Harnessing the Saudi Arabian solar powerhouse opportunity. Webinar Yusuf Macun, Partner May 10, 2017

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1 Harnessing the Saudi Arabian solar powerhouse opportunity Webinar Yusuf Macun, Partner May 10, 2017

2 Markets in MENA with highest PV cumulative installation through 2021 are UAE, Egypt, Algeria and Saudi Arabia. MENA PV market, by country, 2016 and 2021 [annual MW, cumulative GW] Morocco Jordan GW GW Algeria 1, GW x = Cumulative installations in All others 1, Egypt GW Saudi Arabia 1, GW 4 UAE GW 3.6 GW Source: Apricum PV Market Model Q2/2017 center scenario 2

3 Saudi Arabia expected to strongly increase PV installation starting in 2019 to over 1 GW in Annual new PV installations forecast for KSA [GWp] Market sustainability High case 1.3 Large population, growing energy demand Well-developed IPP framework Low case First 300 MW PV tender ongoing and second tender (620 MW PV) announced Goal to diversify from oil and gas Roadmap for renewable energy targets ( Vision 2030 ) <5 <5 < Potential risks Delays in implementation, however, this has been mitigated by greater organization and the new tender authority (REPDO) for ongoing tender round, which started in Q1/2017 Source: Apricum PV Market Model Q2/2017 3

4 Saudi Arabia provides many suitable sites for solar and wind power generation. Detailed Saudi regional suitability for solar and onshore wind power generation 1 Tabuk Jeddah Large cities Arar Hail Buraydah Al-madhinah Khamis moshait Riyadh Examples for areas with wind speed above 6 m/s and up to 8 9 m/s Dammam Resources Solar radiation (GHI) very high across KSA; concentrating technologies (e.g., CSP) more viable in western regions Minimum wind speed of 5 m/s at 80 m height needed for wind to be competitive with oil-fired electricity generation 2 Several sites fulfill these requirements: Initial wind simulation model by Vestas and K.A.CARE shows very attractive wind resources in KSA up to 8 9 m/s, offering LCOE of below 0.10 USD/kWh Grid connectivity For utility-scale generation, adequate grid access necessary, i.e., proximity to large cities However, off-grid sites still suitable for distributed utility-scale generation, e.g., to power desalination plants Suitable for solar energy; GHI in kwh/m 2 : 2,200-2,400 2,400-2,600 2,600-2,800 Source: K.A.CARE renewable resource atlas and Apricum analysis 1) Wind speeds measured at 80m height 2) Assumed at 50 USD/barrel 4

5 Saudi Arabia s Vision 2030 includes ambitious targets and a program for clean energy that has already been kicked off. Saudi Arabia s Vision 2030 Key objectives of Saudi government Introduced in May of 2016 by Deputy Crown Prince Mohammad bin Salman Al Saud Goal is to develop a more diverse and sustainable economy through improved education and privatization of government services Key energy implications include: Renewable energy target of 9.5 GW by 2023 and a 3.45 GW intermediate target by 2020 Six tender rounds envisaged with first round of 700 MW already launched and two more rounds planned (1,020 MW and 1,730 MW) Fuel market liberalization: fossil fuel subsidies to be reduced, increasing PV and wind s competitiveness Localized manufacturing incentives to spur renewed interest from Saudi private sector 1 Meet the growing demand for electricity 2 Reduce fossil fuel consumption in electricity generation 3 Contribute to peak load demand 4 Reduce air pollution and improve public health 5 Maximize local content to spur local employment 6 Fair and transparent bidding process 7 Attract foreign and local private investment and participation in Saudi Arabia 5

6 27 bidders have qualified as technical or managing member for the solar RfP. Each bidder requires a managing and a technical member. A number of other parties are also rumoured to be interested in joining. Managing and technical member ACCIONA Energia Global S.L. ACWA Power Belectric (RWE Group) EDF Energies Nouvelles First Solar International Middle East FZ-LLC Enel Green Power S.p.A. International Power SA, Dubai Branch (ENGIE) Marubeni Corporation Mitsui & Co Total Energies Nouvelles Activities USA Source: REPDO, Apricum Managing member Abu Dhabi Future Energy Company, PJSC-Masdar Cobra Instalaciones y servicios S.A. JGC Corporation Nebras Power Korean Electric Power Corporation (KEPCO) SNC-Lavalin Arabia LLC Sojitz Corporation Tenaga Nasional Berhad Technical member Canadian Solar Enerparc Projects GmbH Fotowatio Renewable Ventures (FRV) GCL New Energy Hanwha Qcells Co. Iberdrola Renovables Energia S.A.U. Trina Solar Limited TSK Electronica Y Electricidad 6

7 Financing Financing requirements and project documentation are reported to be broadly in line with the SEC 100MW PV IPP tender, thus providing continuity. Timeline to bid more generous/realistic than initially ancitipated Relatively modest size of transaction probably means no major liquidity issue Strong interest from international and local commercial banks. ECA involvement unlikely SAR vs USD financing dynamics Strong preference by banks in Middle East IPP financings to use mini-perms: Evaluation by authority / refinancing risk Pre-bid costs vs deliverability: Rumour has it that the latter is the priority Strong bidder equity interest notwithstanding 7

8 Apricum GmbH Spittelmarkt Berlin Germany T F