Crown Prince Salman says Saudi Aramco's $2 trillion IPO is on track for 2018

• Rania El Gamal and Stephen Kalin, Reuters

• 8h
• 1,579

Saudi Crown Prince Mohammed bin Salman, attends the Future Investment Initiative conference in Riyadh Thomson Reuters

RIYADH (Reuters) - Saudi Aramco's initial public offering is on track for next year, and the national oil giant could be valued at more than $2 trillion, Saudi Arabia's Crown Prince Mohammad bin Salman told Reuters in an interview.

The sale of around 5 percent of Aramco next year is a centerpiece of Vision 2030, an ambitious reform plan to diversify the Saudi economy beyond oil which is championed by Prince Mohammad.

Saudi officials have said domestic and international exchanges such as New York, London, Tokyo and Hong Kong have been looked at for a partial listing of the state-run firm.

A decision on which exchange would secure the offering has still not been made, fuelling market speculation that the IPO could be delayed beyond 2018 or even shelved, amid growing concerns about the feasibility of an international listing.

"We are on track in 2018... but the listing (details) are still under discussion," Prince Mohammad told Reuters in an exclusive interview on Wednesday in Riyadh for release on Thursday. "It will be IPO-ed in 2018."

The crown prince declined to discuss specific details of the IPO, which could be the biggest in history and is expected to raise as much as $100 billion.

Prince Mohammad, 32, has sweeping powers over defense, energy and the economy and is expected to take the final decision about Aramco’s listing venue and the other reforms.

View shows Saudi Aramco's Wasit Gas Plant Thomson Reuters

Investors have long debated whether Aramco could be valued anywhere close to $2 trillion, the figure announced by the crown prince, who wants to raise cash through the IPO to finance investments aimed at helping wean the world's biggest oil exporting nation off its dependency on crude.

But Prince Mohammad reiterated on Wednesday that Aramco's estimated valuation would be about $2 trillion.

"I know that there has been a lot of argument around this topic but at the end of the day the right say is that of the investor. Undoubtedly the biggest IPO in the world must be accompanied by a lot of rumors," Prince Mohammad said.

"Aramco would prove itself on the ground on the day of the IPO. Actually when I talked about the valuation, I talk about $2 trillion, it could be more than $2 trillion."

The timing of the IPO will depend on getting legal and regulatory approval from the jurisdictions it opts to list in, industry sources had said. It could also be influenced by the oil price - currently below $60 per barrel - a price Saudi officials have identified as a good level.

Asked whether the rift with Gulf OPEC producer Qatar has dented investors' sentiment, ahead of the Aramco IPO, Prince Mohammad dismissed the impact of the political impasse.

Saudi Crown Prince Mohammed bin Salman waves during a welcoming ceremony for British Defence Secretary Michael Fallon in Jeddah Thomson Reuters

"Qatar is a very, very, very small issue," he said.

Saudi Arabia and three other Arab states have cut ties with Qatar, accusing it of supporting terrorism. Doha denies the accusations.

OPEC kingpin Saudi Arabia is leading OPEC and other oil producers such as Russia to restrict oil supplies under a global oil pact to drain global inventories and boost oil prices.

"We are committed to work with all producers, OPEC and non-OPEC countries, we have a great and historic deal... We will support anything to stabilize the oil demand and supply," Prince Mohammad said when asked whether the kingdom would support extending the agreement beyond March 2018 when it is due to expire.

"I think now the oil market (absorbed) the shale oil supply, now we are regaining things again."

(Additional reporting by Simon Robinson and Samia Nakhoul; Editing by Susan Fenton)

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Here's what to expect from the ECB's crucial meeting later on Thursday

• Sam Jacobs, Business Insider Australia

• 10h
• 96

European Central Bank (ECB) President Mario Draghi testifies before the European Parliament's Economic and Monetary Affairs Committee in Brussels, Belgium February 6, 2017. Reuters/Yves Herman

Thursday’s policy meeting of the European Central Bank (ECB) is the key event on this week’s economic calendar.

ECB President Mario Draghi is set to announce details of the bank’s plan to reduce its bond purchasing program. Any significant deviation from market expectations will have an impact across asset classes, particularly the euro currency.

• The market expects the ECB to announce a reduction in bond purchases of €30 billion per month.
• That will reduce monthly purchases to €30 billion from the current level of €60 billion, which has been in place since April.
• The reduction will start from January 2018 and is expected to run for nine months, which amounts to a forecast total purchase amount for next year of €270 billion.

Markets will also be watching for whether the ECB plans to keep the bond purchasing program open-ended, or specify an end date.

Additionally, there’s likely to be some discussion around the relative scarcity of available bonds that the ECB will be able to buy.

A research note from InTouch Capital Markets said there had been considerable interest in recent statements from ECB sources, which suggested that some ECB policy makers have outlined an upper limit for bond purchases of €2.5 trillion.

Total purchases are on track to reach €2.28 trillion by the end of this year, which means spare capacity will only be just over €200 billion — less than the forecast purchase amount for 2018 of €270 billion.

Another measure to keep an eye on will be whether the ECB provides any specific guidance on the amount of maturing bonds in its portfolio that will be reinvested. Reinvesting bonds would have the effect of maintaining liquidity in the financial system.

On interest rates, the ECB is expected to confirm no changes to the current ultra-accommodative interest rate settings until the conclusion of the bond purchase program.

The euro is holding at above $1.18 ahead of Thursday’s announcement, having weakened from above $1.20 since the ECB’s September meeting amid more recent strength in the US dollar.

Markets Insider

Read the original article on Business Insider Australia. Copyright 2017.

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