Saudi Arabia has identified about 146 state-owned entities that could be privatised or sold to the public as Opec’s largest oil producer looks to monetise assets to meet budget shortfalls amid low oil prices and shrinking revenues.

The list, prepared by the Economy & Planning Ministry, includes subsidiaries of core government ministries and government-related entities (GREs), according to sources familiar with the matter. A final list of state assets planned for privatisation is still being worked on, but Riyadh has already discussed the matter with the private sector, according to a source, who asked not to be identified as the talks are private.

The government intends to sell stakes to private investors or offer shares in these entities through initial public offerings (IPOs), according to sources familiar with the schemes.

Economy minister and deputy minister for economic affairs Ahmed ben Habib Salah was unavailable for comment.

Economic reform

The move is part of Saudi Arabia’s broader push for economic reforms. The economy ministry is due to submit the draft of the National Transformation Plan (NTP) to the royal court by the end of March, as it sets national priorities to reduce its dependence on the sale of hydrocarbons for revenues.

The draft outlines government expenditure cuts, spending plans for projects, a list of the state entities to be privatised and a schedule pinning down the timelines for the sale of these assets. The NTP, among other policy decisions, will also identify Saudi Aramco assets in which the government may potentially sell stakes to the public, sources familiar with the matter told MEED.

The draft is due to be submitted to Deputy Crown Prince Mohammed bin Salman al-Saud, who heads the Council of Economic and Development Affairs. He is expected to announce the details in April. Economy & Planning Minister Adel bin Mohammed Faqih is leading the drafting of the plan in consultation with several other ministries and government bodies.

The chairman of state-owned oil producer Aramco is expected to lead the implementation of the government’s economic reform agenda. As head of the NTP, he will have the status of a state minister.

Riyadh is looking to introduce reforms that will include taxation, a review of subsidies and the limiting of public sector wages. The reforms will also include privatising a range of sectors and economic activities, the Finance Ministry said in 28 December 2015. The ministry did not identify the sectors or activities.

Budget deficit

Saudi Arabia, the biggest GCC economy, expects a SR326bn ($87bn) budget deficit in 2016. The SR444.5bn oil proceeds in 2015 represented 73 per cent of the kingdom’s total revenues. This is 23 per cent less than the income generated from the sale of crude a year earlier. The government has already embarked on spending cuts to compensate for sliding revenues.

Unlocking value in some of Saudi Arabia’s most successful state companies is high on the government agenda. The IPO of Aramco, the biggest oil producer in the world, is also on the cards, the deputy crown prince told English-language weekly newspaper The Economist, in an interview in January. The UK’s Capital Economics estimates Aramco could be worth anything from $1 trillion to upwards of $10 trillion. However, Amin Nasser, CEO of Aramco, later said the government will maintain a controlling stake if it decides to sell shares in the oil major.

State-controlled Saudi Electricity Company (SEC) is also undergoing a restructuring programme. This involves the creation of four generation companies, an independent system operator, and separate transmission and distribution companies, which will lead to potential IPOs of the new subsidiaries, Abdullah al-Shehri, governor of Saudi Arabia’s Electricity & Cogeneration Regulatory Authority (Ecra), told MEED in an exclusive interview.

Riyadh is also considering plans to turn Saudi Ports Authority into an autonomous body, which will enable the port operator to independently raise funds through the debt market or float its shares on the Saudi Stock Exchange (Tadawul), three sources familiar with the situation told MEED on 1 March.

The government has resorted to drawing down on foreign reserves and tapping Saudi banks and financial institutions with local currency bonds to plug the budget deficit. Riyadh has invited banks to submit proposals to extend it a five-year $6bn-$8bn loan, its first bid to tap international debt market for more than a decade.