Aramco seeks to follow ADNOC’s lead raising cash from asset sales

By Nicolas Parasie, Archana Narayanan, Dinesh Nair and Matthew Martin on 12/11/2020

Ken Moelis

Ken Moelis

(Bloomberg) –Saudi Arabia is looking to emulate neighboring Abu Dhabi by using its state energy firm to raise billions of dollars from investors, as the kingdom seeks cash to counter a severe recession.

Saudi Aramco, the world’s biggest oil company, has hired Moelis & Co. to devise a strategy for selling stakes in some subsidiaries, according to people familiar with the matter. The plan includes raising around $10 billion from a stake sale in Aramco’s pipelines, said the people, who asked not to be identified because the matter is private.

Moelis and Aramco declined to comment.

Saudi Arabia has been hammered this year by coronavirus lockdowns and the slump in crude prices. The economy will contract 5.4% in 2020, the most since the 1980s, according to the International Monetary Fund. The budget deficit could widen to 12% of gross domestic product.

Oil-producing Gulf Arab economies have been forced to accelerate efforts to attract investment.

Moelis had a broad role in helping Abu National Oil Co. raise more than $15 billion this year from the likes of Apollo Global Management Inc., Brookfield Asset Management Inc. and Singapore’s sovereign wealth fund. It played a part in nearly all of the major asset disposals by the state-owned energy firm.

ADNOC, which pumps almost all the oil in the United Arab Emirates, OPEC’s third-biggest producer, sold shares in its fuel-retail arm and leasing rights for properties and natural-gas pipelines.

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‘Ken of Arabia’

Many bankers have said this was a quicker way of generating cash than Aramco’s initial public offering in December 2019, which raised almost $30 billion for the kingdom but took around two years to complete.

While Dhahran-based Aramco issued $8 billion of bonds last month to fund the world’s biggest dividend, executives have said they want to lower the company’s leverage following its $69 billion acquisition of chemical maker Saudi Basic Industries Corp. this year. The energy firm has lined up banks including JPMorgan Chase & Co. to help with a stake sale in the pipeline business, Bloomberg News reported in April.

Aramco reshuffled its senior management in August and created a division focused on “portfolio optimization” as it adjusted to weaker energy prices.

Moelis was among the banks that arranged Aramco’s IPO. Its founder, Ken Moelis, has extensive experience of deal-making in the region and has the nickname “Ken of Arabia.”

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