LONDON – Saudi Arabia said on Sunday it has approved plans by the giant state-owned oil producer Saudi Aramko to publicize by taking the country's crown jewel and what is arguably the world's most profitable venture close to its expected goal: to become a publicly traded company.
The country's capital market authority has stated that Aramco plans to sell an unspecified portion of its shares, which are expected to begin trading next month. The bankers of the deal have told the Saudi Arabian government that investors are likely to value the company at about $ 1.5 trillion, people familiar with the matter mentioned earlier.
And Sunday's announcement puts the largest initial public offering ever, with a chance to exceed the $ 22 billion that Alibaba, the Chinese e-commerce giant, accumulated in one day in 2014.
But Aramco's initial public offering will prove to be insufficient for Saudi Arabia's decisive goals,
When Mohammed bin Salman, the de facto ruler of the country, first announced his plans to publish the company in 2016, he said the company would be valued at about 2 trillion Olar that supply will be completed by 2017 and that its shares will be traded as a leading international stock exchange, such as New York, London or Hong Kong, and the Saudi market in Riyadh.
Still, it looks like Aramco is estimated to be under $ 2 trillion. And his I.P.O. the process has been unsuccessful and has begun over the last three years, pausing several times on the complications of preparing its finances and operations – long shrouded in secrecy even as it casts wealth for its kingdom – to control public investors [
And while Prince Mohammed, the Crown Prince of the country, was eager to trade with Aramko both on Tadavul, the local stock market and on the more well-known stock exchange, which is now emerging from the mass.
Last week, at an investor conference at the Ritz-Carlton Hotel in Riyadh, Saudi officials clarified that the throne's thinking was crucial to the IPO.
appointed Minister of Energy, said at a conference Wednesday that the list would be "primarily a Saudi decision, and more specifically a decision by Prince Mohammed."
Much of the proceeds from the offering are unlikely to target Aramko's operations, and to the Fund and public investment, sovereign wealth fund of Saudi Arabia, which became the main mechanism of the Prince to shift the economy from its reliance on oil.
Along with venture capital investments like Uber, a ride-sharing service with a strong presence in the kingdom, the Public Investment Fund is investing money in renewable energy and huge real estate projects aimed at creating jobs for Saudis. Neom, an extensive futuristic city planned for the northwest of the country, will require $ 500 billion from the Public Investment Fund and other investors over time, according to its website.
On Wednesday, the fund announced that it borrows $ 10 billion from a group of international banks, including JPMorgan, Citigroup and Bank of America.
It is not difficult to understand why the prince insists on faster results fueled by the sale of Aramco shares. The economy is yet to make big profits from its schemes. Unemployment among Saudi citizens remains elevated to 12.7%.
What remains undeniable is how big Aramco is. It earned $ 46.9 billion in the first half of the year, producing 10 million barrels a day, which gives it a financial and manufacturing boost that analysts say will lure international investors.
However, the issues are likely to be the dogs of Aramco executives and their army of advisers as they continue to guide future investors to the offering. Some will focus on how the company recovered from a devastating drone and a rocket attack in September that temporarily halted half of its production.
Physical damage may have been largely repaired, but investors are likely to remain concerned that its facilities remain vulnerable in another attack, given the political tensions between Saudi Arabia and its neighbors.
"There is a risk of further attacks against Saudi Arabia, which could lead to economic damage," Fitch Ratings said in September when lowered Saudi Arabia's credit rating to A, from A +
. Investments in Saudi Arabia were generally stifled by the assassination and dismemberment of Saudi dissident and journalist Jamal Hashogi by Saudi agents last year.Prince Mohammed took responsibility for the murder but denied ordering it, but these concerns were difficult for me to find investment in.a week brought together by Wall Street executives and world leaders.
Aramco's status as the most powerful oil company in the world comes as concerns about climate change have raised doubts about the future of fossil fuels. Temasek Wealth Fund has already offered to reduce their exposure to fossil fuels, potentially excluding them as supporters of Aramco.
Aramco employees address these issues by investing about $ 600 million a year in research and development in areas such as more efficient automotive engines and vehicles equipped with carbon capture devices that produce.
The company also invests in factories and joint ventures aimed at diverting more of its oil into chemicals, which Aramco executives believe will see relatively strong growth in the coming decades when demand for transportation fuels may decline as alternatives making electric vehicles more accessible.
"Oil pessimism is overlooked," Aramco Chief Technology Officer Ahmad Al Kuwaiter said in a recent interview at the company's headquarters in Dhahran. "Growth is in materials; he's in the chemicals, "he added.
Michael de la Merced reports from London and Stanley Reed from Riyadh.