Biggest Saudi IPO since Aramco draws strong investor interest

Investment bankers set aside a couple weeks to drum up interest in Saudi Arabia’s first $1bn initial public offering since Aramco. They only needed hours before they had excess orders.

The $1.2bn IPO by ACWA Power International, set to price later this month, is drawing high interest from investors looking for exposure to businesses seen as key to the kingdom’s plans to diversify its economy away from oil. The listing had initial demand amounting to several billion dollars and advisers are having to limit allocations to institutional investors, according to people with direct knowledge of the deal.

While Aramco’s record IPO in 2019 offered investors a slice of Saudi Arabia’s oil riches, ACWA dangles access to the renewable energy and hydrogen projects the nation sees as its future. ACWA, half-owned by Saudi wealth fund PIF, is expected to deliver at least 70 per cent of the kingdom’s renewable projects by 2030 and expects to meet its own net-zero emissions goal before an existing target of 2050.

The IPO is expected to be “significantly oversubscribed,” said Naveed Naz, financial controller of AlJammaz Group, a Riyadh-based family-owned agriculture and technology company that participated in the bidding process. “We expect the company to be able to deliver its growth plans and triple in size within the next 7 to 10 years.”

The PIF, which boosted its stake in the Riyadh-based energy producer late last year, isn’t looking to sell any of its shares, said the people, asking not to be identified while speaking before the offering is complete.

“The company will be heavily oversubscribed due to the nature of the offering, which depends on raising the capital and not exiting or selling,” said Thamer Al Saeed, chief investment officer of Mad’a Investment Co.

The offering comes at at time where Saudi Arabian companies backed by the kingdom’s $430bn wealth fund are taking the lead in new offerings on the Middle East’s biggest stock exchange where IPOs across the region have been scarce. The record Aramco offering, which raised about $30bn in 2019, has paved the way for more Saudi companies to float.

The kingdom also plans to rule the $700bn hydrogen market. It’s building a $5bn plant powered entirely by sun and wind that will be among the world’s biggest green hydrogen makers when it opens in the planned megacity of Neom in 2025, as part of its first steps into shaping a global market for hydrogen. ACWA is a one-third partner in the project.