Saudi Wealth Fund Increases ACWA Stake to 50% Ahead of IPO

Saudi Arabia’s sovereign wealth fund has increased its holding in ACWA Power International to 50% ahead of an initial public offering by the Riyadh-based energy producer.

The Public Investment Fund, known as PIF, said that the investment is in-line with its “strategy to support the development of the renewable energy sector within Saudi Arabia and enable the growth of national champions,” according to a statement on the PIF website.

The PIF statement confirmed an earlier report that the Saudi fund was nearing a deal to boost its stake in ACWA, people familiar had told Bloomberg.

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.

Saudi Wealth Fund Increases ACWA Stake to 50% Ahead of IPO

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 Increases ACWA Stake to 50% Ahead of IPO

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.

©2020 Bloomberg L.P.

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