Saudi government transfers 4% stake in Aramco to sovereign wealth fund

Saudi Arabia has transferred 4% of the shares of national oil group Saudi Aramco to its sovereign wealth fund, part of an increase of around $80 billion, as the Public Investment Fund strengthens its assets and prepares to increase the public debt.

Sunday’s announcement comes a week after the PIF, the engine of an ambitious Saudi plan to reorganize its economy by 2030, received its first credit ratings from Fitch and Moody’s. It is a precursor to the fund that could launch “green bonds” and provide $15 billion in banking facilities as it seeks to raise more debt.

In a statement released by the state news agency, Crown Prince Mohammed bin Salman, the country’s day-to-day ruler and chairman of the PIF, said the move was aimed at supporting the wealth fund’s plans to increase its assets. to SR4tn ($1.07 billion) by 2025.

The PIF wants to inject SR1tn into new national projects by this year. The fund, whose assets have grown over the past six years, has become the main driver of a government plan to diversify its economy away from oil and create more jobs in the world’s largest energy exporter. world.

The government remains Aramco’s largest shareholder, holding 94% of the shares, after the energy giant sold a 1.7% stake on the Saudi stock market in 2019, raising around $29 billion in a a successful initial public offering.

The company said in a statement Sunday that the share transfer to Aramco was a private agreement between the state and the PIF and that no proceeds would go to Aramco.

“The transfer will not affect the total number of shares issued by the company, and the transferred shares will rank pari passu with other existing ordinary shares of the company,” he added.

The PIF, whose governor is Aramco Chairman Yasir al-Rumayyan, will receive dividends from Aramco. Saudi officials said Aramco may plan to sell more shares in the future, depending on market conditions.

Prince Mohammed said the transfer of the 4% stake would strengthen “the strong financial position of the PIF and its increased credit rating in the medium term”.

PIF’s assets under management, which have grown from $152 billion in 2015 to $412 billion in 2020, are estimated to be around $500 billion.

Fitch, which issued the fund with a long-term default rating of A, said government cash injections into the PIF had totaled $77 billion over the past three years. It had also received other grants such as land transfers for domestic investments.

These local investments, such as the futuristic city of Neom, made up 67% of the fund’s portfolio as of December 2020, Moody’s said. The fund has also launched an international acquisition campaign, investing in companies as diverse as electric vehicle maker Lucid Motors and Premier League football club Newcastle United.

Comments are closed.