The Sun Also Rises

Since 2009, you’ve been making selective investments according to a set of goals. What results are you looking to achieve?

Sanabil was established as a commercial entity, and we are a for-profit company fully owned by the government. At the same time, we aim to play a role in introducing new industries and transferring technologies to the Kingdom, which is one of the company’s added values. Today, Sanabil’s activities include asset management, which is focused on liquid investments, a private equity program focused on investments in private equity funds globally, and a direct investment program.

In terms of your direct investments within the Kingdom, what is on the horizon?

So far, we have closed one deal in the Kingdom, and a further one or two are scheduled for this year. All sectors are potentially open for direct investment, but we do prioritize some over others, such as energy, education, and healthcare. We have made one investment in the energy sector, and are considering other investments in the education and healthcare sectors. Sanabil can hold up to 49% of the equity capital of a private company, while ensuring adequate minority protection rights. We also seek international companies to invest in Saudi Arabia. We believe that Sanabil represents a perfect partner, or partner of choice, for foreign companies keen to invest in Saudi Arabia. We can invest up to SAR1 billion in a company or project, and are typically long-term investors, which provides comfort to our investment partners.

How do you respond to regulatory changes in regard to healthcare and mortgages?

There had been a gap in legislation in both sectors you’ve mentioned. Our shareholder, the Public Investment Fund, is considering investing in mortgage financing companies and has also been tasked with the setting up of the country’s real estate refinancing company. I can’t go into details, but I can say that we see great potential in the mortgage sector, and we believe that strategic partnerships with foreign investors are essential in terms of adding value. In the healthcare sector, we are evaluating two potential investments in Saudi Arabia, and we believe that recent health regulations will make the sector more attractive for investors. In general, we believe that in both sectors the demand is there but that an investor’s strategic positioning within the sector and differentiation are the key factors for a successful investment.

How will the solar power agreement with SunEdison complement your investments in renewable energy in Saudi Arabia?

ACWA Power is a project developer and operator of both conventional as well as solar power, while the agreement we signed with SunEdison is to jointly fund a feasibility study to assess the viability of a solar materials project in the Kingdom, and, hence, we believe the two are complementary, although it is as yet too early to discuss the project with SunEdison in detail. In terms of solar radiation, Saudi Arabia enjoys one of the best locations in the world, and, therefore, it seems logical to embark on this project especially given the continuously declining cost of solar power and the improvements in solar power technologies. Therefore, we believe that there is great potential for the renewable energy sector in Saudi Arabia, and for solar power in particular.

Where would you like to see Sanabil in 2020 in terms of return on investment?

I expect 90% of what I’d like to see Sanabil achieve by 2020 is already done, particularly in terms of HR and the business structure. I would also like Sanabil to be able to conduct all operations in-house, and also increase its assets under management. To date, we deployed a large part of our capital; hopefully, by 2020 the profits we will generate from the existing investments will allow us to expand our investments further and bolster management to enable complete in-house operations.

© The Business Year – October 2014