Saudi Aramco Raises $12.4 Bn By One of The World’s Largest Energy Infra Deals

Source: 63ru78, Shutterstock

Summary

  • Saudi Aramco will be selling a minority stake in a newly formed Pipeline Rights Unit.
  • The deal involves 25-year lease-and-lease-back agreement and the company will be getting an upfront payment of around $12.4 billion.

Saudi Aramco in one of the world’s largest energy infrastructure deals has raised $12.4 billion by selling a minority stake in a newly formed Pipeline Rights Unit. A group of investors led by EIG Global Energy Partners LLC would be acquiring the 49 per cent stake in the unit.

The deal involves 25-year lease-and-lease-back agreement, which means lease usage rights to 25 years of rate payments for oil transported through Aramco’s network of intermediaries.

The deal implies a total equity value of about $25 billion for Aramco Oil Pipelines that reflects ongoing progress in company’s strategy of portfolio optimisation, aimed at unlocking value and shareholders returns maximization.

The deal

Saudi Aramco, one of the largest oil companies in the world, has further strengthened its balance sheet with the upfront payment of around $12.4 billion and has reinforced its role as a reagent for attracting substantial foreign investment into the Saudi Kingdom. As per the deal, while the consortium led by EIG has received the usage rights in the company’s stabilised crude oil pipelines network, the oil pipeline company in return has received a tariff payable by Aramco flowing through the network. It is also backed by minimum volume commitments and will not impose any restrictions on its actual crude oil production volumes that are dependent on the Kingdom’s production decisions.

The Saudi oil giant will continue to hold a majority stake of 51 per cent in the Pipeline Rights Unit and it will also be retaining the full ownership and operational control of its stabilised crude oil pipeline network.

The company has stated that the transaction is expected to close as soon as possible, based on the normal closing conditions, with any required merger control and related permissions.

                   

                                Copyright © 2021 Kalkine Media Pty Ltd. 

Also Read: Google Partners with Aramco to Tap Saudi Cloud Market

Significance for Saudi

The deal, which is being termed as the largest energy infrastructure deals, is part of the Kingdom’s drive to diversify its economy by opening up for foreign investment. The long-term investment by globally know investors fortified the captivating investment opportunity embodied by the company’s globally important pipeline assets, its long-term outlook, and the appeal among the international investors of Saudi Arabia as a desirable investment destination.

Aramco’s profits had fallen sharply in 2020, impacted by the Covid-19 related lockdowns around the world that curbed demand for oil. Earnings were down by almost 45 per cent as compared to 2019. Still, the company paid a $75 billion dividend as it made a profit of $49 billion.


Disclaimer
The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.
   
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK