Saudi Arabia's PIF invests $1.3 billion in four local contractors

Move is part of the sovereign wealth fund's plan to back strategic sectors in the kingdom

A construction site in Diriyah. Saudi Arabia's PIF has invested in contractors that have managed complex projects in several sectors. Bloomberg

Saudi Arabia’s Public Investment Fund has invested $1.3 billion in four domestic contractors as part of its wider plan to back strategic sectors central to the diversification of the kingdom's economy.

The fund subscribed to new shares — as part of the companies' capital increases — amounting to “significant minority stakes” in Nesma & Partners Contracting Company, ElSeif Engineering Contracting Company, AlBawani Holding Company and Almabani General Contractors Company.

The investment is intended to improve local supply chains for projects in the country, drive the use of advanced technology and stimulate the growth of the contracting sector, the PIF said on Tuesday.

“These partnerships demonstrate PIF’s commitment to unlock the capabilities of key strategic sectors in Saudi Arabia, including the construction, building components and services sector, which has been identified as one of 13 strategic sectors locally,” said Yazeed Al-Humied, deputy governor and head of Mena investments at the PIF.

“PIF’s investment in four national champions will support local capacity expansion across the sector and stimulate private sector participation and investment to meet current and future demand, in line with Vision 2030.”

The PIF is one of the world’s largest sovereign wealth funds, with about $620 billion in assets under management.

It is diversifying its investment portfolio as it seeks to grow its asset base to more than $1 trillion by 2025.

The fund is at the centre of the Saudi Vision 2030 initiative to diversify the country’s economy and reduce its reliance on hydrocarbons.

The investment in the four companies comes amid a flurry of announcements from the PIF over the past two months.

These include the acquisition of a 30 per cent stake in Saudi Tabreed and a joint venture agreement with US sustainable agriculture company AeroFarms to build indoor vertical farms in the kingdom.

The four contracting companies in which PIF has invested have executed and managed complex large-scale projects in several sectors across various regions of Saudi Arabia, the sovereign wealth fund said.

Their partnerships with the PIF will support their regional and international expansion, it said.

The investments will also help increase private sector local content, contribute to growing Saudi Arabia’s gross domestic product and increase the construction services sector’s competitiveness, the PIF said.

Established in 1981, Nesma & Partners is a contractor in Saudi Arabia providing services in the industrial, oil and gas, civil, infrastructure and electromechanical sectors.

Its clients include Saudi Aramco, the PIF, Neom, the Diriyah Gate Development Authority and the General Authority of Civil Aviation.

El Seif Engineering Contracting Company, which was established in 1975, has delivered projects in the civil, infrastructure, entertainment, tourism, residential, commercial, military, education, healthcare and transport sectors.

“We are delighted to welcome PIF as a partner to expand our work in the coming years,” said Khaled El Seif, chairman of El Seif Engineering Contracting Company.

“The investment will support the growth and development of the sector and will contribute to scaling up capacity and private sector local content.”

Established in 1991, AlBawani Holding is a diversified group of Saudi companies, with a construction division.

It has completed more than 260 projects and currently has projects worth 12 billion Saudi riyals ($3.2 billion), according to its website.

“The construction services sector is of significant importance to the Saudi economy, and we believe that PIF’s contribution and investment into this sector will help support the realisation of Vision 2030’s ambitious projects,” said Fakher AlShawaf, chairman of AlBawani Holding Company.

Almabani is an engineering procurement and construction company with a 50-year history in the industry.

“The kingdom aims to increase the role of the private sector within the economy, and this investment will enhance the ability of private sector firms to provide key services,” said its chairman Youssef Nehme Tohme.