Saudi Aramco advances "the most ambitious" privatization plan in history: plans to sell $35 billion in assets, Wall Street welcomes "an entry window"

After the consortium led by BlackRock leased part of Saudi Aramco's natural gas facilities for $11 billion just a few days ago, this energy giant received intensive inquiries from global funds, all hoping to get a piece of the pie. Encouraged by this demand, as well as the urgent need to strengthen its balance sheet, Saudi Aramco's executive team in Dhahran launched the most ambitious privatization plan in the company's 93-year history. $35 billion asset sale According to sources, Saudi Aramco is progressing with a series of asset divestment transactions, with a total fundraising amount expected to reach up to $35 billion. Despite the conflict in the Middle East since February 28, market observers believe that these assets, which include energy facilities like natural gas power plants and water treatment infrastructure, as well as minority stakes in oil export and storage terminals, will still attract a large number of Wall Street institutions. The planned sales will cover various sectors, including energy facilities, such as natural gas power plants and water treatment infrastructure; in the oil export and storage terminal sector, minority stakes are planned to be sold; in the real estate sector, a plan to dispose of some properties through sale and leaseback, which may include a large park located in the eastern province where the company's headquarters are. Bankers and dealmakers expect that Aramco will open up more assets to global private equity and infrastructure investors. They say that this energy giant is hoping to retain full control of its upstream assets while being willing to sell minority stakes in downstream and midstream assets. These proposed sales, amidst regional conflict threatening overall transaction activity, provide Wall Street institutions with a lucrative trading channel while helping Saudi Arabia boost foreign direct investment far below its ambitious goals. Aramco is advancing these transactions at a time when the war in the Middle East has disrupted exports in the Gulf region. The company has successfully rerouted most of its goods from the Strait of Hormuz through its east-west pipeline to Yanbu Port, ensuring continued exports despite significantly slowed maritime traffic. Aramco says it is taking further measures to enhance this flexibility. Showcasing fundraising capabilities These transactions also serve another purpose: showcasing Saudi Arabia's ability to attract funds, even as Iran launches attacks on Gulf cities and regional infrastructure. In the months leading up to the outbreak of war, the Kingdom of Saudi Arabia had increased efforts to attract foreign capital and gradually abandoned some costly projects. Hasnain Malik, Head of Emerging Markets Equity and Geopolitical Strategy at Tellimer, said: "This may have been seen as Aramco reducing its risk exposure to non-core assets before significant project spending cuts and an Iran war hit export volumes. But now, it will be seen as an attempt by Aramco and its sovereign shareholders to maximize liquidity." For years, Aramco has been a pillar of the Saudi economy. Its energy sales revenue and generous dividends have supported the Kingdom's ambitious economic transformation plans, which are hindered by rising costs. Over the years, Aramco has also been signaling its desire to extract more value from its vast asset base, using infrastructure sales and leverage to fund expansion while retaining cash for the country. Even as the turmoil brought by the war has dragged down transaction activity in other regions, Aramco's divestment plan is moving forward. Ongoing transactions include plans to sell and lease back real estate assets (potentially including a large park located in the eastern province where the company's headquarters are), plans to sell stakes in its oil export and storage terminals, and transactions involving gas power plants and water treatment infrastructure. These efforts are not only expected to bring unexpected gains to Wall Street institutions but also help Saudi Arabia improve a key metric - foreign direct investment. Currently, this metric is far below the Kingdom's goal of attracting $100 billion in foreign investment annually by the end of this decade. Challenges for foreign direct investment "Foreign direct investment will still be a challenge," said Rachel Ziemba, a Senior Fellow at the New American Security Center. This means that "the Saudi state needs more cash than in the past," and some of this cash can come from Aramco's huge dividends and tax revenues from oil income and concession fees. Ziemba also said that Aramco's plan is "a combination of two trends: optimizing the balance sheet and deploying as much capital in the energy sector, and perhaps some other high-priority infrastructure." She is also the founder of the consulting firm Ziemba Insights. Traditionally, the Saudi company has relied on joint ventures and partnerships to gain equity in key industries such as refining and petrochemicals, from the U.S. Gulf Coast to China, to ensure stable export channels for its crude oil. Even before the company's initial public offering in 2019, Aramco had begun to optimize its assets and build its debt structure. The company has sold stakes in key infrastructure sectors such as oil and gas pipelines, listed a subsidiary on the Riyad Stock Exchange, and is progressing with a transaction to sell stakes in a domestic refinery to a Chinese partner. For decades, Aramco's vast oil fields have been the cornerstone of the Saudi economy. Now, the Kingdom of Saudi Arabia is increasingly looking beyond oil itself, transforming pipelines, power plants, ports, and even real estate into financial assets to attract foreign capital for funding its next phase of growth. Salah Shamma, Director of Middle East and North Africa Equities at Franklin Templeton Investments, said: "The key for investors is not a single transaction, but the cumulative impact over time: how much cash flow will be realized today, and what this means for Aramco's long-term free cash flow situation."