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Friday, July 12, 2024 | Daily Newspaper published by GPPC Doha, Qatar.
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Business


Aramco is a big part of the kingdom’s cash flow plans. In June, the Saudi government offloaded a stake in the company that eventually brought in $12.35bn, while the company’s massive dividend payouts — the biggest in the world — also help fill state coffers

Saudi Aramco sells $6bn of bonds amid fierce demand

Saudi Aramco pulled in more than $31bn of orders for its $6bn bond sale, its first dollar-debt offering in three years.Bids peaked above $11bn for both the oil giant’s 10- and 30-year notes, according to a person with knowledge of the matter. Aramco also sold 40-year bonds in the deal that priced Wednesday.The strong demand — final order books topped $23bn — allowed the company to cut spreads offered on each of the tranches by at least 35 basis points. The deal was its first dollar debt sale since a $6bn offering in 2021.An Aramco spokesperson didn’t comment on the size of the transaction, and referred Bloomberg to a company statement earlier this week announcing that it planned to sell notes. The deal is extending the oil-rich kingdom’s debt spree as it looks to fund projects.“Aramco is extending maturities as it will continue to gradually leverage up given their expansion plans and capex needs,” according to Apostolos Bantis, managing director of fixed income advisory at Union Bancaire Privee Ubp SA.Saudi Arabia’s government and affiliated companies have borrowed vast amounts this year, and as of June had topped China as the biggest issuer of international debt among emerging markets. The state, which needs funds to help cover an expected budget shortfall resulting from an ambitious economic diversification plan, has accounted for more than half of the total debt sold by Saudi entities this year.Aramco is a big part of the kingdom’s cash flow plans. In June, the Saudi government offloaded a stake in the company that eventually brought in $12.35bn, while the company’s massive dividend payouts — the biggest in the world — also help fill state coffers.Aramco maintained its $31bn quarterly dividend to the Saudi government and other investors in May despite lower profit. Its free cash flow — funds from operations minus capital expenditure — of $22.8bn in the period was less than the total payout.Aramco sold its first dollar bond in 2019, and followed it with a 50-year debt offering in 2020. It issued dollar-denominated Islamic notes in 2021, data compiled by Bloomberg show.The company hired banks including Citigroup Inc, Goldman Sachs Group Inc, HSBC Holdings Plc, JPMorgan Chase & Co, Morgan Stanley and SNB Capital to manage the latest bond sale.Aramco is likely to use the funds to refinance existing borrowings and contribute to its investment programme. The company is expanding natural gas production at home including $25bn of contracts for the Jafurah project. It’s spending billions to maintain oil output and pursuing acquisitions overseas, including tapping into LNG supply in the US and agreeing to take a share in an automotive joint venture.Chief Financial Officer Ziad al-Murshed said in February that the company would sell long-dated debt this year as financial markets improve and the company looks to boost leverage on its balance sheet. The plan to issue long-maturity bonds shows Aramco is confident it can remain relevant well past the middle of the century even as the energy transition raises questions over future oil demand.

Alexander Wiedmer and Soumaya Ben Beya Dridje, partner and junior partner, respectively, at Rasmal Ventures, during a Startup Grind Qatar panel discussion. PICTURE: Thajudheen

VC experts see Qatar as launchpad for regional, global expansion

The country’s growing ecosystem is providing startup founders with the opportunity to utilise Qatar as a springboard for expanding their operations in the region or other international markets, according to experts from a Qatar-based venture capital (VC) fund manager.Alexander Wiedmer and Soumaya Ben Beya Dridje, partner and junior partner, respectively, at Rasmal Ventures, were part of a Startup Grind Qatar panel, which discussed Qatar’s growing startup ecosystem and how these small businesses have been scaling and commercialising over the last couple of years.According to Wiedmer, it is a “super exciting time” to set up shop in Qatar. He further discussed current developments in the country’s VC and startup ecosystem, particularly citing Qatar Investment Authority’s (QIA) $1bn “fund of funds” to attract VCs here.During the opening ceremony of the first-ever Web Summit Qatar 2024, HE the Prime Minister and Minister of Foreign Affairs Sheikh Mohamed bin Abdulrahman bin Jassim al-Thani announced the QIA’s billion-dollar investment in international and regional VC funds to support local and international entrepreneurs.Speaking at one of Web Summit Qatar 2024 panel discussions, QIA chief investment officer – Americas, Mohamed al-Sowaidi said the the QIA’s $1bn investment underlines Qatar’s attractiveness as a destination for international funds.Wiedmer emphasised that this fund of funds will lead to more local and international VCs in Qatar, which will in turn attract more entrepreneurs to the country.“Qatar has previously not received much attention in terms of innovation due to political reasons, but this is changing. There will be more VCs here. There will be more VCs from the outside looking at the companies in Qatar. And so it’s a very good time to set up a company in Qatar. I think it’s only looking up,” Wiedmer said.Similarly, Ben Beya Dridje pointed out the strategic advantages of establishing a startup in Qatar, especially for startups targeting regional clients. She noted that the country is an ideal springboard to the regional market and beyond for either local or international startups that want to grow and expand their operations.Ben Beya Dridje also underscored Qatar’s potential in specific sectors, citing for example energy tech. Despite Qatar’s small market size, she stressed that the country can be significant for certain industries.

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