Aramco signs $10.4bn deals with local, foreign companies

DAMMAM / AGENCIES

Saudi Aramco signed on Wednesday agreements with foreign and local companies worth at least 39 billion riyals ($10.4 billion).
The bulk of the memorandum of understanding agreements were part of a drive to promote local manufacturing, the company said. One agreement was also signed with drilling and oil service company Schlumberger worth 6 billion riyals.
Meanwhile, the company is asking banks to pitch for roles as coordinators and bookrunners on its initial public offering, people familiar with the matter said, as the state-owned crude producer pushes ahead with plans for the world’s biggest share sale.
The company sent out the request for proposals to banks over the past few days and aims to appoint a group of lenders by early next year, said the people, asking not to be identified as the information is private. Saudi Aramco, as it’s known, hasn’t told banks where it plans to list the shares, the people said.
Saudi Arabia is seeking to sell as much as 5 percent of Aramco as part of a plan by Crown Prince Mohammed bin Salman to set up the world’s biggest sovereign wealth fund and reduce the economy’s reliance on hydrocarbons. The sale could be the largest ever, based on the government’s $2 trillion valuation of the company.
Aramco is still waiting for a decision on how many shares will be offered to the public and where it will list outside of the kingdom, Chief Executive Officer Amin Nasser said last month. A spokesman for Aramco declined to comment.

‘ON TRACK’
Saudi officials in October reassured investors at a business conference in Riyadh that plans for the Aramco offering were still on track to take place next year, dispelling reports that the process was delayed. People familiar with the situation had said earlier that month that Saudi Arabia was wondering whether to delay the international portion of the offering
until at least 2019.
If the company manages to achieve a valuation that matches the Crown Prince’s expectations, the sale would raise about $100 billion, eclipsing the record $25 billion Alibaba Group Holding Ltd. raised in its IPO in 2014.
London and New York exchanges are vying for a role in Aramco’s offering, along with Hong Kong, Singapore, Tokyo and Toronto. The head of the local Tadawul stock exchange also opened the door to a Saudi-only listing in an interview. Khalid Al Hussan said the Tadawul had the “aspiration” to handle the listing alone. He also warned that even if the listing only takes place in Riyadh, the timetable for a sale in 2018 “will be very tight.”
Aramco has already been working with advisers including JPMorgan Chase & Co., HSBC Holdings Plc, Morgan Stanley, Moelis & Co. and Evercore Partners Inc. on preparations for the listing, people familiar have said. Independent Wall Street rainmaker and former Citigroup Inc. banker Michael Klein is also advising the oil ministry on the
privatisation.
The oil company has already unveiled plans to raise its spending to $414 billion over the next 10 years, including on infrastructure and drilling, as it moves into new businesses. The spending plan is higher than Aramco’s projection last year of around $334 billion by 2025, as the oil producer has been expanding its businesses.
Aramco has already created a department for renewables to develop wind and solar projects and last month it signed a preliminary deal with petrochemical producer Saudi Basic Industries Corp (SABIC) to build a $20 billion complex to convert crude oil to chemicals. The project, which the partners said would be the largest crude-to-chemicals facility in the world and the first in the kingdom, are part of the Saudi government’s effort to diversify the economy beyond exporting crude.
The kingdom’s “Vision 2030” economic reform plan aims at ending its reliance on oil and to stimulate the domestic non-oil private sector. Its centrepiece is a plan to sell up to 5 percent of Aramco in an initial public offering (IPO) next year.
Saudi Aramco outlined a plan known as In-Kingdom Total Value Add (IKTVA) two years ago, aimed at doubling the percentage of locally produced energy-related goods and services to 70 percent of the total spent by 2021. “Saudi Aramco is expected to spend more than 1 trillion Saudi riyals over the next decade. That has not changed, and we still want to see 70 percent of those riyals being spent locally,” Nasser said.