Investment Environment & Growth KSA: Solar Industry Briefing and - - PowerPoint PPT Presentation

Renewable Energy: Investment Environment & Growth

KSA: Solar Industry Briefing and Networking May 8th , 2018

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SAGIA's role Potential incentives Investment environment Serving the renewable market beyond KSA Renewables in Saudi Arabia Why invest in Saudi Arabia

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Key facts and figures

Total population

32.5 Mn

Population growth rate2

2.5%

Nominal GDP

$ 646 Bn

Internet speed

6.7 Mbps

Export1

26th largest exporter globally

Import1

31st largest importer globally

GDP per capita

$ 19,858

Saudi labor force

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

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Seven key reasons to invest in Saudi

• 1. Middle East, North Africa and Turkey; Source: Saudi Arabia's Vision 2030

Diversification and reform journey Game-changing opportunities Integrated infrastructure Attractive property solutions Young and skilled population Expanding quality of life Leading financial sector

Vision 2030 with clear priorities 12 Vision Realization Programs Quantifiable initial successes Privatization program Localization of value chain Giga projects across the country Strategic natural location Largest seaport on Red Sea Digital infrastructure >35 industrial and economic cities Business areas with cluster-effects Land at very competitive prices ~50% of Saudis under 30 years old Universities increasing research Tax free salaries Amongst safest places in the world 26th healthcare systems worldwide Asset financial system 192% of GDP Well-capitalized banking sector Biggest capital market in MENAT1

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Unlimited natural endowment for renewable energy production Government commitment to unlock the renewable energy sector Access to large regional market Advanced knowledge-based market Investor-centric ecosystem key reasons to invest in Renewables in KSA

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Saudi Arabia Ranks 12th Worldwide For Annual Electricity Production

252 257 264 273 274 286 286 315 339 551 553 582 648 663 4,351 6,142 331 1,000 1,087 1,401

Annual electricity production (Twh) and Production-per-capita ranking (#) within top 20 largest producers

#15 #2 #19 #6 #9 #1 #7 #18 #8 #5 #10 #3 #16 #13 #11 #14 #17 N.a #4 #12 # Saudi Arabia

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

Annual electricity production Production- per-capita ranking

Ranking of production-per-capita within top 20 energy producers

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KSA's natural endowment position it among the best countries globally for solar and wind energy production

33.9 39.9 44.3 47.3 52.0 62.3

K Petajoule/Year

25.0 26.5 29.2 30.1 0.5 0.6 1.0 0.5 0.5 0.5 1.3 1.8 2.4 2.9 7.4 7.5 8.2

K Petajoule/Year

0.5 9.3

Source: Shell global energy resources database

Top 10 countries for energy resource potential in centralized solar (PV on land) Top 15 countries for energy resource potential in wind (onshore)

Great mix of natural resources places KSA among the top markets to deploy renewables KSA is ranked as the 6th country with highest potential for production of Solar energy KSA is ranked as the 13th country with highest potential for production of onshore wind

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Today

Renewable sources constitute a small fraction of the energy mix

Going forward

Saudi aims to heavily increase the share of renewable energy Renewable energy share1 <1%

Note: Share of renewables from total KSA's generation capacity Source: IRENA, REPDO

Renewable energy share1 >10%

Commitment to unlock the renewable energy sector

Establishment & growth Focus on localization

We have set ourselves an initial target

• f generating 9.5 GW of renewable

energy by 2023 We will also seek to localize significant portion of the renewable energy value chain in the Saudi economy, including R&D, manufacturing, among other stages

Source: Saudi Arabia's Vision 2030

High ambition

to establish a strong growing sector

Share of renewables in KSA's total generation capacity

4% 10%

Saudi targets to increase renewable energy generation capacity to 9.5 GW by 2023

Source: REPDO, Team analysis

9.50 2030 2023 2020 2017 3.45

<100 MW

Further targets to be announced soon

Capacity targets (GW)

