Saudi Arabia’s PIF, Chinese firm buy into port operator

Saudi Arabia’s Public Investment Fund (PIF) and Chinese ocean container shipping behemoth COSCO Shipping Ports Ltd will each buy a 20% stake in Jeddah-based port operator Red Sea Gateway Terminal (RSGT).

The combined value of the 40% stake sale will be $280 million, regulatory filings show. The deal effectively values the port operator at $700 million.

The RSGT founders will retain the remaining 60% stake in the port company. These include the Saudi Industrial Services Co, Jeddah-based Xenel Industries Ltd and City Island Holding Ltd, which is a wholly owned subsidiary of the Malaysian utility and infrastructure conglomerate MMC Corp Berhad.

This 60% stake is held by the three companies via the Red Sea Ports Development Co, in which MMC Corp holds a 20% stake.

The deal will help RSGT in its expansion plans. In December 2019, RSGT had signed a 30-year build-operate-transfer agreement with the Saudi Arabian Ports Authority, as part of which it will invest $1.7 billion for upgrading and automating infrastructure facilities.

For PIF, the Saudi Arabian sovereign wealth fund, the investment makes sense as the oil-rich kingdom seeks to diversify its economy and reduce its dependence on fossil fuels.

COSCO Shipping Ports is part of Shanghai, China-based COSCO Shipping Lines Co Ltd, a multinational shipping company that manages the world’s third-largest ocean container capacity by volume.

COSCO has been expanding its footprint in West Asia. It holds a minority stake in Egypt’s Suez Canal container terminal and operates the CSP Abu Dhabi Port Container Terminal at Khalifa port.