Saudi Arabia considers plan for airport stake sale

03 July 2017

Adviser could be appointed before end of July

Saudi Arabia is considering the option of selling a significant minority stake in Riyadh’s King Khaled International airport as part of its privatisation drive aimed at generating billions of dollars in alternative revenues to offset the impact of lower oil revenues.

Saudi Civil Aviation Holding Company (SCAHC), the owner of commercial aviation assets in the kingdom, has invited local and international banks to pitch for an advisory role for the potential transaction, according to news agency Bloomberg, which cited anonymous sources familiar with the matter.

An adviser could be appointed before the end of July as the government looks to complete the sale by early next year. The size and potential value of the stake, which could be sold to investors including private equity firms, infrastructure funds and international airport operators, has yet to be decided. There is no guarantee at this stage that the government will actually go ahead with the transaction, according to the report.

SCAHC, which is fully owned by Saudi Arabia’s main sovereign wealth fund, the Public Investment Fund (PIF), was set up earlier this year and the government has already started transferring the ownership of commercial airports in the kingdom to the holding firm, MEED reported on 21 May. The move is part of the government’s plan for the General Authority of Civil Aviation (Gaca) to play the role of a pure regulator.

Gaca’s information technology (IT), air traffic management and training academy have also become independent companies operating under the umbrella of the holding company.

A slump in oil prices from the mid-2014 peak of $115 a barrel to the current below $50 a barrel has forced Saudi Arabia to transform its economy and privatise some state-controlled enterprises and services to reduce the burden on public finances. Riyadh plans to part-sell about 100 government enterprises, including a less than 5 per cent stake in oil and gas giant Saudi Aramco through a public float.

The kingdom expects its privatisation programme to yield about $200bn in total through the full or partial sale of government firms. Administrative preparations have already been made and the kingdom plans to begin offering assets primarily in four sectors – sports, electricity generation, water provision and grain silos – this year. MEED earlier reported that the kingdom has appointed advisers to sell more than a dozen professional football clubs to private sector investors.

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