Government of Saudi Arabia Transfers 4% Stake in Aramco
In a recent move, the government of Saudi Arabia has transferred a 4% stake in Saudi Aramco, a global energy giant, to Sanabil Investments, a subsidiary of the Public Investment Fund (PIF). This transfer follows a similar one in February 2023, in which 4% of Aramco’s shares were transferred to the PIF. Notably, despite these transfers, the Saudi Arabian government remains the company’s largest shareholder, holding a 90.186% stake.
Impact on Aramco’s Shares and Operations
Despite the transfer, the total number of issued shares of Aramco will remain unaffected, with the transferred shares ranking equally alongside other existing ordinary shares. The company has also confirmed that the transfer will not impact its operations, dividend distribution policy, governance framework, or strategy.
Long-Term Vision 2030 Initiatives Drive the Transfer
This transfer is part of Saudi Arabia’s long-term initiatives to diversify the national economy and expand investment opportunities, in line with the Vision 2030 plan. By transferring a stake to the PIF and its subsidiaries, such as Sanabil Investments, the government is solidifying the fund’s financial position and credit rating. The PIF, one of the world’s largest sovereign wealth funds, is at the centre of the Saudi Vision 2030 initiative, which aims to diversify the country’s economy away from hydrocarbons.
Expansion Plans for the PIF and its Subsidiaries
Under a five-year strategy announced in 2021, the PIF aims to more than double the value of its assets under management to $1.07 trillion and commit $40 billion annually to develop Saudi Arabia’s economy until 2025. As part of this strategy, the fund has already created ten new sectors, launched more than 30 new companies, and created 331,000 jobs in Saudi Arabia. Some of the sectors include health care, renewables, telecoms, media and technology, food and agriculture, automotive, transportation and logistics, real estate, aerospace and defence, construction and building components and services.
Establishment of New Companies by the PIF
The PIF has established several new companies, including the futuristic city known as Neom, the Red Sea Development Company, Qiddiya, the KAFD Development and Management company, SAMI, the Saudi Jordanian Investment Fund, Jeddah New Downtown Company, Saudi Entertainment Venture, Saudi Information Technology Company and National Energy Services.
Potential for Further Share Sales
According to Yasir al-Rumayyan, governor of PIF and chairman of Aramco, the company may consider selling more shares if market conditions are right. This potential for further share sales underscores the PIF’s ambitious expansion plans and Saudi Arabia’s commitment to diversifying its economy.
Fitch Ratings Raise Aramco’s Ratings
In a recent development, Fitch Ratings raised Aramco’s long-term foreign and local currency issuer default ratings to A+ from A with a stable outlook. This upgrade was due to the company’s strong business profile and its ambitions to deliver a “sustainable and progressive dividend”.
Conclusion
In conclusion, the transfer of a 4% stake in Aramco to Sanabil Investments, a subsidiary of the PIF, is part of Saudi Arabia’s long-term initiatives to diversify the national economy and expand investment opportunities in line with Vision 2030. While the transfer will not impact Aramco’s operations or its shareholder structure significantly, it underscores the PIF’s and Saudi Arabia’s ambitious expansion plans and potential for future growth. The establishment of new companies by the PIF and its subsidiaries, as well as the potential for further share sales, highlights Saudi Arabia’s commitment to driving economic diversification and creating new investment opportunities. With Fitch Ratings recently raising Aramco’s ratings, the company’s strong business profile and commitment to delivering a “sustainable and progressive dividend” further underlines Saudi Arabia’s potential as a growing economic power in the global market.
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