Saudi Arabia to raise $10bn from privatisation by 2020

The kingdom will kick off moves to bring state assets to market, says law firm Hogan Lovells

Solar energy schemes are among the first large-scale PPP projects in Saudi Arabia, as the kingdom seeks to diversify the economy and expand the private sector under Vision 2030. Fahad Shadeed

A wave of privatisation deals in Saudi Arabia will raise $10 billion by 2020 as the kingdom presses on with its economic transformation plan, according to a study by global law firm Hogan Lovells.

Last year “was initially proposed to be the year when the first few key assets would come to market, however 2019 will see the process move into a new gear,” the report by global law firm Hogan Lovells said.

The Arab world's largest economy plans to eventually raise as much as $200 billion through privatisation as part of its Vision 2030 economic roadmap aimed at expanding the private sector and diversifying the revenue streams of the world’s top oil exporter to reduce its dependence on hydrocarbons.

The National Center for Privatization & PPP was set up in 2017 to oversee sales of public assets and forge public-private-partnerships (PPPs). Separately, the kingdom wants to raise another $100bn through the sale of a five per cent stake in state-owned oil giant Saudi Aramco.

The government has worked hard to prioritise asset sales that could take place this year, including the most established revenue-raising companies, and attract greenfield investment through PPPs. The water sector looks set to pioneer the first tranche of privatisations with the planned sale of the Ras Al Khair desalination plant already well advanced and others under way, Hogan Lovell’s 2019 Middle East Investment Outlook report said.

In addition, four flour mills are likely to be sold within the year, as well as several national football clubs.

Meanwhile, the PPP market is expected to become “vibrant” in 2019, the report added, with more deals anticipated in the renewables, education, transportation and health sectors.

The first few large-scale PPP projects are already under way, including Sakaka PV, the kingdom’s first utility-scale solar project under the King Salman Renewable Energy Initiative, which closed financially in November with Saudi energy company ACWA Power on board.

Saudi Arabia published a draft PPP law last July that contained guidance around practices and the possibility of payment guarantees from the Saudi Ministry of Finance to reduce the risk of such partnerships for private investors. The law is under consultation at present.

“Vision 2030 puts the creation of a vibrant private sector and the streamlining of government activities at the heart of Saudi Arabia’s economic transformation,” Saad Alrashed, a partner at Hogan Lovells in Riyadh, wrote in the report.

“There are signs that demand from the private sector is picking up, and with PPPs and privatisation coming through in 2019, we expect to see a major shift in the sector this year.”