EEC Unveils Comprehensive Capital Optimisation Plan to Drive Holistic Turnaround and Deliver on Strategic Initiatives Aligned with Saudi Vision 2030

Overview

On 8 September 2024, Emaar The Economic City (“EEC”) announced a transformative business strategy, as approved by EEC’s Board of Directors and aligned with Saudi Vision 2030.

This strategy will be enabled by a SAR 8.7 billion Capital Optimisation Plan (“COP”) consisting of a restructuring of all of EEC’s SAR 3.8 billion in bank debt facilities, the full conversion to share capital of SAR 4.0 billion of EEC’s debt owed to PIF, and a new convertible shareholder facility of up to SAR 1.0 billion from PIF. Furthermore, EEC will be pursuing a capital decrease to offset all of its accumulated losses.

This page intends to provide our shareholders with an overview of EEC’s Capital Optimisation Plan and its transformative future business strategy.

Capital Optimisation Plan to provide strong platform for holistic turnaround:

The COP reinforces EEC’s robust partnership with key stakeholders including (i) one of its major shareholders, PIF, and (ii) its commercial lenders.

The plan consists of four key components:

  • A restructuring and syndication of all EEC’s existing bilateral credit facilities with Alinma Bank, Saudi Awwal Bank, Banque Saudi Fransi and Saudi National Bank (together the “Banks”) amounting to SAR 3.8 billion. This will re-align the repayment schedules for EEC’s bank debt facilities to match the Company’s investment plan, turnaround strategy and liquidity profile. The debt will be governed under one new syndicated facility agreement and is fully Shari’a-compliant.
  • The full conversion to share capital of SAR 4.0 billion of EEC’s debt, representing a SAR 2.9 billion facility from the Ministry of Finance (“MoF”), which was recently novated to PIF, and SAR 1.1 billion shareholder loan from PIF. This conversion will significantly de-leverage EEC’s balance sheet and reduce interest expense with the added benefit of shoring up the Company’s share capital position.
  • A new convertible shareholder facility of up to SAR 1.0 billion from PIF to bolster the Company’s liquidity position and provide adequate funding over the short- and medium-term to invest in critical and transformative growth initiatives, which are integral to the successful turnaround of EEC.
  • A capital decrease, to offset EEC’s accumulated losses. The capital decrease will have no adverse impact on the operations of the Company, but is designed to stabilize EEC’s financial position, creating a healthier balance sheet and greater potential for future growth.

It should be noted that both the debt conversion and the capital decrease remain subject to regulatory and shareholder approvals, while the restructuring and syndication of the existing bilateral credit facilities and PIF’s new shareholder loan are not binding at this stage and are subject to finalization of, and entry into, binding long-form documentation with the relevant parties.

EEC will make further announcements to the market in due course.

Strategic focus: aligning with Saudi Vision 2030 by enhancing key sectors for development

The COP enables EEC to focus on its strategic priorities for the Company and KAEC, which include industrial and logistics businesses, non-industrial knowledge-based sectors, tourism, and residential real estate. With the strategy subject to continual refinement to tap dynamic market opportunities, EEC will prioritise developing an attractive ecosystem for industrial, logistics and non-industrial businesses to flourish by developing sector specialised facilities and services for them to access. In tourism, EEC will focus on enhancing the quality and diversity of visitor services and experiences, attracting events and cultivating a diverse entertainment offering, and establishing a domestic and regional profile for the City as a premier destination to visit. Objectives for residential real estate are to provide a range of quality housing options for a wide range of resident segments and to ensure access to high quality social infrastructure and services.

Key foundations for achieving strategic priorities

Strategic priorities for EEC will focus on both real estate and operations. The three strategic pillars of EEC’s real estate business are:

  • City master development
  • Real estate development
  • Asset management

Within these, the Company will focus on attracting and retaining reputable real estate developers and investors and executing a more efficient and optimised master plan for KAEC.

EEC will selectively execute signature projects independently or in collaboration with partners, upgrade and monetise current real estate inventory, and improve the performance of assets by partnering with best-in-class operators.

For special economic zone (“SEZ”) operations, EEC will seek to leverage reputable Industrial Valley tenants to attract more businesses.

The longer-term focus will be to transform and grow by achieving positive cash flows and investing in residential projects, growing the asset management business to increase exposure to achieve sustainable performance. EEC is prioritising the continued upgrade of KAEC utilities with particular focus on infrastructure, paving the way for investors to set up and invest in projects, and contributing to a more stable and efficient operating model.

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