Saudi Arabia's Marafiq to list shares on Tadawul amid regional IPO boom

PIF-backed utility plans to float 30% of its shares on the Arab world's biggest bourse

Marafiq is the sole electricity and water provider to the industrial centre in Yanbu, Saudi Arabia. Photo: Marafiq

Saudi-based Power and Water Utility Company for Jubail and Yanbu is pushing ahead with plans to list its shares on the Tadawul stock exchange amid continued initial public offering momentum in the region's equity markets.

The state-backed utility, better known as Marafiq, received regulatory approval for the public float on September 26, and plans to list 30 per cent of its share capital, or 73,094,500 ordinary shares, it said on Sunday.

Marafiq counts the kingdom’s sovereign investment fund, the Public Investment Fund, as well as the Royal Commission for Jubail and Yanbu, Saudi Aramco subsidiary Aramco Power Company and the Saudi Basic Industries Corporation (Sabic) among its shareholders, each with a 24.81 per cent stake.

The final offering price will be determined at the end of a book-building process, the company said, without disclosing when it intends to list the shares.

“Today’s announcement marks an important milestone in Marafiq’s journey, a journey which began almost 20 years ago,” said Mohammed Al-Zuabi, the utility's president and chief executive.

“We have since become an integrated utilities provider offering a full suite of services across the utilities value chain, with a growing footprint across the kingdom.”

While capital markets in the US and Europe have slumped amid inflation woes and fears of a looming recession, equity markets in the GCC and the broader Mena region have experienced a flurry of IPOs, with various government-owned companies listing their shares.

Mena recorded a 500 per cent annual increase in the number of listings during the first six months of this year, with 24 IPOs raising $13.5 billion, according to an EY report on Mena IPOs. In the second quarter of 2022, nine IPOs raised about $9bn.

Globally, 630 IPOs raised $95.4bn in proceeds during the first half, which is a significant annual drop of 46 per cent in the number of deals and 58 per cent slump in the proceeds raised, the report said.

The UAE was the biggest IPO market in terms of aggregate value of deals, while the kingdom led the volume, with five IPO deals in the first six months of the year, according to EY data.

Marafiq will be the fifth utility to list on Tadawul, the Arab world’s biggest bourse, joining the Saudi Electricity Company and Acwa Power.

The company primarily serves industrial centres in Jubail and Yanbu and counts some of world’s largest industrial companies among its customers that accounted for 86 per cent of its total 6.2bn riyals ($1.65bn) revenue in 2021.

The company, which recorded 665 million riyals in net profit last year, has 15,147 residential and commercial customers and 4,132 industrial and government clients, it said on Sunday.

“Having such a solid customer base ensures sufficient and stable demand for utility services and low counterparty credit risk,” the company said.

Together, Marafiq and its subsidiaries have about 4.8 gigawatts of gross power generating capacity, accounting for about 3.2 per cent the kingdom’s total.

Marafiq also provides water desalination, seawater cooling and wastewater treatment, with 1.3 million cubic metres a day of desalinated water.

“Marafiq is a critical component of Saudi Arabia’s industrial ambitions, which are central to the kingdom’s Vision 2030,” chairman Khalid Al Salem said.

“With our strong foothold in two of Saudi Arabia’s most strategically important industrial cities and a growing presence throughout the kingdom, the initial public offering of Marafiq is an opportunity for investors to not only benefit from our steady and reliable cash flow but also to be part of an exciting growth story.”

HSBC Saudi Arabia and Riyad Capital are joint financial advisers, bookrunners, joint global co-ordinators and underwriters on the deal.

Al Rajhi Bank, Banque Saudi Fransi, Riyad Bank, Saudi British Bank and Saudi National Bank have been appointed as receiving agents.