Green energy for Europe and how to see Aramco’s lower max production target

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WHAT WE’RE TRACKING TODAY

THIS MORNING: Aramco’s lower max production target underlines a more flexible investment policy, rising appetite for renewables

Good morning, friends. Energy policy and travel (thank you, Founding Day holiday) dominate the conversation on Saudi on what is otherwise a reasonably slow news day at home and an achingly slow one abroad.

But slow ≠ boring: What domestic news there is today is particularly meaty. Enterprise: All beef, no filler.

UP FIRST: Aramco’s recent decision to shelve plans investment in new production capacity came on the back increasing emphasis on cleaner energy, Reuters reported yesterday, citing statements by Energy Minister Prince Abdulaziz bin Salman during the International Petroleum Technology Conference in Dhahran. “I think we postponed this investment simply because.. . we’re transitioning,” he said. The state oil giant is flexible when it comes to investing in growth and can comfortably shift emphasis between oil, natural gas, petrochemicals and renewables, he said.

ICYMI- Aramco made a surprise announcement last month that it was putting on hold its expansion plan and will target a “maximum sustained production capacity” of 12 mn barrels of oil per day. That’s about 1 mn bpd below the target of 13 mn bpd by 2027 that it had set back in 2020.

Prince Abdulaziz’s remarks are significant and underline a substantially more nuanced energy policy than the Kingdom was given credit for during the late 2023 COP28 climate conference in Dubai, where we were cast as the spoiler. Saudi will pump oil for so long as there is demand — while laying the groundwork for a diverse energy industry and an economy in which hydrocarbons are vastly less central. The latest case in point: See our lead news item on the sale of green power to Europe.

Aramco remains ready to raise output if necessary, CEO Amin Nasser told reporters on the sidelines of the event. “We have adequate spare capacity of about 3 mn barrels,” he said. “And as a company — because this is a decision for the government — we remain ready whenever they want to increase [maximum sustained capacity]; we are always ready to expand,” Nasser added.

ALSO FROM NASSER-

#1- Growth in global oil demand will be “robust” this year, Bloomberg quotes him Nasser as saying. “We see 104 mn barrels of demand for this year, so a growth of about 1.5 mn barrels,” he said “So it is robust.” This will mark a second year of growth after OPEC figures showed global oil demand hitting a record of over 102 mn bpd in 2023.

#2- A secondary offering in Aramco would be a “shareholder decision,” Nasser said in statements picked up by Reuters. This is the first confirmation by an official on a floated plan seeing the state-owned oil giant selling shares in a secondary offering.

RENEWABLE ENERGY

WATCH THIS SPACE #1- Neom unit is accepting bids for 800 MW solar project:Enowa is poised to receive bids engineering, procurement, and construction work on its 800 MW Shiqri solar power farm, MEED reports. The deadline for the project, which is located in Tabuk, was originally slated for early February before being delayed to 3 March 2024. At least four companies have already been invited to bid. Enowa is a unit of Neom.

WATCH THIS SPACE #2- The Energy Ministry is working on multi-GW solar tenders, Al Eqtisadiah reported yesterday, citing statements by Minister Prince Abdulaziz bin Salman during the IPTC in Dhahran. The ministry is working on launching 30 GW solar tenders, he said, without providing further details on the bidding process or a timeline for the tenders.

REMEMBER- The Kingdom unveiled plans in December to more than double its renewables target to 130 GW by 2030. It plans to add 20 GW in renewable energy annually to reach 130 GW by 2030, up from a previous target of 58.5 GW, according to earlier statements by the Energy Minister. The government is ready to export up to 150 GW of green hydrogen or electricity, he added.

TOURISM WATCH

#1- Expect talk of travel and tourism to pick up in the days ahead as we look forward to the Founding Day long weekend on 22-24 February. Global business news essential Skift is dissecting the recent news that we’ve blown past the government’s target of 100 mn tourist trips by 2030, taking note of rising spending, a fast-diversifying mix of experiences, and the challenge of counting domestic tourist trips.

BACKGROUND- The Tourism Ministry’s new target is to see 150 mn tourism trips (80 mn by domestic travelers, 70 mn by international travelers) by 2030, as we noted last week.

