Acwa Power, the Saudi Arabia-based power generation company, could raise as much as $1.1bn through an initial Public Offering (IPO) in the third or fourth quarter of this year.

The company with an estimated power and water projects portfolio of $27bn is reviving plans to list on Saudi Stock Exchange (Tadawul) and is engaged with the regulator Capital Market Authority (CMA), according to a source familiar with the matter.

“They have been in touch with the regulator and that’s an ongoing process. They are thinking about it, but obviously, the deal will depend on the market conditions,’’ according to the source, who asked not to be identified as information is not public.

The share sale is likely to take place late in the second half of 2016, when there’s more visibility on government’s economic reform agenda, oil prices and the direction of Saudi Arabia’s equities market, the person said. “It [IPO] is not going to happen before that for sure”.

Acwa had first expressed intention to float in October 2013 and Saudi Fransi Capital is said to be advising the company on the share sale. However, a slide of close to 70 per cent in crude prices from a mid-2014 peak has affected investor sentiment in the kingdom. Saudi Arabia, the biggest GCC economy, relies heavily on the sale of hydrocarbons and proceeds from oil represented 73 per cent of its total revenue in 2015. 

Tadawul has slumped in tandem with oil prices and its benchmark Tadawul All share Index, which traded above 11,000 points in mid-2014 is currently hovering close to 6,000 level. The stock gauge has slumped 34 per cent in 12-month period including a 14 per cent plunge in the first two months of 2016 alone. 

It is understood that Acwa’s decision to list however, does not depend on a turnaround in the Saudi equities market to mid-2014 levels or a reversal of oil prices. The company is awaiting investor activity to pick up before it goes ahead with the float. Acwa, is fully committed to the IPO and it is watching the market closely to get the timing right. 

Saudi Arabia’s power sector will require $133.3bn of investment in new projects to ensure that supply remains above demand, Abdullah al-Hussayen, kingdom’s Minister of Water & Electricity told Saudi Water & Electricity Forum on 9 February.  

Acwa, being a power company with good fundamentals can generate a lot of interest from high net-worth individuals and some of the institutional investors sitting on the sidleines after the market slum, awaiting investment opportunities in defensive sectors such as power and utilities, according to the source.

This, probably, is the reason why the Saudi government is looking at the potential IPO of various subsidiaries of state-controlled, Saudi Electricity Company (SEC), Abdullah al-Shehri, governor of Saudi Arabia’s Electricity & Cogeneration Regulatory Authority (Ecra), told MEED in an exclusive interview.

SEC is undergoing a restructuring programme, which will involve the creation of four generation companies, an independent system operator, and separate transmission and distribution companies, according to Al-Shehri.

“I think SEC could have an IPO for the generation companies, once they have been created. They could be part of an IPO, or they could also turn it into a strategic partnership for investors from Saudi Arabia or from outside,” he explained. “And the same is possible for the transmission company. I think it is going to be operated on a commercial basis, it will be very valuable and the IPO would be a good option for it.”