Aramco IPO on minds of participants in Saudi Arabia’s investment conference

Aramco signed at least four deals worth a total of more than $2 billion, including a $1 billion memorandum of understanding with Spanish pipeline firm Tubacex Group.
Sunday 03/11/2019
An eye on the future. Chairwoman of Saudi Arabia’s stock exchange Sarah al-Suhaimi (L) speaks before an interview with US Treasury Secretary Steven Mnuchin at the Future Investment Initiative forum in Riyadh, October 30.(AP)
An eye on the future. Chairwoman of Saudi Arabia’s stock exchange Sarah al-Suhaimi (L) speaks before an interview with US Treasury Secretary Steven Mnuchin at the Future Investment Initiative forum in Riyadh, October 30.(AP)

WASHINGTON - Saudi Arabia’s third Future Investment Initiative conference gathered an impressive 6,000 attendees, including a king, presidents, Trump administration cabinet members, chairmen of sovereign wealth funds and top executives of leading Western banks and asset management firms.

Many of those on hand had shied away from last year’s Future Investment Initiative (FII), which occurred shortly after Saudi journalist Jamal Khashoggi was killed in the Saudi Consulate in Istanbul.

However, the robust and high-powered attendance at this year’s FII conference, commonly referred to as “Davos in the Desert,” suggests that many investors and governments were willing to look past the outcry over Saudi officials’ suspected involvement in Khashoggi’s death to capitalise on business opportunities in the kingdom as well as strategic purchases by Saudi Arabia’s $320 billion sovereign wealth fund, the Public Investment Fund (PIF).

Saudi Arabia has been eager to entice investment in its domestic non-oil sectors as part of Saudi Crown Prince Mohammed bin Salman bin Abdulaziz’s Saudi Vision 2030 economic transformation programme, which intends to wean the country off its dependence on crude oil revenues and create jobs by building up private industry.

The Saudi Arabian General Investment Authority announced at the conference that the Saudi government had signed 23 agreements with a total value of $15 billion, including projects in Saudi manufacturing and technology.

State oil and gas conglomerate Saudi Aramco signed at least four deals worth a total of more than $2 billion, including a $1 billion memorandum of understanding with Spanish pipeline firm Tubacex Group. Other deals announced during the event involved Saudi non-government entities and foreign firms, including an agreement between Samsung and Saudi entertainment resort Qiddiya.

Much of the buzz during the conference centred on the timing of Saudi Aramco’s on-again, off-again initial public offering (IPO), with reports indicating that shares could be available on the domestic stock exchange within weeks.

It was not surprising that top executives from some 25 banking and financial institutions were drawn to the forum because the Saudi Aramco IPO will generate hundreds of millions of dollars in underwriting fees. Saudi Oil Minister Prince Abdulaziz bin Salman told FII delegates: “The Aramco IPO will come soon, at the right time, the right opportunity and the right decision, but it will be a Saudi decision, and specifically Crown Prince Mohammed’s decision.”

PIF Governor and Saudi Aramco Chairman Yasir al-Rumayyan reflected that the 6,000 participants at this year’s gathering were “more than double the first FII.” The PIF, which organised the conference, touted nearly 300 speakers from 30 countries taking part in the October 29-31 event.

Saying that one purpose of the conference was for “connecting capital with ideas, building relationships and doing deals,” Rumayyan extolled the virtues of forward-looking technologies and emphasised that a key pillar of the forum was building a sustainable future.

Last year, after the killing of Khashoggi, US Treasury Secretary Steve Mnuchin pulled out of the conference but this year he was part of an American delegation that included US Energy Secretary Rick Perry, US President Donald Trump’s senior adviser and son-in-law Jared Kushner and State Department Special Envoy on Iran Brian Hook.

Other leaders in attendance included Jordanian King Abdullah II, the presidents of Kenya, Nigeria, Niger and Sierra Leone and the prime minister of Burkina Faso.

As significant was the high-level representation from banking heavyweights Goldman Sachs, JPMorganChase, Citigroup, HSBC Holdings and Credit Suisse, asset fund management firms BlackRock and Blackstone Group and Japanese tech investment giant SoftBank. Although his predecessor Jim Yong Kim skipped last year’s gathering, World Bank President David Malpass attended the 2019 forum.

The heads of the sovereign wealth funds of Kuwait, the United Arab Emirates, Bahrain and Russia also participated in the conference, presumably with an eye to investing in the Saudi Aramco IPO.

Technology giants Amazon, Apple and Alphabet Incorporated’s Google did not attend this year’s event and major Western media firms opted for the second year not to serve as sponsors or send speakers in protest of Khashoggi’s killing.

Kushner, speaking during a panel discussion, emphasised that “there is a need to invest in the future of the Middle East and create more jobs and opportunities.”

“What holds back investors is terrorist issues,” he said.

Kushner pushed regional leaders to make difficult decisions to secure investments, a nod to the economic portion of the Trump administration’s Middle East peace plan.

King Abdullah told forum participants: “Arab youth are our most vital resource and the key to the future of this region and this world and they are waiting for you.”

Carlos Hernandez, JPMorgan Chase’s global banking head, contended that Saudi Arabia was taking the right steps in opening its capital markets and applying reforms to the domestic stock exchange to make the Gulf country more attractive to foreign investors. Hernandez said: “We at JPMorgan believe that Saudi Arabia will become the main hub in the region, as well as one of the main hubs globally.”

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