#2- Thinking of traveling for Founding Day? Odds are good you’re looking at a break in Egypt, followed by India, Turkey, the UAE, and the United Kingdom, according to data released yesterday by Skyscanner. Rounding out the top 10 searches by Saudi travelers: Morocco, Thailand, Italy, France, and Indonesia.

#3- IMF boss ❤️ AlUla: IMF chief Kristalina Georgieva said she was impressed by the quality of her experience in AlUla during a recent vision.

She also likes our economic policy: The Kingdom’s economy has become more dynamic as it seeks to reduce its reliance on oil exports, Georgieva told Al Arabiya (watch, runtime: 0:49) on the sidelines of the World Government Summit in Dubai.

WATCH THIS SPACE-

#1- Today is your last chance to apply to cycle three of the Flat6Labs Riyadh SeedProgram. The program offers early stage startups some SAR 500k in cash funding, up to SAR 2.4m in follow-on funding, access to investors, legal support, and exclusive business networking events. And you get to work with the folks at Flat6, who are as smart as they are good humans. You can apply here.

#2- Arizona State University’s mascot Sparky the Sun Devil could be taking up residence in Riyadh: Education Minister Yousef Al Benyan discussed with US officials opening a branch for Arizona State University in the Kingdom during a visit to Washington last week, state news agency SPA reported yesterday. His statements came during a forum focused on education investments in the Kingdom attended by over 150 US investors and representatives.

#3- SDAIA launched theNational Occupational Standards Framework for Data andAIaimed at setting guidelines to “standardize and improve occupational practices and applications” in the industry, according to a post on X. The framework outlines the necessary expertise and skills required for those in the industry. It also separately launched the “Saudi Standards for Smart Cities” to develop a framework for operations in smart cities.

DATA POINT- The number of documented commercial lease contracts rose 15% y-o-y in January to reach a record 59.5k for the month, the government’s rental e-services platform Ejar said yesterday on X.

SPORTS-

#1- Al-Thuqbah clinched the top spot in archery at the 2024 Arab Women's Sports Tournament with a commanding 6-0 victory in the final showdown against Emirati host Sharjah, Arriyadiyah reports. Women’s clubs Capital, Al-Ittihad, Al-Khaleej also participated in the event, which wrapped up yesterday. Some 63 teams from 15 Arab countries participated.

#2- Getting ready for the AFC Champions League: A delegation from the Asian Football Confederation is in town to assess how ready Riyadh’s Kingdom Arena stadium is to host the remainder of Al Hilal’s games in the AFC Champions League, Al Riyadiah reported yesterday, citing two sources close to the matter. Reps from the Saudi Arabian Football Federation and Al Hilal will also be evaluating the stadium as a host of the club’s games in the Roshn Saudi League.

The stadium is already a Guinness World Record holder: The Kingdom Arena, which can accommodate more than 40k fans, was built in a record two months. It was inaugurated in late January where Al Hilal beat Lionel Messi’s Inter Miami 4-3 in the Riyadh Season Cup. The second game at the stadium saw Al Hilal crowned champions after they beat rivals Al Nassr 2-0. It recently received two Guinness World Records certifications as the largest indoor football stadium with the largest seating capacity.

#3- Riyadh Season said it will host the Egyptian Cup final between Al Ahly and Zamalek on Friday, 8 March at Al Awwal Park stadium, according to a statement.

THE BIG STORY ABROAD-

It would not be inaccurate to say that it’s an achingly slow news morning globally — and what news there is out there is a dog’s breakfast.

Overall: Gaza peace talks in Cairo lead the front page of the Financial Times, while Bloomberg ’s lead piece adds that US President Joe Biden is pushing for a six-week break from fighting. The Wall Street Journal is obsessing over whether the US Supreme Court will hear Donald Trump’s challenge to a lower court ruling that denies him blanket immunity for crimes he may have committed as president.

We do, however, have a couple of nice SIGN OF THE TIMES pieces for your consideration:

PwC delays graduate scheme promotions as client demand slows (Financial Times)
AI Is starting to threaten white-collar jobs. Few industries are immune. (Wall Street Journal)

CIRCLE YOUR CALENDAR-

The Saudi Capital Market Forum will open on Monday, 19 February and wrap up on Tuesday. Held under the theme “Powering Growth,” the event will bring together members of the global financial landscape for discussions on the capital markets and investment strategies.

