The Saudi Public Investment Fund (PIF) is channeling funding into select sectors within its domestic market as part of a revised strategy. Image Credit: Reuters

Dubai: The Saudi wealth fund PIF and Cosco Shipping Ports have bought 40 per cent in Red Sea Gateway Terminal Ltd. (RSGT), while the founding shareholders of the terminal operator will hold the rest.

The investment will help to transform RSGT into both a regional - and global - logistics hub in line with PIF’s task of “unlocking new economic opportunities”.

For the Public Investment Fund, the deal is part of its commitment to channel funds into businesses and economic sectors at home, with the Saudi economy poised to make a strong comeback after the pandemic hit. The firming up in oil prices too would be another major boost for the economy, and which PIF will try to capitalise on.

Deal structure

PIF and Cosco Shipping Ports will hold 20 per cent each. The transactions imply an enterprise value for RSGT of $880 million and a gross inflow of equity value for the founding shareholders of $280 million. 

Transport and logistics a priority
The PIF’s 2021-25 strategy focuses on 13 key priority sectors, including transport and logistics.

The Red Sea Gateway Terminal's location is on the main East-West trade routes, with close proximity to the main cargo end destinations on the west coast of Saudi Arabia. It seeks to capture significant intra-Red Sea transshipment cargo volumes.

“Working closely with PIF and CSPL, we will accelerate our shared vision, further strengthen our customer offering, and elevate our mandate to meet the increasing demand for terminal and logistics services,” said Jens O. Floe, CEO of RSGT. “RSGT will continue to focus on developing a niche emerging market operator with a keen focus on ports in the Red Sea and East Africa.”

RSGT has a 30-year concession - under a build-operate-transfer agreement - with Saudi Arabian Ports Authority, which commenced in April 2020. RSGT assumed operations of the North Container Terminal in Jeddah Islamic Port and expanded its handling capacity from 2.5 million TEU to 5.2 million TEU. This made it the largest container terminal in Saudi Arabia.

Throughout the concession period, RSGT’s annual throughput capacity is envisaged to grow to about 9 million TEU following an investment plan of $1.7 billion in infrastructure, equipment and technology.

“Moving forward, a key element of RSGT’s ongoing development plan, beyond domestic and targeted international expansion, is to further develop our port and supply chain facilities enabling us to better meet the needs of our global and local customers”, said Floe.