Saudi's Sovereign Fund to Invest in Giant Clean Power Unit

(Bloomberg) -- Saudi Arabia’s sovereign wealth fund will develop the bulk of the kingdom’s proposed renewable power projects, turning it into one of the region’s biggest utility investors.

The Public Investment Fund will be responsible for developing 70 percent of the kingdom’s renewable power capacity, Saudi Energy Minister Khalid Al-Falih said in a speech in Abu Dhabi. The rest will be tendered by the ministry.

Saudi Arabia is revamping its domestic power industry by adding natural-gas fired and renewable power plants so it can stop burning oil at home. About 70 percent of its power will be generated by gas by 2030, Al-Falih said. That would free up some 600,000 barrels of crude that’s burned for power generation a day, which could be more profitable if exported or converted to chemicals.

The kingdom plans to build about 60 gigawatts of renewable power capacity by 2030, with the PIF holding stakes in more than 40 GW of that capacity. That would make the fund’s clean energy portfolio rival some of Africa’s biggest utilities. South Africa’s Eskom Holdings SOC Ltd. can generate more than 45 GW and power capacity in Egypt is about the same.

PIF is already a majority shareholder in Saudi Electricity Co., the kingdom’s utility that generates most of the country’s power. The fund plans to attract investors and technical partners to its renewable projects.

200 Gigawatts

Saudi Arabia’s renewable power target is less than a third of Crown Prince Mohammed Bin Salman’s vision for a 200 gigawatt capacity buildup by 2030. That ambition still stands, an energy ministry official said, but will be reached in a rather circuitous way.

Instead of generating all that electricity in Saudi Arabia, the kingdom will make solar panels, turbines, windmill blades and other equipment, Turki Alshehri, head of the energy ministry’s renewables office, said in an interview. Those components will eventually be used to generate power, and together with the planned 60 gigawatts of power plants in Saudi Arabia, will help the country reach its target.

These investments in a rival source of energy isn’t a threat to the world’s biggest oil exporter, Al-Falih said.

“Renewables are going to primarily displace sources like coal,” which is used for power generation, Al-Falih said. “We’re still primarily into transport and chemicals, and that will continue to grow.”

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