The Diriyah Contemporary Art Biennale will kick off in Diriyah on Tuesday, 20 February and wrap up on Friday, 24 May. Headlined After Rain, it will be led by German curator Ute Meta Bauer and features 92 artists from 43 countries. It will see several new commissions, including a joint project documenting “Saudi futurism” since the 1940s by local artist Ahmed Mater and Berlin-based photographer Armin Linke.

The Future Investment Initiative (FII) will host a two-day priority summit in Miami starting Thursday, 22 February.

The annual tech event LEAP will open in Riyadh on Monday, 4 March and continue through Thursday, 7 March. Dubbed the “Digital Davos”, the event will bring together the global tech industry for discussions on the future of technology.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

Saudi Arabia and Greece have set up a JV to link their power grids

Saudi, Greece establish SPV for an electricity interconnection project: The Saudi National Grid and Greece’s Independent Power Transmission Operator (IPTO) have set up a 50-50 joint venture by way of a special purpose vehicle dubbed Saudi Greek Interconnection, IPTO said in a press release last week. The project “will interconnect for the first time Saudi Arabia with the European continent,” said National Grid CEO and Chairman of the new SPV Waleed Al Saadi.

The JV will work on a feasibility study for the Saudi-Greek electricity interconnection project which aims to link the power grids of both countries together as part of their wider plan to supply Europe with green energy. Plans for the JV were first announced in September 2023. The JV “is a very important project for Europe that can accelerate the continent’s energy transition and provide access to new sources of clean energy,” said IPTO Chairman and CEO and the CEO of the new Saudi Greek SPV, Manos Manousakis.

Remember: Electricity ≠ oil. Deliver crude to a Greek port and you still have a refining and onward transport problem to solve. Sell greece electrons and ship it down a wire and the Greek partner can instantly on-sell that capacity to others to which its grid is connected.

Mapping the route + talk of renewables: The new venture aims to establish a joint power grid, export the electricity produced using renewable energy to Greece, and to Europe via Greece, said Al Saadi adding that it will pave the way for “effective use of renewable energy, access to sustainable electricity generation and improved security of electricity supplies.”

Background: The European Union identified in 2022 (pdf) MENA countries including Saudi Arabia, Algeria, Qatar, the UAE, and Iraq as partners that could help it reduce its reliance on Russian oil by providing key components of its energy mix.

PRODUCING GREEN ELECTRONS TO GO DOWN THOSE WIRES- The Saudi Power Procurement Company has revealed a list of 23 qualified bidders for 3.7 GW of renewable energy projects, state news agency SPA reported on Thursday. The independent power producer (“IPPs” in industry speak) range from a 300 MW site in Makkah to the 2 GW Al Sadawi facility. Qualified bidders include regional and international players including Masdar, EDF Renewables, Jinko Power, and Samsung.

Saudi German Health is taking orders from retail and institutional investors for SAR 1 bn sukuk

Saudi German Health has started taking orders from retail and institutional investors for a SAR 1 bn sukuk issuance, it said in a Tadawul regulatory filing yesterday. It’s the company’s first debt sale under a SAR 1.5 bn sukuk programme it announced last month. The company could adjust the size of the offering after the order window closes on Sunday, 25 February.

Use of proceeds: Saudi German would use the proceeds to finance the company’s general corporate operations, after having entered into mudaraba and murabaha transactions in compliance with Shariah law, according to the base prospectus (pdf).

It’s all about keeping borrowing costs under control: “This [sukuk program] will help improve cashflow and boost profitability,” President and Deputy Chairman Makarem Batterjee told CNBC Arabia in an interview last month, estimating the healthcare provider’s total debt at SAR 3 bn.

What’s on the table: The five-year SAR-denominated sukuk carries a fixed annual yield of 7.2%. Returns will be paid out to sukuk holders on a quarterly basis. Investors can place orders for a minimum of 5 sukuks at the value of SAR 1k for each. SGH has the option of redeeming the sukuk before the expiry date.

ADVISORS- Al Rajhi Capital is quarterbacking the transaction as the sole lead manager, financial advisor and arranger. Linklatersis acting as legal advisor.

