growth,” said Williams. 


Oil Updates – prices set for second week of gains on signs demand improving

Updated 21 June 2024
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Oil Updates – prices set for second week of gains on signs demand improving

NEW YORK/SINGAPORE:  Crude oil futures were little changed on Friday but on course to rise for a second week amid signs of improving demand and falling oil and fuel inventories in the US, the world’s biggest oil consumer.

Brent futures for August settlement were down 6 cents to $85.65 a barrel by 2:00 p.m. Saudi time, while US West Texas Intermediate crude futures for August delivery were down 5 cents to $81.24.

Both benchmarks were headed for a second week of more than 3 percent gains. Prices have gained about 5 percent this month to reach their highest in more than seven weeks.

“The seasonal demand increase, as shown by the latest EIA (US Energy Information Administration) data, renewed confrontation between Israel and Hezbollah, and the hurricane season could sustain price strength into the summer,” Citi analysts said in a note.

US government data released on Thursday showed total product supplied, a proxy for the country’s oil demand, rose by 1.9 million barrels per day in the week ending June 14 to 21.1 million bpd.

The data from the EIA showed a drawdown in US crude stockpiles by 2.5 million barrels rose during the week to 457.1 million barrels, compared with analysts’ expectations for a fall of 2.2 million.

Gasoline inventories fell by 2.3 million barrels to 231.2 million barrels, the EIA said, compared with forecasts for a 600,000-barrel build.​

Demand prospects elsewhere also helped push prices higher.

“Signs of stronger demand in Asia also boosted sentiment. Oil refineries across the region are bringing back some idled capacity after maintenance,” analysts at ANZ Research said.

The head of Lebanon’s Hezbollah this week pledged a full-on conflict with Israel in the event of a cross-border war and also threatened EU member Cyprus for the first time.

Weighing on prices were US data released on Thursday that showed a decline in new unemployment claims, which may lead the Federal Reserve to keep interest rates unchanged.

Higher interest rates typically limit economic growth and, in turn, oil demand. 


Saudi Arabia and Switzerland strengthen economic ties at 4th Financial Dialogue in Zurich

Updated 20 June 2024
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Saudi Arabia and Switzerland strengthen economic ties at 4th Financial Dialogue in Zurich

RIYADH: Saudi Arabia and Switzerland are poised to deepen cooperation in finance and economics as top officials convened for the 4th Saudi-Swiss Financial Dialogue in Zurich.    

The event, inaugurated by Saudi Arabia’s Finance Minister Mohammed Al-Jadaan, focused on enhancing macroeconomic outlooks, fostering international multilateral cooperation, and advancing specific bilateral economic initiatives.    

It comes against the backdrop of a robust trade relationship between the countries. In 2023, Saudi Arabia exported $810.67 million worth of goods to Switzerland, while Swiss exports to the Kingdom totaled $6.77 billion, according to the UN’s international trade database.   

“The Saudi-Swiss relations have been growing for more than six decades, and our meeting ... for the 4th Saud-Swiss Financial Dialogue in Zurich embodies the two nations’ keenness to deepen cooperation between Saudi Arabia and Switzerland in various fields, most notably in finance and economics,” Al-Jadaan said in a post on X a day before the event.   

“Today, I was pleased to inaugurate the 4th Saudi-Swiss Financial Dialogue with the participation of the Head of the Federal Department of Finance & Vice President of the Swiss Federal Council, Ms. Karin Keller-Sutter. I emphasized on the Kingdom’s aspiration to explore new areas and markets that would deepen the existing cooperation between the two nations,” the minister added in another post.

In February, a high-profile delegation of Swiss business leaders visited Saudi Arabia to explore burgeoning trade and investment prospects in the Kingdom.   

Guy Parmelin, a Swiss Federal Councillor and head of the Department of Economic Affairs, Education and Research, led the delegation at the time.  

In an interview with Arab News during his visit, Parmelin highlighted the robust growth in trade between Switzerland and Saudi Arabia in recent years. “Swiss companies are very interested in investing in the Kingdom,” he added.   

He emphasized the eagerness of the accompanying business delegation to capitalize on Saudi Arabia’s rapidly transforming economic landscape.   

In November 2022, during an official visit to Riyadh, Swiss Finance Minister Ueli Maurer met with his Saudi counterpart, Al-Jadaan, and they signed a cooperation agreement to inaugurate the third Saudi-Swiss Financial Dialogue.   

Lauding the strength of the Saudi economy, Maurer stressed the importance of bilateral dialogues in developing economic activities in both countries and strengthening Switzerland’s role as a strategic partner for the Kingdom in achieving the goals of Vision 2030. 


Pakistan stocks hit record high on budget, IMF optimism

Updated 20 June 2024
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Pakistan stocks hit record high on budget, IMF optimism

  • Pakistan released tax-heavy budget last week which investors believe will strengthen case for new IMF bailout
  • Market breached 78,000 level for first time during intraday trade as it reopened after five-day break on Thursday

KARACHI: Pakistan’s benchmark share index rose 2.8 percent to a new record high on Thursday, driven by expectations last week’s budget will strengthen the case for a new bailout from the International Monetary Fund.

The government’s budget was welcomed by investors as it avoided an anticipated increase in capital gains tax, despite an ambitious tax revenue target.

The market extended its post-budget rally on Thursday when it reopened after a five-day break, which included a public holiday, and breached the key 78,000 level for the first time during intraday trade.

Foreign portfolio investment in the market is at the highest in almost ten years, with inflows of $83 million as of June 14, data compiled by Topline Securities and JS Global Capital showed.

Sohail Mohammed, CEO of Topline Securities, said that a statement from credit rating agency Fitch that the budget would strengthen the prospects for an IMF deal would help to bring more foreign inflows.

The benchmark share index is up 26.2 percent year to date and has almost doubled since Pakistan signed a nine-month standby arrangement with the IMF last summer.

“Pakistani equity investors are driving the PSX higher, continuing to unlock valuations on better sentiment, which is a trend that began when Pakistan signed its last IMF deal last summer,” said Amreen Soorani, head of research at JS Global Capital.

“The trend paused briefly on anticipation of stricter capital gains taxes, which did not materialize,” she said, adding that the index is trading at a four times price to earnings ratio despite the recent rally and offers attractive dividend yields.

The financial sector was up 4.4 percent, with banks like UBL, HBL, MCB, Bank Alfalah, Habib Metropolitan Bank, Allied Bank, up more than 4 percent.

Adnaan Sheikh, assistant vice president of research at Pak Kuwait Investment Company, said that foreign investor interest and the central bank’s decision to cut its key rate by 150 basis points last week — its first rate cut in nearly four years — had pushed the market up.

Apart from the capital gains tax, analysts said the budget and other revenue measures were in line with expectations and key to sealing a new IMF program. This will include a challenging tax target of a near-40 percent jump from the current year and a sharp drop in the fiscal deficit to 5.9 percent of GDP from 7.4 percent for the current year.

Sheikh said the strict budgetary measures to secure new IMF funding will be likely to attract more foreign investors to the market, in addition to the current inflows.

Pakistan’s lower house of parliament is set to meet later on Thursday to debate the budget that the government presented last week.