Aramco may have second IPO and boost sovereign fund assets to $1.1tn, Crown Prince says

Revaluation of Saudi Arabia's PIF real estate assets and injection of proceeds from privatisation programme will increase the fund's assets, Prince Mohammed bin Salman says

Saudi Arabia's Crown Prince Prince Mohammed bin Salman speaking at the fourth edition of the Future Investment Initiative. Courtesy FII Institute

Saudi Aramco may have a second listing which will help increase the assets of its Public Investment Fund to $1.1 trillion, the kingdom’s Crown Prince Mohammed bin Salman said.

In addition to the raising of capital from a future share sale of the state-controlled oil producer, the sovereign wealth fund assets base will increase from a re-evaluation of real estate holdings in mega projects like Neom, Prince Mohammed said at the fourth edition of the Future Investment Initiative on Thursday.

"A lot of people are asking how we are going to increase assets of the PIF from $400bn," Prince Mohammed said.

"[It] will [partly] be through future Armaco IPOs in coming years and this cash will be transferred to the PIF and reinjected inside and outside of Saudi Arabia," he said.

He did not give a timeline of a future share sales, or where the world’s biggest oil exporting company intend to list additional shares.

Aramco listed its shares on the Saudi Stock Exchange, Tadawul, the world’s biggest IPO in 2019, raising $25.6 billion and later selling more shares boosting the total to $29.4bn. As of Thursday the company's market value was $1.86tn, second only to tech giant Apple. In the run up to the 2019 listing, Tokyo and Hong Kong were touted as potential venues for a second share sale.

"There are lot of resources, a lot of assets managed by the PIF, [that are] valued today at zero," Prince Mohammed said.

These assets, he added, include land of the kingdom’s $500bn futuristic city Neom – which is the size of Belgium – in addition to land of its Amaala project, its land holdings in the mega development Red Sea project and Riyadh’s entertainment district Qiddiya, which is half the size of Bahrain's landmass.

"There are tens of real estate assets that have a book value of zero at PIF," he said. "Once investments are injected, they will be reflected on the value of the asset, which will increase."

The fund's profits from its investments at home and abroad as well as proceeds from Saudi Arabia’s privatisation plans will also be redirected to its coffers, which will help it achieve the target.

"In the next few years, I don’t think it is challenging," the Crown Prince said. "This is going to be achieved without a doubt, and we will work on that."

Saudi Arabia, the Arab world’s biggest economy, is rapidly transforming its economy away from oil under its Vision 2030 programme. Under the initiative it plans to reduce its reliance on oil revenue. Earlier this week, the PIF, which is at the heart of the kingdom’s diversification ambitions, launched a five-year strategy with the goal of more than doubling its assets.

The sovereign fund plans to contribute $320bn to the kingdom's non-oil gross domestic product and invest a minimum of $40bn a year into the domestic economy until 2025 and help create 1.8 million jobs.

The fund, which invests at home and abroad, has already tripled assets under management to nearly $400bn over the past four years, according to the fund’s governor, Yasir Al-Rumayyan.

It has identified 13 new sectors for investments including healthcare, renewables, telecoms, media and technology, entertainment, food and agriculture, automotive, transportation and aerospace.

"The variety, or the menu of investments in Saudi Arabia, is really big … this is the proposition through the PIF and through the private sector and the government," Mr Al-Rumayyan told the FII on Wednesday.

Prince Mohammed also laid out plans to further develop the kingdom’s capital Riyadh, double its population and make it one of the top-10 city economies in the world.

"With cities representing 85 per cent of global economies, true growth begins in the city, whether in terms of industry, innovation, education, services, or other sectors," he said. "I have no doubt that the world economies are not based on nations, but on cities."

Riyadh currently has a population of 7.5 million people and the kingdom plans to boost it to 15 to 20 million inhabitants by 2030.

"All of Riyadh’s features set the groundwork for job creation, economic growth, investment and many more opportunities," Prince Mohammed said during his conversation with Matteo Renzi, Italy's former prime minister.

"We are, therefore, aiming to make Riyadh one of the 10 largest city economies in the world - today it stands at number 40,’" he said.

Detailed expansion plans, which will offer the private sector opportunities to invest, will be finalised within the next few months, the country's minister of investment, Khalid Al Falih, said at a separate FII panel discussion.

Regulatory reforms to ease doing business and special economic zones, as well as a massive industrial city and a logistics hub will drive foreign direct investment in the kingdom, he said.

"We ae currently studying 20 special economic zones and Riyadh will get about five or six of them," he said.