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November 27, 2019updated 28 Nov 2019 9:25am

Abu Dhabi Investment Authority to invest in Saudi Aramco IPO

The Abu Dhabi Investment Authority (ADIA) is looking to invest between $1bn and $2bn in Saudi Aramco’s initial public offering (IPO), according to a report by Reuters.

By Jack Unwin

The Abu Dhabi Investment Authority (ADIA) is looking to invest between $1bn and $2bn in Saudi Aramco’s initial public offering (IPO), according to a report by Reuters.

The final decision has not been approved by ADIA’s board of directors, which is chaired by United Arab Emirates President Sheikh Khalifa bin Zayed al-Nahyan with the deputy chairman Crown Prince Sheikh Mohammed bin Zayed al-Nahyan.

ADIA has refused to comment on the story, whilst Saudi Aramco stated that it does not comment on specific investor meetings.

Other companies Reuter’s names as having been approached by Saudi Aramco are the Kuwait Investment Authority (KIA) and GIC Private in Singapore. KIA has not responded to a request for comment.

Saudi Aramco IPO

Despite being known as the most profitable company in the world, Saudi Aramco’s first-ever IPO has struggled to get off the ground.

The company initially looked to offer 5% of its shares, receiving $100bn in investment and giving the company a valuation of $2tn. This has gradually been reduced, with Saudi Aramco now offering 1.5% of its shares with a valuation of $1.6-$1.7tn.

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It is currently looking to raise around $25.6bn in funding but has struggled to raise this from international investors and recently cancelled a series of marketing roadshows around the world to drum up interest.

International companies have raised concerns about Saudi Aramco’s lack of transparency regarding its closeness to the Saudi government. Meanwhile, the drone attacks on the company’s Abqaiq and Khurais production facilities on 14 September shook confidence and reduced Saudi Aramco’s production by 5.7 million barrels per day (bpd).

Third Bridge global energy sector lead Peter McNally said: “According to the discussions we’ve held, there are real concerns about long-term value, particularly if economic reform in Saudi Arabia fails to generate the necessary private sector employment and leads to continued dependence on Aramco as a source of revenue for the Kingdom.

“Most foreign portfolio managers and large investors are going to factor that into their risk calculations, and it’s a big factor.”

As such it has instead focused on companies and groups from within the Gulf region, with ADIA weighing up an offer and KIA being approached.

The IPO has also been put back on several occasions since it was first discussed in 2016, with the latest delay triggered on the 20 October.

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