Source: REPDO, Team analysis

Localization requirement targets

2017

30% localization requirement

2018

40% to 60% localization requirement

Future

Continuously increasing localization requirement

KSA set 30% localization requirement of/in the value chain in 2017, aimed to increase to over 40% - 60%

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10,090 21,600 2,219 3,725 9,500 130 950

300

11,000 1,750 1,582 0–300 301–600 601–900 901–1200 >1200 Export Expected renewable targets (MW) by 2020/2030

Beyond local consumption, KSA manufacturers have the

• pportunity to serve 17 GW in the GCC region

5,000 GCC Region Total renewables market size in GCC countries to reach ~17 GW Illustrative

MENA map with expected renewable targets (MW) by 2020/2030

Source: IRENA, Team analysis

Total renewables market size in MENA region to reach ~70 GW

Three key factors make export of renewable energy to neighboring countries favorable

Geographical advantage

• KSA is located at a close proximity to the GCC

countries and thus has a logistical advantage (i.e., lower transportation cost, shorter delivery time) over

• ther European and Asian source countries

Trade agreements with other Arab countries

• Following GAFTA1 – Goods produced in any of the

GAFTA member countries shall be exempted from duty in any other member country

Favourable trade regulations on industrial goods

• KSA has set favorable trade regulations on the export
• f industrial products/equipment
• 1. Greater Arab Free Trade Area

Source: Team analysis

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Saudi Arabia strategically located to facilitate trade

• 1. Red Sea Foundation – King Abdullah Economic City (KAEC) 2016

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

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20 investment opportunities are identified for the renewable sector

20 2 5 8 5 5 10 15 20 Solar Common Solar CSP

#Investment opportunities

Wind Tota l Solar PV

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Clear governance and regulatory framework Incentives to attract private sector investors

Investor-centric Ecosystem is Established by the Government for Private Sector Investors

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Clear allocation of roles along the value chain

Sector role allocation

OEMs Sector Planner/ promoter Sector Regulator Licenses issuer Funder /Investor Sector

• wner

Executor

National Renewable Energy Program (NREP) Ministry of Commerce & Investment Private Sector Ministry of Energy, Industry and Mineral Resources Renewable Energy Project Development Office (REPDO) Saudi Standards, Metrology and Quality Organization (SASO)* SAGIA Saudi Industrial Development Fund (SIDF) Other key government supporting entities Private Sector

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Selected key incentives

• ffered to

investors for renewables investors

Custom duty drawback

Refund to importers/ exporters of raw material imports that are processed in Saudi Arabia and re-exported as more finished products

Loans

Up to 75% of project financing through soft loan by SIDF

Land incentives

Land for lease starting from $ 0.26 per sqm

Ownership

100% foreign direct ownership allowed

Nationalizati

• n

incentives

Up to 15% (for male) and 20% (for female) of the monthly salaries of KSA nationals employees to be covered by HRDF

Repatriation

• f capital

No restrictions on repatriation of capital

Custom duty exemption

Customs duty exemptions for primary raw materials and spare parts (not available in KSA)

Source: Responsible entities

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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 growth Mission

SAGIA offers support across multiple dimensions to investors

Find best location for project Assist investor in fact finding missions and understand local value chain Develop business connections & linkages with local market Provide information to help investors evaluate and plan

Location search Site visits Matchmaking and Linkage Market & economic intelligence

Create a better investment ecosystem Structure incentives packages and build business cases Provide variety of facilitation and liaison in support

Improving business climate Incentives assistance Set-up assistance

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Simple, clear and fast business set-up process for manufacturing investors in Saudi

Prepare required documents1 Documents authenticated at the ministry of foreign affairs and Saudi embassy Apply online on SAGIA website SAGIA license approval Article authentication Find location & Lease agreement Apply online on MCI website initial industrial license Open bank account Commercial registration at MCI Open labor office file Open recruitment file (700) Register with GOSI, DZIT Obtain residency visa for general manager Final Industrial license registration at MCI 1 day 1 day 1 day 1 day 1 day 3 days

• 1. Commercial registration and financial statement for last year

Source: SAGIA

@investsaudi

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