Renewable Energy: Investment Environment & Growth KSA: Solar Industry Briefing and Networking May 8 th , 2018
Why invest in Saudi Arabia Renewables in Saudi Arabia Serving the renewable market beyond KSA Investment environment Potential incentives SAGIA's role 1
Export 1 Total population 26 th largest exporter 32.5 Mn globally Population Import 1 growth rate 2 31 st largest importer globally 2.5% Key facts Nominal GDP GDP per capita and figures $ 646 Bn $ 19,858 Internet speed Saudi labor force 6.7 Mbps 5.7 Mn 1. U.S. Dollar current price (WTO statistics 2016); 2. Average yearly growth rate from 2014 to 2017. Note: 2016 and 2017 data; Source: General Authority for Statistics; The World Bank, Organization for Economic Co-operation and Development; WTO Statistics 2
Seven key reasons to invest in Saudi Vision 2030 with clear priorities Diversification and reform journey 12 Vision Realization Programs Quantifiable initial successes Privatization program Game-changing opportunities Localization of value chain Giga projects across the country Strategic natural location Integrated infrastructure Largest seaport on Red Sea Digital infrastructure >35 industrial and economic cities Attractive property solutions Business areas with cluster-effects Land at very competitive prices ~50% of Saudis under 30 years old Young and skilled population Universities increasing research Tax free salaries Expanding quality of life Amongst safest places in the world 26th healthcare systems worldwide Asset financial system 192% of GDP Leading financial sector Well-capitalized banking sector Biggest capital market in MENAT 1 1. Middle East, North Africa and Turkey; Source: Saudi Arabia's Vision 2030 3
Unlimited natural endowment for renewable energy production 5 Government commitment to unlock the renewable energy sector key reasons to invest in Access to large regional market Renewables in KSA Advanced knowledge-based market Investor-centric ecosystem 4 4
Saudi Arabia Ranks 12th Worldwide For Annual Electricity Production Annual electricity production (Twh) and Production-per-capita ranking (#) within top 20 largest producers 6,142 Annual Saudi electricity Arabia 4,351 production 1,401 1,087 1,000 663 648 582 553 551 339 331 315 286 286 274 273 264 257 252 Production- per-capita #15 #2 #19 #6 #9 #1 #7 #18 #8 #5 #10 #3 #16 #13 #11 #14 #17 N.a #4 #12 ranking # Ranking of production-per-capita within top 20 energy producers Note: 2016 values, TWh stands for TeraWatt-hours; Source: British Petroleum Statistical Review of World Energy June 2017; British Petroleum Statistical Review of World Energy 2015 workbook; Workbook of historical data 1985-2013 on Electricity generation: Statistical review of world energy 2014 5
KSA's natural endowment position it among the best countries globally for solar and wind energy production KSA is ranked as the 6 th country with highest KSA is ranked as the 13 th country with highest potential for production of Solar energy potential for production of onshore wind K Petajoule/Year K Petajoule/Year Top 10 countries for energy resource Top 15 countries for energy resource 62.3 potential in centralized solar (PV on land) potential in wind (onshore) 9.3 52.0 8.2 47.3 7.5 7.4 44.3 39.9 33.9 30.1 29.2 26.5 25.0 2.9 2.4 1.8 1.3 1.0 0.6 0.5 0.5 0.5 0.5 0.5 Great mix of natural resources places KSA among the top markets to deploy renewables Source: Shell global energy resources database 6 6
Today Going forward Renewable sources constitute a Saudi aims to heavily increase small fraction of the energy mix the share of renewable energy Renewable energy share 1 <1% Renewable energy share 1 >10% Note: Share of renewables from total KSA's generation capacity Source: IRENA, REPDO 7
Establishment & Commitment to Focus on growth localization unlock the renewable energy sector We have set ourselves an initial target We will also seek to localize significant of generating 9.5 GW of renewable portion of the renewable energy value energy by 2023 chain in the Saudi economy, including R&D, manufacturing, among other stages Source: Saudi Arabia's Vision 2030
Saudi targets to increase renewable energy generation capacity to 9.5 GW by 2023 Capacity targets (GW) High ambition 10% to establish a 9.50 strong growing sector Further 4% targets to be announced 3.45 soon <100 MW 2017 2020 2023 2030 Share of renewables in KSA's total generation capacity Source: REPDO, Team analysis
