Saudi Wealth Fund Said Near Deal to Boost ACWA Stake Before IPO

Saudi Arabia’s sovereign wealth fund is close to an agreement to raise its holding in ACWA Power International ahead of an initial public offering by the Riyadh-based energy producer, according to people with knowledge of the matter.

The Public Investment Fund, known as PIF, is in advanced stages of talks to increase its stake to more than 40%, the people said, asking not to be identified because the information is private.

Once that deal is completed, ACWA is planning to move ahead with an IPO as soon as the first half of 2021, which could raise about $1 billion, the people said. No final decisions have been made, and details of the potential transaction could change, they said.

The PIF and ACWA declined to comment.

ACWA is already one of the biggest developers of power generating capacity in the Middle East alongside France’s Engie SA, and the largest home-grown developer by far. It delayed plans for an IPO two years ago after its Turkish subsidiary was pummeled by the lira’s plunge, people familiar with the matter said at the time.

Additional investment will allow ACWA to compete for more contracts to bolster its position in the Middle East — where the flow of new projects has slowed — and beyond. In 2018, the PIF said it boosted its stake to about 25%.

PIF Mission

The $347 billion sovereign investor is a key lever for the kingdom’s de facto ruler to revive growth and get his economic master plan, known as Vision 2030, back on track after what may be the deepest recession the world’s largest crude exporter has experienced since 1987.

Handed $40 billion earlier this year to buy global stocks, the PIF will plow the same amount into the domestic economy next year and again in 2022. Some of the local investments could be financed by liquidating existing assets, according to Crown Prince Mohammed bin Salman, who chairs the fund.

Saudi Wealth Fund Making Another Splash, This Time at Home

Ties between ACWA and the PIF have been growing. ACWA is part of a consortium developing a hydrogen power plant at Neom, a new $500 billion city being developed by the sovereign fund. It’s also building a renewable power project for the kingdom’s Red Sea Development Co., a tourism project also under the auspices of the PIF.

ACWA’s chief executive officer has said that the PIF was set to increase its holding in the company to 45% earlier this year, before the coronavirus pandemic struck the region and oil prices crashed.

The power company was looking to expand its global presence to 16 countries this year and remained “committed” to a plan to sell shares, CEO Paddy Padmanathan said in a Bloomberg Television interview in February. The company has power and desalination plants in operation and under construction across 12 countries.

It owns and operates plants that produce power and water across the Middle East, Africa and Asia. Almost half of the projects it’s built, or currently constructing, use renewable energy.

— With assistance by Verity Ratcliffe

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