Saudi privatization dollars: Where from, where to and progress
Already $3.5 billion secured
Saudi Arabia has completed six public-private partnership deals (4 water projects, 1 healthcare, 1 transport) in the past two months worth around $3.5 billion, and plans at least 23 more by 2022 (from 40 in pipeline), said Turki al-Hokail, CEO of the National Centre for Privatisation and Public-Private Partnership (NCP), according to Reuters.
“50-70% of the companies involved (from France, Spain, China, Japan, US, Scandinavia, Egypt and the UAE) in each of the six deals so far were foreign. Foreign banks had loaned 70-80% of the financing for each deal,” Hokail said.
Riyadh wants to generate $9.3 billion to $10.0 billion in non-oil state revenues from its privatization program by 2020, using a mix of asset sales and public private partnerships (PPP law is expected to be approved during H2 2019).
The National Center for Privatization (NCP) was set up in 2017 to oversee sales of public assets and forge PPPs.
Privatization includes sale of stakes in utilities, soccer clubs, flour mills and medical facilities, according to Bloomberg.
Saudi as privatization player
“They’re (Saudi) looking at the energy sector, at some of our privatization plans that they might bid for through our privatization process,” Pakistani investment minister Haroon Sharif told Reuters, hinting at mining sector.
India is expecting Prince Mohammed to announce an initial investment in its National Investment and Infrastructure Fund (NIIF), a quasi-sovereign wealth fund, to help accelerate the building of ports and highways, quoting Saudi state media.
Saudi Arabia has also announced plans for a $10 billion refinery and petrochemical complex at the coastal city of Gwadar, where China is building a port as part of its vast Belt and Road initiative.
Saudi state news said Saudi officials will discuss investments with China, South Korea and Indonesia, in sectors including healthcare and telecommunications, without giving further details.
Saudi sector/money-raising aims
Aramco is months away from raising as much as $100 billion in an IPO and another $40 billion in privatizations, according to Bloomberg.
Last October, al-Tuwaijri said the state sell-off would span four sectors: Silos and grains, schools, health care and desalination.
Saudi Arabia’s economy minister Mohammed al-Tuwaijri said following the announcement of a $295 billion budget that five sectors are prepared for privatization in the first quarter of 2019, according to Al Arabiya.
Privatization aims at increasing Saudi nationals’ participation in the labour market which currently stands at 42%, according to al-Tuwaijri.
Foreign investment (FDI) in Saudi more than doubled in 2018 to $3.5 billion rising 110% from 2017.
On the selling blocks…on hold
Stock Exchange- Tadawul
Tadawul, the Middle East’s largest stock exchange, unveiled plans for a public offering in 2014, but has been pushed back to this year at the earliest, according to Bloomberg, waiting for a value boost up with the inclusion of Saudi stocks in indexes compiled by FTSE Russell and MSCI Inc.
Plans to sell a stake in King Khalid International Airport were said in September 2018 to have been put on hold.
Potential buyers had until November to submit bidding qualification applications.
The sale of the $7.2 billion Ras Al Khair power plant on the east coast is expected to be done by 2020.
Plans to privatize soccer clubs started in 2016. There are currently no “obstacles” that could derail the timeline to sell the clubs by 2020, the NCP said, where 16 clubs could raise $800 million to $1.5 billion.
The NCP said it will also open tenders for municipal assets related to commercial-land for development, renewable energy PPP projects in solar and wind, parking centers; a second cargo license station at King Khalid International Airport, the establishment of an agriculture company and a PPP for independent schools, as well as school buildings on a build-maintain-transfer basis.
In the health sector, the NCP is eyeing as much as $7.5 billion in public-private partnerships.