March 6, 2017 Read More →

Expansion Into Renewables Opens Saudi Aramco IPO to ‘a Larger Pool of Investors’

Bloomberg News:

Aramco is the world’s largest oil company, but when it sells shares next year its foray into renewables is what may lure investors who would otherwise be forced to stay away.

Saudi Arabian Oil Co., as it is formally called, is considering investments of as much as $5 billion in renewable energy, part of the kingdom’s effort to reduce the amount of oil feeding domestic energy needs.

That program and signs that King Salman’s government is finally making good on its vows to dramatically expand use of photovoltaics underpin the credibility of Aramco’s embrace of environmental and sustainability goals, measures that investors increasingly are looking for.

“They immediately open themselves up to a larger pool of investors,” said Scott Gehsmann, partner at the deal advisory service of the accounting and consulting firm PwC. “If a company is looking at raising capital, they typically must have a strategy around sustainability. If they don’t have one, it can be perceived as a negative.”

Saudi Arabia has said it thinks Aramco is worth more than $2 trillion. It produces about 10 million barrels of crude a day, about as much as China consumes. Wood Mackenzie Ltd. puts the value at more like $400 billion, clients who attended a private meeting at the oil consultant said last month. The Saudi government is hoping to raise about $100 billion from its initial share sale. It may tender about 5 percent of the company sometime in 2018.

Regardless, drawing in a bigger group of investors requires both better environmental and social governance disclosures and the start of strategy to deal with limits on fossil-fuel pollution coming from the United Nations climate deal signed in Paris in 2015.

Saudi Aramco’s Green Energy Push Seen Widening Appeal of IPO

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