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Abu Dhabi, UAETuesday 11 December 2018

Saudi Arabia and SoftBank sign $200bn deal for 'world's largest solar project'

SoftBank founder envisions project as means of weaning Saudi Arabia off dependence on oil and to create as many as 100,000 jobs

Masayoshi Son, chairman and chief executive of SoftBank Group shakes hands with Crown Prince Mohammed bin Salman in New York after signing an agreement for the huge solar project. Jeenah Moon / Bloomberg
Masayoshi Son, chairman and chief executive of SoftBank Group shakes hands with Crown Prince Mohammed bin Salman in New York after signing an agreement for the huge solar project. Jeenah Moon / Bloomberg

Japan’s SoftBank Group and Saudi Arabia agreed to build a $200 billion solar power development in the kingdom, which will be the largest in the world, create thousands of jobs and cultivate a manufacturing industry in line with the kingdom's economic diversification plans.

The agreement was concluded by SoftBank founder and Japan’s wealthiest man Masayoshi Son, and Saudi Arabia’s Crown Prince Mohammed Bin Salman who is on a three week visit to the United States.

The partnership is part of the collaboration between Softbank and Saudi Arabia, which has committed to invest as much as $45bn in a $100bn Softbank fund through its sovereign wealth fund, the Public Investment Fund.

“This is the first big investment in the Saudi kingdom to create the world’s biggest solar power generation,” Mr Son said in New York where the agreement was announced. “This kind of project would have never been feasible without the big vision that we share with the crown prince.”

The project is in line with Saudi Arabia’s Vision 2030 which seeks to reduce the country’s reliance on oil and transform its economy. The overarching roadmap includes creating an industrial base, and the privatisation of state-owned entities such as Saudi Aramco which based on a $2 trillion valuation is set to be the world’s largest initial public offering when it is listed.

The 200 gigawatts solar power generation project will create clean, sustainable, and low cost renewable energy, Mr Son said.

“The kingdom has great sunshine, great size of available land, and great engineers and great laborers. Most importantly the best and greatest vision,” he said. “With this scale of this specific project we can create the manufacturing facility inside the kingdom. We can create a factory inside the kingdom, so we can have the largest and newest technology.”

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Mr Son said the project, set to be completed by 2030, will create 100,000 jobs and reduce the cost of generating electricity as the kingdom has burned oil to generate power.

“The cost saving with this project we estimate is $40 billion. This will increase the GDP [of Saudi Arabia] by $12bn, that is our estimate,” Mr Son said. “We will create a total new ecosystem in the kingdom.”

He said construction of the new solar park, which will be spread around the kingdom and will not exclusive be to a single area, begins immediately. The project will be built in phases with the first stage generating electricity in 2019. Manufacturing capability will follow two years after.

“We will also create the R&D centre and education and training centre so the new technology continues to evolve,” Mr Son said.

The cost of the first stage of the project will be $5bn and the remaining portion of the project will be through project debt financing.

In October last year, Saudi Arabia said it planned to build Neom, a mega-city also being billed as a “start-up the size of a country”, that will span 26,500 square kilometres. It will cost $500bn to develop with funding coming from PIF and international investors such as Softbank. Former Alcoa and Siemens executive Klaus Kleinfeld has been appointed to lead the project.