Saudi Aramco to offer $16 billion in contracts to small, medium businesses

DUBAI: Saudi Aramco will offer 140 contracts worth 60 billion riyals ($16 billion) to small and medium-sized enterprises (SMEs) in the kingdom, the Al Arabiya TV website reported on Saturday.

Aramco is working with the government to boost cooperation with SMEs as it spends 170 billion riyals on different services a year, Mohammed bin Ayed al-Shamri, deputy director of procurement and supply, was quoted as saying.

Aramco’s financial data, published earlier this week, showed it generates by far the biggest profit of any company in the world, boasting core earnings of $224 billion and a net income of $111 billion.

Aramco said last week it had agreed to buy the 70 percent stake held by the Saudi Public Investment Fund (PIF) in Saudi Basic Industries (SABIC) for $69.1 billion, one of the largest deals in the global chemicals industry.

While the firm said in the presentation the bonds would not be used to fund the acquisition, many investors believe the debt plans are linked to the purchase, which will give PIF, the main vehicle for Crown Prince Mohammed Bin Salman’s plan to diversify the Saudi economy away from oil, cash to push through its investment strategy.

“There is a clear connection with the sovereign, it is highly coordinated policy, particularly in terms of production targets and in some cases the price of oil and where they want to sell oil,” said Ray Singh, vice president, diversified fixed income at Eaton Vance.

According to Ashmore’s Dehn the “seamless” relationship between Aramco and the government is positive for investors.

“I would imagine they [Aramco] would be coordinating with the Saudi debt management office as the government and Aramco are pretty similar issuers and Aramco’s issue would cannibalize the government to some extent and reduce the Saudi government weighting on the JPM index.”