Home prices in Saudi Arabia were flat last quarter even as commercial real estate prices dipped -Gastat

Homeowners paid 0.6% more to buy a home in 4Q 2023 than they did in 4Q 2022, while there was a decline in the price of commercial and agricultural properties, according to the latest figures (pdf) from the General Authority for Statistics.The real estate price index inched up 0.2% y-o-y in the last quarter of 2023

The slight increase in residential price tags came on the back of a 0.7% rise in land prices and a slight 0.1% increase in the value of apartment sales. Prices for villas decreased 3.8%, those for buildings fell 0.9%, and houses declined 0.3%.

The price tags on commercial, agricultural properties dipped slightly: Commercial real estate prices dropped 0.5% y-o-y in 4Q 2023, driven by a 0.9% decrease in the prices of shops and a 0.5% decline in the prices of commercial plots. The prices of commercial buildings and centers remained unchanged. Also, agricultural land plots saw a slight 0.1% y-o-y drop in 4Q 2023.

A unit of Bawan Company acquires Maali Holding’s entire stake in two electricity companies

Bawan Engineering Industries is buying out minority shareholders: The industrial outfit has signed an agreement that would see it increase its total ownership in United Transformers Electric and United Technology of Electric Substations & Switchgears to 90% in each, according to a disclosure on Tadawul. The shares purchase agreement is pending the final approval of parent company Bawan Company.

The details: Bawan has acquired the entire stake of Maali Holding in both companies for a total of SAR 20 mn. Prior to the transaction, Maali held a 4.5% stake in each of the sold companies.

KPIs from the subsidiaries: Their combined net profit rose 85% y-o-y to SAR 48.5 in 9M 2023, while their revenues declined 12.3% y-o-y to SAR 533.8 mn.

A peek into Bawan’s results- The industrial group saw its net profit fall 25% y-o-y to SAR 99.8 mn in 9M 2023 due to a decrease in sales for its metal, plastic and wood segments, according to a disclosure to Tadawul. This was also driven by an increase in borrowing costs and discontinued operations in its concrete business. Revenues remained basically unchanged, falling 0.5% y-o-y to SAR 2.5 bn over the same period.

Riyad Bank, Yamama Cement’s 2023 results are in

RIYAD BANK-

Riyad Bank’s net income rose 14.6% y-o-y in FY 2023 to c. SAR 8 bn on the back of a rise in total operating income, according to a disclosure to Tadawul yesterday. Its revenues rose 16.9% y-o-y to c. SAR 16 bn in the same period on the back of an increase in net special commission income, trading, and operating income.

Dive deeper: The bank’s assets rose 7.6% y-o-y last year to SAR 387 bn, while investments were up 11.3% y-o-y to SAR 58.1 bn. Client deposits were up 6.2% y-o-y to SAR 255 bn.

YAMAMA CEMENT-

Yamama Cement’s net income plunged 14.5% y-o-y in FY 2023 to SAR 304.4 mn on the back of a decrease in sales volume and value due to a drop in local demand, according to a disclosure to Tadawul. Revenues were also down 7.2% y-o-y to c. SAR 935.2 bn in the same period.

Some action at the Global Smart Cities Forum. Plus: debt, aviation, infrastructure

AVIATION-

Riyadh Air + Sabre: The kingdom’s newest carrier, Riyadh Air, has hired US-based travel technology company Sabre to provide its end-to-end solutions to the airliner’s network planning, commercial and analytics operations, according to a statement by Sabre yesterday. The technology will help Riyadh Air “make informed network planning and commercial decisions, ensuring greater revenue returns,” Riyadh Air Chief Commercial Officer Vincent Coste said.

REMEMBER- Riyadh Air is set to kick off its operations next year and has a target of operating flights between 100 destinations by 2030.

SPACE-

Saudi Space Agency (SPA) has inked two separate agreements with the global space surveillance companyNorthStar and US-based LeoLabs, it said in a press release (pdf). The agreement will see SPA separately cooperate with both companies to boost the space industry in the Kingdom.

