Gulf Governments Sell Some Energy Assets

Oil-rich nations continue to diversify their income streams away from fossil fuel-based enterprises.

With Gulf governments increasingly under pressure to diversify away from hydrocarbons, the region’s two largest economies—Saudi Arabia and the United Arab Emirates (UAE)—are the focus of attention from international investors as they offload stakes in once closely held investments.

In mid-September, ACWA Power International, a company backed by Saudi Arabia’s sovereign wealth fund (the Public Investment Fund, or PIF), set the price range for its IPO. At between 51 and 56 Saudi riyals (about $13.6 to $14.9) a share, the offering is expected to raise 4.5 billion riyals (around $1.2 billion), in the largest share sale since Aramco sold a 2% stake in the oil giant in 2019. ACWA, half owned by the PIF, will sell 81.2 million shares, equivalent to 11.1% of the company. Additionally, the company has earmarked over 4 million shares to certain employees in an incentive plan.

The deal caps a period of frenzied IPO activity. Also in September, a unit of Saudi Telecom said it raised 3.6 billion Saudi riyals after indicating it would sell around 24 million shares. Attention is now turning to a planned listing of Saudi Tadawul Group, the owner and operator of the kingdom’s stock exchange, before the end of the year.

Meanwhile in the UAE, Abu Dhabi National Oil Company (Adnoc) increased the size of its offering in the IPO of Adnoc Drilling. It cited “significant oversubscription across all tranches,” which include UAE retail, qualified domestic and international institutional investors. The new offering increased the number of shares to 1.76 billion ordinary shares equivalent to 11% of share capital from 1.2 billion ordinary shares. The shares priced at 2.30 Emirati dirhams ($0.63) will see the company raise just over 4 billion dirhams, or around $1.1 billion.

Adnoc continues to own a majority 84% stake, while US energy technology company Baker Hughes retains its 5% holding. The share offering is the second occasion Adnoc has tapped IPO markets; the company listed 10% of its distribution business in 2017. Last year, Adnoc sold a further 1.25 billion shares in its distribution arm, valued at $1 billion, in a block placement with institutional investors.

There is speculation the company could soon list as much as 15% of its fertilizer joint venture with Netherlands-based OCI, known as Fertiglobe. Elsewhere, an IPO of Emirates Global Aluminium is expected to take place in 2022.