KSA set 30% localization requirement of/in the value chain in 2017, aimed to increase to over 40% - 60% Localization requirement targets Continuously increasing localization requirement 40% to 60% localization requirement 30% localization requirement Future 2017 2018 Source: REPDO, Team analysis
Beyond local consumption, KSA manufacturers have the opportunity to serve 17 GW in the GCC region MENA map with expected renewable targets (MW) by 2020/2030 Illustrative 950 3,725 130 300 11,000 10,090 21,600 1,750 9,500 5,000 2,219 1,582 Total renewables market size in MENA region to reach ~70 Total renewables market size in GW GCC countries to reach ~17 GW Expected renewable targets (MW) by 2020/2030 301 – 600 601 – 900 901 – 1200 >1200 0 – 300 Export GCC Region Source: IRENA, Team analysis 11
Geographical advantage • KSA is located at a close proximity to the GCC countries and thus has a logistical advantage (i.e., Three key factors lower transportation cost, shorter delivery time) over make export of other European and Asian source countries renewable energy Trade agreements with other Arab countries to neighboring • Following GAFTA 1 – Goods produced in any of the countries GAFTA member countries shall be exempted from duty favorable in any other member country Favourable trade regulations on industrial goods • KSA has set favorable trade regulations on the export of industrial products/equipment 1. Greater Arab Free Trade Area Source: Team analysis
Saudi Arabia strategically located to facilitate trade Crossroads of international trade roads between 3 continents >10% 1 of world trade moves through the Red Sea Riyadh, Jeddah, Dammam in pivotal locations for distribution to key markets of Middle East, Egypt and East Africa 1. Red Sea Foundation – King Abdullah Economic City (KAEC) 2016 13
20 investment opportunities are identified for the renewable sector #Investment opportunities 2 20 20 5 15 8 10 5 5 0 Solar PV Wind Solar CSP Solar Common Tota l 14
Investor-centric Ecosystem is Established by the Government for Private Sector Investors Clear governance Incentives to attract private and regulatory framework sector investors 15 15
Clear allocation of roles along the value chain Sector role allocation Sector Sector Planner/ Sector Licenses Funder owner promoter Regulator issuer /Investor Executor OEMs National Renewable Saudi Standards, Metrology Ministry of Commerce Saudi Industrial Private Sector Ministry of Energy, Industry Energy Program and Quality Organization & Investment Development and Mineral Resources (NREP) (SASO)* Fund (SIDF) Renewable Energy Project SAGIA Other key government Development Office supporting entities (REPDO) Private Sector 16
Custom duty Customs duty exemptions for primary raw materials and exemption spare parts (not available in KSA) Selected key Refund to importers/ exporters of raw material imports that Custom duty incentives are processed in Saudi Arabia and re-exported as more drawback finished products offered to Loans Up to 75% of project financing through soft loan by SIDF investors for Land Land for lease starting from $ 0.26 per sqm renewables incentives Nationalizati investors Up to 15% (for male) and 20% (for female) of the monthly on salaries of KSA nationals employees to be covered by HRDF incentives Ownership 100% foreign direct ownership allowed Repatriation No restrictions on repatriation of capital of capital Source: Responsible entities 17
SAGIA is Saudi Arabia's Investment Promotion Agency, mandated to work closely with potential investors to attract investment into the Kingdom To promote Saudi Arabia as a world-class investment destination, attract and retain investors, and expand their investments; for the benefit of a sustainable national economic Mission growth 18
SAGIA offers support across multiple dimensions to investors Market & economic Matchmaking and Site visits Location search intelligence Linkage Assist investor in fact finding Provide information to help Develop business connections Find best location for project missions and understand local investors evaluate and plan & linkages with local market value chain Set-up assistance Incentives assistance Improving business climate Provide variety of facilitation Structure incentives packages Create a better investment and liaison in support and build business cases ecosystem
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