After the Saudi Crown Prince Mohammed bin Salman, announced plans for the largest spending in the history of the Kingdom during the next decade through plans to invest about $ 1.3 trillion, all eyes are turning to the Crown Prince’s reliance on Aramco and the major listed companies as part of the ambitious expansion plan.
A report by the British newspaper Financial Times says that the crown prince is counting on the major companies listed on the market, led by Aramco, as a cornerstone of that plan by cutting distributions at a time when Saudi Arabia seeks to diversify its economy away from oil and gas within the framework of the Kingdom’s Vision 2030.
During the announcement of the plan, Crown Prince Mohammed bin Salman said that more than 20 companies agreed to join the new initiative of providing about 60% of investments from the Saudi oil giant Aramco, which was listed in the Saudi capital market in 2019, in addition to the petrochemical giant SABIC, which is expected to play. It is also an important role in implementing the initiative.
Do not fear them
The Saudi Crown Prince affirms that his ambitious plan will not harm the shareholder structure of the listed companies.
During the announcement of the plan, the crown prince said that the shareholders of the listed companies would not be harmed by the plan to reduce capital dividends, but rather they would get opportunities for growth in the stock market.
The Saudi Crown Prince’s announcement had a magic effect on the Saudi market in the Wednesday session, with the main index of the market rising to its highest level since April 2015 amid record liquidity, while the main index of the market recorded the second-best quarterly performance in the first quarter of this year since the quarter ending in late December 2016.
A Saudi official source told the Financial Times that the crown prince’s ambitious initiative was optional for companies as he left the decision to them about the future of their dividend policy.
The official source told the newspaper that Aramco will continue to fulfil its promise to pay its cash dividends to minority shareholders in the company.
Last year, Aramco distributed about $ 75 billion to shareholders, at a time when the share offered by the company in the money market is 1.7%, and it is the largest listed company in the world by market value.
Saudi Finance Minister Mohammed Al-Jadaan excludes the use of Aramco as a tool for developing the state.
“As a listed company, I will not give speculation about the company’s future plans, but let us remember that this is an optional program,” Al-Jadaan said.
The CEO of Aramco told CNBC that the company will participate in investment plans that will maximize returns and achieve the largest possible benefit for shareholders.
Incentives for foreigners
Saudi Finance Minister Mohammed Al-Jadaan told the newspaper that Saudi Arabia would give incentives to foreign companies wishing to participate in the initiative, including tax exemptions and energy price reductions for heavy-consumption industries, in addition to soft loans.
“The goal is to increase the contribution of private sector investments … We are talking here about companies in the sectors of technology, financial technology, mining, logistics, renewable energy, manufacturing and other sectors,” Al-Jadaan added.