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If Saudi authorities decide this year which foreign stock market will be the venue of what would be the biggest IPO in history, and if the government finalizes energy subsidy reforms, Saudi Aramco may be ready to disclose its audited financial figures in early 2018, Reuters reports, citing three sources.
If so, it would be the first time that the world is privy to Aramco financials.
Saudi authorities have been hoping for a US$2-trillion valuation of the company, and have plans to sell a 5 percent of that $2-trillion pie by the end of next year to fetch roughly US$100 billion for funding the Vision 2030 program to diversify away from oil. Many outside observers and analysts think that this target valuation is too high.
“Aramco will have its 2017 results by the first quarter, the audited accounts will be available then, so the IPO could happen after that,” one source told Reuters.
But before Aramco can finalize and release those audited figures, it needs to complete the arduous task of choosing a foreign venue for the IPO to ensure the audit’s figures are in line with the IPO venue’s standards. It also needs to finalize the reform of the country’s fuel subsidies.
Even though Saudi Arabia’s advisors are favoring London over New York to host the IPO, Saudi Crown Prince Mohammad bin Salman and the Saudi government are said to be more inclined to favor New York, recent reports suggest.
This is a necessary pre-audit step, because a New York listing would require accounts to be prepared under U.S. GAAP standards. IFRS standards would be acceptable for London, Hong Kong, and Singapore.
According to one of Reuters’ sources, Aramco has so far used IFRS standards, but it could quickly revise the accounts into U.S. GAAP, should the authorities choose to list in New York.
Another issue with the accounts is the planned fuel subsidy reform, which is currently being funded by Aramco. Plans are that the government would pay for subsidies, Reuters’ sources said.
Saudi Arabia is said to be studying raising domestic gasoline prices by the end of 2017 to bring them to parity with international prices—which would mean a rise of about 80 percent for octane-91 grade gasoline compared to current prices. A decision is expected this month or next.
The decisions about the IPO venue and the fuel subsidies have to be taken by Q4 this year, so that Saudi Arabia can keep the IPO on track, a third source told Reuters.
“The ball is in the government’s court now,” the source said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.