Saudi Aramco Power Company, the utility asset of the kingdom's oil company, joined the consortium led by Acwa Power to develop the 1.5 Gigawatt Sudair Solar plant in the kingdom. The project reached financial close on Sunday.
The 3.4 billion Saudi riyals ($907m) project, which is backed by the kingdom's Public Investment Fund, will be built within Sudair Industrial City and will provide power to 185,000 homes, offsetting 2.9 million tonnes of carbon dioxide.
In April, Crown Prince Mohammed bin Salman announced the development of the project. The consortium then signed a 25-year power purchase agreement with the Saudi Power Procurement Company. The project is set for commissioning in the second half of 2022 and will become the largest of its kind in the kingdom.
Saudi Arabia, the world's largest exporter of oil, plans to add gas and renewables capacity equating to one million barrels of oil per day by 2030.
The kingdom is looking to green its power mix and export more barrels of oil. It is also committing to lowering emissions and the energy impact of fossil fuels as part of its diversification strategy for 2030.
The PIF holds a 50 per cent stake in Acwa Power, one of the most prolific developers of conventional and renewable energy projects in the kingdom.
The sovereign wealth fund has been given the mandate to develop nearly 70 per cent of renewable projects in Saudi Arabia. Utilities and renewables are among the 13 sectors identified by the fund as part of its Vision 2030 strategy.
Acwa Power and Saudi Arabia's Badeel, which is part of the consortium, will hold a 50 per cent and 35 per cent stake each in the company. Aramco's Sapco will have a 30 per cent interest in the company.
The solar project has one of the lowest tariffs for solar photovoltaic projects globally.
Mizuho Bank, Riyad Bank, Korea Development Bank, Arab Petroleum Investments Corporation, Al Rajhi Banking and Investment Corporation, Standard Chartered are financiers of the project. Bank Al Bilad, Saudi British Bank and SMBC International provided equity bridge financing.
Funding for the scheme is based on limited recourse project financing with senior debt structured as soft mini-perm facility with a tenure of 28 years, covering both conventional and Islamic tranches.
"Our involvement in the Sudair Solar PV plant reflects our efforts to advancing sustainable energy solutions, both within our own operations and the broader energy network," said Aramco senior vice president - downstream, Mohammed Al Qahtani.
"While hydrocarbons will continue to be a vital part of the energy mix for decades to come, renewables like solar have an important role to play in helping achieve the world’s climate goals. Sudair will support Saudi Arabia’s ambition to generate part of the nation’s power needs from renewable energy by 2030, and is one of several low-carbon energy options being deployed by Aramco," he added.
The engineering procurement and construction contract for the project was awarded to Larsen & Toubro in April.
