Saudi sovereign wealth fund buys stake in utility firm

Saudi Arabian sovereign wealth fund Sanabil and the nation's pension agency acquired 19 per cent of ACWA Power International.

The Saudi Arabian sovereign wealth fund Sanabil and the nation's pension agency acquired 19 per cent of ACWA Power International, a company that invests in power and water projects in the kingdom and regionally.

Riyadh-based ACWA issued 89.5 million new shares to Sanabil and the Saudi Public Pension Agency, each of which will sit on ACWA's board of directors, the company said yesterday. Morgan Stanley advised ACWA on the transaction, which will give Sanabil and the pension agency stakes of 13.7 per cent and 5.7 per cent, respectively. No financial details were given in the statement.

"ACWA Power has been growing rapidly and has started to expand beyond its borders in Saudi Arabia," Klaus Froehlich, Morgan Stanley's head of investment banking for the Middle East and North Africa, said today. "This transaction will allow the company to continue its growth and further compete for contracts in Saudi Arabia which are mostly government related."

Established in 2008, ACWA operates five power plants in Saudi Arabia, and was qualified to tender for projects in countries including Kuwait, Egypt and Turkey, according to its website. The company, with more than $17 billion of investments, has power generation capacity of 13,000 megawatts, it said in the statement. It also produces 2.37 million cubic meters a day of desalinated water.

ACWA owns and operates a 60-megawatt plant in Bulgaria and is developing two concentrated solar power plants in Morocco and South Africa, chief executive Paddy Padmanathan said in an interview in October. In Jordan, it has two 1.5-megawatt wind farms and a biomass plant.

Sanabil's investment is "consistent with its strategy to invest in the growth of Saudi private companies that contribute to the local economy," Ibrahim bin Muhammed Alromaih, the chief executive, said in a statement.

Saudi Arabia's $727 billion economy grew 6.8 per cent in 2012, the Finance Ministry said in its budget statement on December 29. That beat the 5.6 per cent median estimate of 16 analysts compiled by Bloomberg. The government is investing more than $500 billion on projects in infrastructure and industry.

"This is the first investment for Sanabil and it is expected to be more active in the future," Froehlich said. "It's likely to remain focused mainly on Saudi Arabia supporting the industrial expansion that is taking place there."