Russian sovereign fund eyes investor consortium for Saudi Aramco IPO
The Russian Direct Investment Fund, a $10bn sovereign fund, said on Thursday it could set up a “significant consortium” of investors for the planned initial public offering of Saudi Arabia’s state energy giant Saudi Aramco.
Kirill Dmitriev, the head of the fund, said he expects widespread interest from Russian financial groups for the public offering tipped to be the world’s biggest ever.
“We see significant interest from Russian banks, from Russian investment banks and a number of other Russian investors, so we believe that we will be able to create a fairly significant consortium for these investments,” he told reporters at a conference in Sochi.
Mr Dmitriev has previously said that Russian pension funds were considering participating in the Saudi Aramco IPO, which the kingdom hopes will take place later this year. Crown Prince Mohammed bin Salman, who is driving plans as part of broader economic reforms, believes Saudi Aramco could be valued at $2tn and the IPO could raise $100bn through a 5 per cent sale.
Mr Dmitriev added that RDIF has been working with Chinese entities to facilitate their participation in the share sale, which would likely include several big cornerstone investors.
“We are helping our partners, including Russian and Chinese, to invest in this company,” Mr Dmitriev added, in remarks reported by Interfax. Although he conceded that “the share of the [RDIF] itself will be absolutely minimal.”
Saudi Arabia is weighing different options for the privatisation of Saudi Aramco which could include an international listing — in London, New York or Hong Kong — alongside one on the domestic Tadawul market. It is also considering a private sale.
While the kingdom is targeting a late 2018 listing, advisers and Saudi Aramco executives think 2019 is more likely.
Russia and Saudi Arabia — big resource-rich nations that pump a fifth of the world’s oil — have put aside their longstanding rivalry to forge an international agreement on curbing oil production to bolster the market after a three year downturn in prices.
Their partnership, politically and economically, has since thrived with both nations seeking investments in the wider energy sector and beyond as the two countries become closer despite their differences in global conflicts such as Syria.
For Russia the Saudi relationship, as well as a stronger link with China, is helping to offset souring relations with the west and the impact of financial sanctions that have curbed funding from US and European banks.
Russia’s largest non-state natural gas producer Novatek and Saudi Aramco are preparing to announce an agreement that could involve the Saudi state giant’s involvement in a planned new Arctic gas project. This follows comments by Russia’s energy minister Alexander Novak this week that a deal was close.
The agreement is pending final approvals and could include liquefied natural gas supply contracts such as a possible investment in Novatek’s Arctic LNG 2 project, a person with knowledge of the talks said.
French energy major Total and Chinese energy group CNPC are shareholders in Novatek’s $27bn Yamal LNG plant which began shipments this winter. The Russian company has long said that it is in discussions with potential Saudi partners in future gas projects.
Saudi Aramco has said it is keen to make investments in gas abroad, although the company has divulged little information about any Russian deals. A Novatek spokesman declined to comment.
Mr Novak, who headed a Russian delegation in Saudi Arabia this week, also said that the state-owned nuclear company Rosatom had applied for a tender to construct two power plants in Saudi Arabia.