ARTIFICIAL INTELLIGENCE-

The Saudi Data and Artificial Intelligence Authority (SDAIA) signed a number of MoUs aimed at adopting smart city technologies during the Global Smart Cities Forum in Riyadh yesterday. Those include:

A MoU with Aseer Regional Development Authority to provide joint technological services and share expertise on data, AI and smart cities;
A MoU with Sharqia Development Authority to adopt smart city technologies in the region;
A MoU with the Red Sea Authority to provide Deem cloud services to help boost the authority’s infrastructure and digital transformation.

INFRASTRUCTURE-

TheSaline Water Conversion Corporation (SWCC) signed a commercial service agreement with Modon to design and execute a flood water and residual water drainage system at Dammam’s second industrial city, state news agency SPA. The agreement comes a few months after Modon signed in November an agreement with the SWCC to set up and operate a number of water infrastructure projects in Al Kharj Industrial City.

ENERGY-

#1-Gas Arabian Services was awarded a SAR 35 mn contract from Yamama Cement to supply metering skids, pressure reduction station and gas pipelines, it said in a disclosure to Tadawul yesterday.

DEBT WATCH-

Knowledge Tower Trading plans murabaha sukuk: Educational consulting services provider Knowledge Tower Trading plans to issue SAR-denominated murabaha sukuk worth 20 mn as part of its sukuk program, it said in a disclosure to Tadawul yesterday. The issuance aims to boost working capital, operations and the expansion and investments in its assets, it said. It appointed Tarmeez Capital as the sole arranger of the offering.

MENA M&A activity was up just 4% in value terms in 2023

Despite all the turmoil, regional M&A activity was up fractionally last year: MENA closed mergers and acquisitions worth USD 86 bn in 2023, up 4% from the year before despite regional tension and global economic uncertainty, writes EY in its 2023 MENA M&A Insights update. Tech transactions led the pack, with 141 closing 2023. The energy and resources sectors — including metals and mining, oil and gas, and chemicals — also saw “significant capital deployment” for the year.

Most came from the GCC: The Gulf nations closed 565 transactions, worth some USD 83.2 bn.

The region’s sovereign wealth funds drove activity — led by the Abu Dhabi Investment Authority (ADIA), UAE’s Mubadala, the Public Investment Fund (PIF), and the Qatar Investment Authority — with a focus on “national development and investing in sectors of the future,” EY MENA strategy and transactions leader Brad Watson said.

Cross border M&As made up 72% of the total value of M&As in 2023, with North America remaining the largest target region by value — with transactions totaling USD 2.7 bn — and largest number of inbound MENA transactions — with 32. Meanwhile, domestic transactions made up 49% of the total volume of MENA M&A activity by volume for the year.

Other highlights:

The UAE was the top inbound destination. Interest in UAE acquisitions was driven by “its business-friendly regulations and efficient legal framework.”
Outbound M&As secured USD 53.5 bn through 208 transactions.
The region’s largest M&A in 2023 was ADIA and Apollo Global Management’s USD 8.2 bn acquisition of Univar Solutions.
The second- and third-largest were PIF-owned Savvy Games’ USD 4.9 bn acquisition of US mobile games developer Scopely and Blackstone and ADIA’s USD 4.7 bn acquisition of software company Cvent Holding.

Looking ahead: “We expect M&A activity in MENA to remain robust in 2024 given continuing secular trends around energy transition and digitalization of everything,” Watson said.

Asian markets are a mixed bag this morning: The Nikkei and Kospi are handily in the green, but Chinese markets remain closed for the Lunar New Year holiday, so there’s nothing to report out of Hong Kong or Shanghai. Looking ahead: Futures suggest a weak open in both Europe and on Wall Street later today.

TASI	12,295.91	+0.7% (YTD: +2.8%)
MSCI Tadawul 30	1,591.25	+0.7% (YTD: +2.6%)
USD : SAR (SAMA)	3.75 Sell	3.75 Buy
Interest rates	6% repo	5.5% reverse repo
EGX30	28,494.72	+1.1% (YTD: +14.5%)
ADX	9,324.19	-0.2% (YTD: -2.7%)
DFM	4,210.96	+0.7% (YTD: +3.7%)
S&P 500	5,021.84	-0.1% (YTD: +5.3%)
FTSE 100	7,573.69	+0.01% (YTD: -2.1%)
Euro Stoxx 50	4,746.35	+0.7% (YTD: +5%)
Brent crude	82.04	-0.2%
Natural gas (Nymex)	1.75	-5.4%
Gold	2,033.90	-0.2%
BTC	50,084.45	+4.2% (YTD: 125.5%)

THE CLOSING BELL-

The TASI rose 0.7% yesterday on turnover of SAR 11 bn. The index is up 2.8% YTD.

