Saudi Crown Prince Mohammed bin Salman, Deputy Prime Minister and Minister of Defense, announced that the stalled plan to sell shares in oil giant Aramco will go ahead, promising an initial public offering by 2021.
"I believe late 2020, early 2021," he said, discussing the timing of the IPO in an interview with Bloomberg at the royal palace in Riyadh on Wednesday.
"The investor will decide the price on the day. I believe it will be above $2 trillion. Because it will be huge."
The IPO project was first announced in 2016 as the cornerstone of the prince’s Vision 2030 plan to modernize the Saudi economy. Officials said this year that it would be delayed to 2019. Soon after, Aramco put the IPO on hold and instead started talks to buy a majority stake in local petrochemical giant Sabic, a deal potentially worth $70 billion.
"Everyone heard about the rumors of Saudi Arabia canceling the IPO of Aramco, delaying that, and that this is delaying Vision 2030," Prince Mohammed said. "This is not right."
The IPO was "100 percent" in the Kingdom’s interest, he stressed.
Prince Mohammed said the IPO’s delay had its origin in mid-2017, when it became clear that Aramco needed a push into petrochemicals. He said it would had been unfair to go ahead with the listing only to surprise investors soon after with a big deal in chemicals, reported Bloomberg.
The Aramco IPO would be a seismic event for financial markets. Prince Mohammed said he hoped to raise a record $100 billion by selling a 5 percent stake, dwarfing the previous record, set in 2014, when Chinese retailer Alibaba Group Holding Ltd. raised $25 billion.
Energy Minister Khalid Al-Falih said in August that Saudi Arabia would go ahead with the project "at a time of its own choosing when conditions are optimum."
Prince Mohammed has now given the company and its advisers a new deadline, requiring the completion of the Sabic and acquisition and a giant international share sale in less than three years.
Prince Mohammed said the deal between Aramco and Sabic, which he hopes will close next year, was key for the future of the country’s energy industry. The state-owned company can pull it off easily due to its low debt, he said.
"If we want to have a really strong future for Aramco after 20, 30, 40 years from today, Aramco has to invest a lot in downstream because we know that the new demand for oil 20 years from now, it will be from petrochemicals," he said.
If Aramco had developed a separate petrochemical business, Sabic would have definitely suffered, Prince Mohammed said, partly because Aramco provides Sabic with the bulk of the fuel it processes into chemicals.
Prince Mohammed said that the Saudi government will keep the shares of Aramco after the IPO, rather than transfer them into the sovereign wealth fund as originally planned. Instead, the PIF will receive the $70 billion from the sale of its stake in Sabic, plus the $100 billion that country hopes to raise from the Aramco IPO.
"So PIF is good, the economic plans in Saudi Arabia is good, and that deal is good for the downstream industry in Saudi Arabia," he added, referring to the Aramco-Sabic deal.
Prince Mohammed provided a detailed timetable of his plans for Aramco, saying that after the Sabic deal is completed in 2019, the company would need a full financial year before it can go ahead and sell shares to the public.
"So, the deal in 2019, one financial year in 2020 and then immediately Aramco will be IPO-ed," he said. "We’ve tried to push to IPO it as soon as possible, but this is the timing, based on the situation that we have."
