IPO values Saudi PetroRabigh at half project cost

PetroRabigh, a $10 billion joint venture between Saudi Aramco and Japan’s Sumitomo Chemicals, will sell 219 million shares to Saudi nationals at 21 riyals each, HSBC Saudi Arabia said in a statement.

The share price offers a 50 percent discount on the project’s cost of $10 billion, according to Reuters calculations.

Sumitomo and state-owned Aramco, the world’s largest oil company by output, agreed in 2005 to develop the petrochemical complex through a 50-50 joint venture that would upgrade a refinery at Rabigh on the Red Sea coast.

Aramco said last year the IPO would take place after operations began in 2008. Sumitomo was against selling shares before production started, scuppering an initial IPO plan in 2006.

Aramco officials argued that an early share sale would raise cash and help offset rising project costs. Soaring material and construction prices have more than doubled the project’s cost from an initial estimate of $4.3 billion.

The joint venture is expected to start commercial operations in the fourth quarter of 2008.

The complex will produce 18.4 million tonnes of oil products, 1.3 million tonnes of ethylene and 900,000 tonnes of propylene a year.

Sumitomo Chemicals and Aramco will each retain a 37.5 percent stake after the IPO, Sumitomo Chemicals said in a statement in Tokyo.

All Saudi banks will take subscriptions for the IPO from January 5-12, HSBC Saudi Arabia CEO Timothy Gray said.

Institutional investors will get between 25 and 50 percent of the offered shares depending on appetite for the retail tranche, Gray said. Up to 1.78 million shares will be earmarked for employees, he added.

The minimum subscription is for 10 shares and the maximum is one million shares.

HSBC Saudi Arabia, a subsidiary of HSBC, was appointed lead manager and financial adviser for the IPO.