In Heathrow Airport Saudi Arabia’s Wealth Fund Acquires 10% Stake

In Heathrow Airport Saudi Arabia's Wealth Fund Acquires 10% Stake

To acquire 10% ownership of Heathrow airport. The public investment fund of Saudi Arabia (PIF) has entered into an agreement with an infrastructure giant based in Spain, known as Ferrovial,

The other 15% in its parent company FGP Topco to French based PE fund Ardian.❍

In 2006, Ferrovial bought into it and now announced the transaction as being worth £2.37bn ($3bn).

However, the firm says that their deal is still regulated by certain conditions.

When it comes to the BAA Airports Deal the agreement will put an end to the venture of Ferrovial into the operator for UK’s Airport that had begun with 56% ownership and dropped into the level of 25% as of year 2013.

Other stakeholders in FGP Topco are Qatar Investment Authority, Caisse de dépôt et placement du Québec, GIC, Australian Retirement Trust, China Investment Corporation, and University Superannuation Scheme.

This year, the airport has been making losses because it has a lot of debts and the increases in the costs of borrowing have become very aggressive.

The Civil Aviation Authority has also reduced their ticket prices that cover services such as terminal operations, landing charges, baggage handling and security.

However, the regulator has predicted that it will lower down to £25.43 ($33.83) for 2024 and “stay almost flat” till the end of 2026.

At Heathrow bosses demanded costs to exceed £40 while airlines sought for it be around £18.50.

Today, for instance, Saudi’s PIF which is one of the most active sovereign wealth fund boasts more than $700bn valued by its oil wealth has also invested in sport for example football and golf.

However, such a fund is in the hands of Prince Mohammed bin Salman Al Saud whose government is involved in many cases of violating human rights.

US intelligence believes Prince Mohammed ordered the execution of a US-based journalist, Jamal Khashoggi, in 2018, despite the fact that the prince has been granted immunity in the US and has been invited to visit the UK, according to the Saudi Arabian embassy.

What is the Saudi Arabia Public Investment Fund?

The Public Investment Fund (PIF) is the sovereign wealth fund of Saudi Arabia. It is one of the biggest sovereign wealth funds inside the world, with overall property expected at US$620 billion as of 2023. The PIF become established in 1971 through King Faisal bin Abdul aziz Al Saud to offer financing assist for tasks of strategic importance to the country wide financial system.

The PIF’s number one task is to pressure the monetary transformation of Saudi Arabia via investing in domestic and worldwide tasks so that it will diversify the financial system, create jobs, and sell monetary increase. The PIF additionally invests in a variety of asset instructions, inclusive of equities, constant earnings, actual estate, and infrastructure.

The PIF is a key participant in Saudi Arabia’s Vision 2030 economic transformation plan. The PIF is making an investment in a extensive range of initiatives which can be designed to diversify the economy and create new industries. These tasks include:

  • Tourism: The PIF is investing within the development of Saudi Arabia’s tourism zone, inclusive of the development of latest accommodations, motels, and subject matter parks.
  • Entertainment: The PIF is investing in the development of Saudi Arabia’s leisure region, together with the construction of latest cinemas, theaters, and museums.
  • Technology: The PIF is investing inside the development of Saudi Arabia’s technology zone, inclusive of the introduction of latest technology hubs and the funding of startups.

The PIF is likewise making an investment in a number of international tasks. These projects include:

  • Infrastructure: The PIF is making an investment within the development of infrastructure initiatives in a number of international locations, including bridges, roads, and airports.
  • Real estate: The PIF is making an investment in actual property projects in some of principal cities around the world.
  • Energy: The PIF is investing in strength tasks, which includes renewable strength initiatives and oil and fuel projects.

The PIF is a essential driver of Saudi Arabia’s monetary transformation. The PIF’s investments are assisting to diversify the economic system, create jobs, and sell monetary increase. The PIF is also gambling a key function in Saudi Arabia’s worldwide outreach and is supporting to reinforce Saudi Arabia’s relationships with other countries.

Why need Saudi Arabia Fund acquires in Heathrow airport

Various reasons for PIF of Saudi Arabia to purchase 10% shares on London’s Heathrow Airport.

  • Diversification: The PIF has been trying various types of assets and different sectors all over the world with an aim of diversification and minimizing exposure to risks. In addition, investing in an iconic asset such as Heathrow can be regarded as the means of developing further away from purely traditional ‘oil and gas’ portfolio positions.
  • Influence: Having a 10% ownership at Heathrow Airport, PIF would have a powerful say on the airport’s operations since it is one of the busiest airports worldwide. With this, PIF will be privy to important data on international travel patterns and prospects.
  • Strategic location: This would be more beneficial for PIF if it possessed even a 10 percent say at Heathrow Airport which serves as a key entry point into Europe. Such measures would also help PIF’s investment in Europe like a share of Neom smart cities project.
  • Brand recognition: Associating itself to Heathrow airport, would make investment worthwhile for the PIF. PIF could use this as an opportunity of improving its brand image and lure in additional investors.

Generally speaking, PIF stands to gain various advantages as a result of taking shares at Heathrow. Nevertheless, the investment has several adverse effects. For instance, the airport sector is cyclic, and air travel demand could reduce in coming years. Further, PIF invests in the foreign asset, which can make it subject to the exchange rate fluctuations and other risks.

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