MbS says Aramco could reduce state dividend

Saudi Arabian Crown Prince Mohammed bin Salman (MbS) announced last week that state oil behemoth Saudi Aramco could reduce its payouts to the government, its majority shareholder.

Following the company’s partial listing on the local Tadawul Stock Exchange in late 2019, the state’s shareholding was reduced to 98.27%, with 3.45bn shares (1.73%) sold during the initial public offering (IPO) and soon after.

MbS’ statement follows the recent launch of the Shareek (Partner) programme which seeks to facilitate SAR5 trillion ($1.33 trillion) worth of investments into the Saudi economy from private sector businesses by 2030 and from Aramco and Saudi Arabian Basic Industries Corp. (SABIC), in which the NOC owns a 69% stake. The programme is expected to bring about the creation of thousands of jobs and increase the private sector’s contribution to GDP by as much as 65%.

MbS added that Aramco and SABIC’s contributions would account for 60% of the total investment.

He noted that the Kingdom’s largest firms have been asked to reduce their dividends to increase capital expenditure. “That will lead to growth of the company so stakeholders will own more money. In exchange, the Saudi government will help them with regulations, more subsidies and other incentives,” he added.

The move could ease Aramco’s $73.5bn annual state dividend requirement, while minority shareholders will be ring-fenced. Speaking to Middle East Oil & Gas (MEOG), Ian Simm, Principal Advisor at consultancy IGM Energy, said: “In effect, Riyadh will sacrifice a portion of its share on the premise that this will be recycled into the Saudi economy through Shareek. Prior to the IPO, prospective investors were promised a $75bn dividend, and while this represents a departure from this, the roughly $1.3bn per year to minority shareholders is sacrosanct.”

In 2019, Aramco promised a minimum $75bn dividend for each of the five years following the IPO. “We promised them that and we will keep that promise,” said the Crown Prince.

Providing rationale behind the programme, MbS said: “We will recycle the money. We shouldn’t keep our shares forever. Whatever mature investment we have, we have to IPO. So for example, if you own 70% of a company, [The Public Investment Fund (PIF)] should maintain majority at 30% and sell 40%.”

Meanwhile, Finance Minister Mohammed al-Jadaan told Reuters that the 24 largest listed companies will invest SAR2 trillion ($530bn) by 2025 and another SAR3 trillion ($800bn) by 2030. He added that the PIF is a shareholder in most of these firms.