Saudi Arabia has transferred 4% of Saudi Aramco shares to its sovereign wealth fund – Public Investment Fund (PIF) – according to a statement.
In line with Aramco’s market capitalisation, a 4% stake would mean shares worth about $80 billion.
Prince Mohammed bin Salman, Saudi Arabia’s Crown Prince, Deputy Prime Minister, Chairman of the Council for Economic and Development Affairs, and Chairman of PIF made the announcement on Sunday. He added that the transfer is part of the kingdom’s long-term strategy to support its economic diversification plans.
The transfer of shares also supports the PIF’s plan to grow its assets under management to $1.07 trillion by the end of 2025.
The state will remain as the largest shareholder in Saudi Aramco even after the transfer as it owns 94% of the company’s shares, the Saudi Crown Prince explained. He added that the shares will bolster the fund’s strong financial position and high credit ratings in the medium term. This is because the PIF relies on the value of its assets and the returns on its assets under management for its funding strategy.
A statement from Aramco to Saudi Stock Exchange said that the transfer is a “private transfer between the state and PIF, and the company is not a party to the transfer and did not enter into any agreements or pay or receive any proceeds from the transfer.”
In addition, the transfer will not have an impact on Aramco’s “operations, strategy, dividends distribution policy or governance framework”, and will not affect the company’s total number of issued shares, and the shares transferred will rank equally alongside other existing ordinary shares in the company,” the statement noted.
Aramco’s growth in 2021
In 2019, Aramco listed a portion of its shares, raising $29.4 billion, and the proceeds were transferred to the PIF. It also raised $6 billion in Islamic bonds last year so that it could pay dividends to the new shareholders.
Furthermore, in April 2021, the Crown prince, in a televised briefing, had announced that the kingdom was in talks to sell 1% of Aramco. “Discussion on the acquisition of 1% of Aramco by one of the world’s leading energy companies is underway,” he said.
Aramco’s profits for Q3 2021 were $30.4 billion, an enormous shoot-up from $18.8 in Q3 2020. The company attributed this rise to “higher crude oil prices and volumes sold and stronger refining and chemicals margins in Q3, which were underpinned by rebounding global energy demand and increased economic activity in key markets.”
PIF’s five year plan
The Saudi Crown Prince said that the PIF will continue to achieve its strategy by maximising the value of its assets, launching new sectors, forming strategic partnerships, and localising knowledge and technologies, according to PIF’s statement.
By 2025, the PIF will deploy up to $255 billion in domestic projects, increasing its local content contributions and the contributions of its portfolio of companies to around 60%, creating direct and indirect jobs in the local labour market.
The Crown Prince stressed on the kingdom’s commitment in continuing the implementation of its financial and economic reforms. This also included the investment opportunities available to public development funds and the private sector to enable the realisation of Vision 2030 targets.
