PIF’s expansion has continued apace in 2023 with the ongoing delivery of major projects and spending on global footballers.
A public-private-partnership worth $5.6bn was finalised with developers in June for temporary housing for 95,000 workers on Neom. In July, Neom was reported to be seeking a $2.7bn loan from local banks to add to its core project funds as well as $800m specifically for Shushah Island, a luxury tourism island development. In August, PIF was said to be planning a bond issuance of at least $3bn, which comes on the back of a $5.5bn Green Bond issued in February. The total cost of Neom is planned to be $500bn.
In the world of sport, following on from the successful £300m purchase of Newcastle United in 2021 and the subsequent turnaround in its performance, Saudi’s Sports Investment Company was touted in July to be considering the acquisition of another major European football club. The transfer of a number of global star football players to Saudi’s Pro League has continued with the Brazilian, Neymar, signing over to Al Hilal from Qatar-owned Paris St Germain as well as Liverpool’s Jordan Henerson and Manchester United’s Alex Telles both moving to Saudi clubs, following in the footsteps of Cristiano Ronaldo earlier this year. PIF-owned Al Hilal was also reported to have offered €300m to transfer Kylian Mbappé from Qatar-owned French club PSG, although the French forward was reportedly not interested. In total, transfers of 20 players from European to Saudi clubs so far this year have cost $1.8bn in transfer fees and first-year salary commitments and are mostly backed by PIF and its subsidiaries.
On the other hand, Saudi’s move into global golf has gone quiet over the summer. Since the announcement in June of a merger with the PGA Tour and DP World there has been little news of what that might look like. The parties are working to an end-of-year deadline and have likely been working hard behind the scenes, although there have been rumours that progress is slow and the US Congress is holding hearings over concerns about the merger.
In July, a PIF joint-venture completed a $2.6bn purchase of a 10% stake in the base metals business of the Brazilian mining company, Vale, and PIF is also involved in talks to purchase a 25% stake in Pakistan’s Reko Diq gold and copper mine from the Pakistani government, alongside Barrick Gold. Additionally, it came to light in July that PIF had contributed to the £4bn acquisition of Selfridges in 2021, which was carried out by Signa, an Austrian property company and included an equal partnership with Thai retailer, Central Group.
In 2022, PIF’s assets grew 15% to $778bn with an increase in borrowing of $85bn as well as an equity transfer from Aramco. There are considerable unlisted assets included within this figure and it is not clear how these are valued. The fund reported a bottom-line loss of $16bn in 2022 after making $26bn profit in 2021. The losses were a result of lower fair values on investments, mainly in the tech sector and particularly for the Softbank Vision Fund, as well as due to higher spending on Saudi “giga-projects” and higher spending within PIF subsidiaries. The Vision Fund returned to profits in the second quarter of 2023 and Softbank is currently in talks to purchase Arm from its Vision Fund, which could provide an $8bn cash windfall to PIF, which owns a stake of around 45% in the fund.
Oman repays debt despite lower oil revenue
Oman repaid $4bn of debt in the first half of 2023 despite a narrowing budget surplus
Oman’s budget surplus contracted to $1.7bn or 3% of GDP in the first half of 2023. Lower oil prices and production cuts have suppressed revenue. Nonetheless, Oman continued to pay down its debt, with circa $250m repaid in June, taking total debt repayments to $4bn for the first half of the year. Oman’s total debt stands at around 40% of GDP with a stated policy of reducing debt to around 30% of GDP.
The other main factor narrowing the budget surplus was higher spending in the non-oil sector, with civil ministry spending up 11% in the year to May. However, non-oil budget income rose strongly in the first half of the year. In particular, income tax was up almost 50% in the year to May, suggesting that corporate profitability has made a comeback after the lean Covid years. The latest data for June was released last week. Oil revenue was down with cuts to production and softer oil prices and spending was lower compared with last year due to electricity subsidies being paid last month while last year they were paid in June.