In the green: Jamjoom Pharma (+9.9%), Atheeb Telecom (+9.9%) and Salama (+9.7%).

In the red: Sadafco (-7.5%), Chemical (-5.9%) and Takween (-4.5%).

Asian markets are up/down in early trading this morning and futures suggest xx

CORPORATE ACTIONS-

#1-Yamama Cement’s BoD has proposed a dividend of SAR 1 per share to eligible shareholders for FY 2023, it said in a disclosure to Tadawul yesterday. A distribution date will be determined following the approval of the general assembly, it added.

#2- The Capital Market Authority has approved a request by air conditioning services provider Shaker Group to raise its capital by 15.1% to SAR 555 mn, it said in a disclosure to Tadawul yesterday.

CALENDAR

FEBRUARY

14 February (Wednesday): The International Petroleum Technology Conference (IPTC) wraps up, Riyadh.

14 February (Wednesday): Filipino exporters wrap up a business-matching tour in town.

18-21 February (Sunday-Wednesday): Restatex Riyadh Real Estate, Riyadh International Convention and Exhibition Center, Riyadh.

19 February (Monday): The Future of Business 2024 Forum, Eastern Chamber’s HQ, Dammam.

19-20 February (Monday-Tuesday): Saudi Capital Market Forum, King Abdullah Financial District, Riyadh.

19-21 February (Monday-Wednesday): Makkah Expo for Hotels and Restaurants, Makkah.

19-21 February (Monday-Wednesday): Future of Media Exhibition (FOMEX), Riyadh.

20 February-24 May (Tuesday-Friday): Diriyah Contemporary Art Biennale, Diriyah.

22 February (Thursday): Founding Day (Public Holiday)

26 February (Monday): OTSEC Summit, Dammam.

26-29 February (Monday-Thursday): Big 5 Construct Saudi, Riyadh.

26-29 February (Monday-Thursday): FM EXPO SAUD

26-29 February (Monday-Thursday): Stone and Service Saudi Arabia, Riyadh.

MARCH

2 March (Friday): end of Noor Riyadh show, segment “Refracted Identities, Shared Futures”, Riyadh.

4-6 March (Monday-Wednesday): International Conference on Sand and Dust Storms in the Arabian Peninsula, Riyadh.

4-7 March (Monday-Thursday): LEAP 2024, Riyadh.

11 March (Monday): Flag Day (national holiday)

Wrapping up 23 March (Saturday): Desert X ALUla.

Signposted to happen sometime in March:

Ramadan

APRIL

14-21 April (Sunday-Monday): IMF and World Bank spring meetings, Washington, DC

28-29 April (Sunday-Monday): World Economic Forum’s Special Meeting, Riyadh.

29 April-1 May: Future Hospitality Summit at Al Faisaliah Hotel, Riyadh.

Signposted to happen sometime in April:

Eid Al-Fitr (national holiday)

MAY

19-21 May (Sunday-Tuesday): Saudi Energy Convention, Riyadh.

21-23 May (Tuesday-Thursday): The Saudi Food Show, Riyadh.

Signposted to happen sometime in May:

Global Trade Review (GTR): KSA
Saudi Energy Convention

JUNE

5 June (Wednesday): World Environment Day.

30 June (Sunday): ZATCA tax exemption scheme expires

Signposted to happen sometime in June:

Eid Al-Adha (national holiday)

AUGUST

12-15 August (Monday-Thursday): The Saudi Food Expo, Riyadh

SEPTEMBER

11-12 September (Wednesday-Thursday): The Saudi Event Show, Riyadh.

23 September (Monday): National Day (national holiday)

DECEMBER

2-13 December (Monday-Friday): Conference of the Parties (COP16) to the United Nations Convention to Combat Desertification, Riyadh.

Signposted to happen sometime in 2024:

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