Financing agreed for $2.2bn Saudi solar project

ACWA Power

• 2060mw plant will provide electricity for 350,000 homes
• Kingdom rapidly accelerating expansion of renewables capacity
• ACWA Power, Aramco and PIF unit Badeel in consortium

Financing agreements worth $2.2 billion have been finalised and signed to build one of the world’s largest single site solar power projects in Saudi Arabia.

ACWA Power Co announced the deal for Al Shuaibah 1 and Al Shuaibah 2 PV projects in Mecca province, saying they will be funded by a combination of long-term debt and equity. 

A consortium of ACWA Power, Electricity Holding Company (Badeel), a unit of the Public Investment Fund, and Saudi Aramco are behind the ambitious solar plan, with ACWA Power holding a 35 percent equity stake.

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The total financing includes a loan from the National Development Fund on behalf of the National Infrastructure Fund as well as a US-dollar denominated commercial facility from a consortium of local, regional and international banks.

The solar power facility is expected to start operations by the end of 2025. It will have a generating capacity of 2,060 megawatts (mw), which will provide enough electricity to power 350,000 homes. 

Al Shuaibah 2 – ACWA Power’s sixth solar plant in Saudi Arabia – will be slightly larger than Abu Dhabi’s 2,000mw Al Dhafra Solar PV.

The kingdom is accelerating efforts to expand its renewables capacity and aims to generate half its electricity from renewables by 2030.

As of 2021, just 0.2 percent of the kingdom’s electricity came from non-hydrocarbon sources, according to the BP Statistical Review of World Energy 2022.

ACWA and Badeel – both backed by the Saudi sovereign wealth fund – are also working together to develop three other solar projects that aim to power about 750,000 homes.

The projects, Ar Rass 2, Saad 2 and Al Kahfah, are valued at $3.3 billion in total and aim to produce a combined capacity of 4.5 gigawatts (gw).

Financial close is expected by the third quarter of 2023.

The Economist Intelligence Unit said in a research note earlier this year that it expects investment in clean energy projects to rise in Saudi Arabia, assisted by high oil prices in 2023‑24, but will likely fail to meet its 2030 target of 40gw.

Analysts added they expect Saudi Arabia to exploit current oil windfalls to accelerate its clean energy transition as the government aims to invest a total of $101 billion by the end of the decade.

In May, the Saudi Electricity and Water Regulatory Authority said it has qualified a list of 106 contractors and consultants to design, inspect, install and maintain small photovoltaic solar energy systems in homes and facilities across the kingdom.

The country also announced the development of 10 new solar and wind energy projects in its 2023 budget, as part of its strategy to slash oil use in electricity generation. They will have a combined total output capacity of 7gw. 

Last month, TotalEnergies reached financial closure to manage a $100 million solar photovoltaic power plant close to Riyadh as part of a consortium also comprising Japan’s Toyota Tsusho and Saudi Arabia’s Altaaqa Renewable Energy (Zahid Group).

The French oil major won the project in the third round of the kingdom’s national renewable energy programme. Construction started in June, with commercial operations expected to launch in early 2025.