meed-logo

line1 line2 line3
SIGN IN / REGISTER

FDI trends align with Vision 2030

3 October 2024

 

This package also includes: Riyadh redoubles efforts to boost inward investment

Foreign direct investment (FDI) trends are typically volatile and impacted by economic and political factors.

According to a report on FDI by GlobalData, there was a decline in both project numbers and capital investment in 2023 after a strong year in 2022. 

While the overall numbers were down, the report highlighted global trends that include a strong investor focus on the Middle East and elsewhere in Asia, outside of China, with Saudi Arabia and the UAE identified specifically as markets that offer strong potential. 

According to a GlobalData poll, the Middle East ranked as the fourth most attractive region for FDI in 2024 by investor sentiment.

Middle East deals 

In terms of deals, the Middle East experienced annual growth in both project activity and inbound capital investment from FDI in 2023. Companies announced 1,848 projects worth an estimated $88.3bn. Geopolitics, strategic partnerships, digitalisation, emissions reductions and artificial intelligence are the key themes causing investors to expand in the region. 

The UAE was the largest destination country in the region with $23bn of deals across 1,277 projects, which also made it the third-largest FDI market in the world in 2023 based on project activity. 

Saudi Arabia was the second-largest destination country in the region based on project activity. According to GlobalData, the kingdom attracted inward investment of $17.3bn from 305 FDI projects, which represents a growth of 23% in inward FDI investment in 2022-23. 

Core sectors

A detailed analysis of the Saudi FDI data shows that some sectors have been more successful than others. The numbers show that the core sectors of Vision 2030 have been best placed when it comes to attracting FDI.

The most successful sector in terms of value is metals and minerals. There have been $9.5bn of metals and minerals projects announced in the kingdom, which is significantly more than the second-largest sector, renewables and alternative power, which has attracted $5.4bn of deals. 

Metals and minerals are an increasingly important sector for Saudi Arabia. The kingdom says its natural resources are worth $2.5tn – an increase of more than 90% compared with 2016 estimates.

To help monetise these reserves, Riyadh enacted a new mining investment law in 2021, and since then the Ministry of Industry & Mineral Resources (MIMR) has awarded more than 2,000 mining permits to local and foreign firms under its accelerated exploration initiative.

Renewables and alternative power is also an important sector for FDI, with foreign players investing in power generation projects that are delivered on a public-private partnership basis. 

Not all projects are announced with a value. Based on the number of FDI projects rather than the aggregate of their announced value, the best-performing sector is tourism, with 271 projects, followed closely by business and professional services, with 270 projects. 

Tourism is another key pillar of Vision 2030. It has been identified as a focal point for Saudi Arabia’s economic transformation because it opens up the kingdom to foreign visitors, while at the same time creating jobs and investment opportunities.

When analysed based on business function, manufacturing is the leading sector based on deal value, while construction is the largest sector when measured by the number of projects. Both of these sectors are playing a key role in delivering the objectives of Vision 2030. 

Manufacturing investments are helping develop jobs and investment opportunities in Saudi Arabia, while also keeping Saudi spending within the kingdom and securing supply chains. This is highlighted clearly by the kingdom’s various moves into the automotive manufacturing space, which aims to establish Saudi Arabia as a key supplier of vehicles for both the local and international markets. 

Construction underpins many of the other sectors being developed in Saudi Arabia as much of the new economic activity that is planned needs new facilities. Whether it be hotels for tourism, factories for manufacturing or office buildings for professional services, there is a wide range of construction projects planned and underway in the kingdom. 

FDI landmarks

Notable breakthroughs in FDI in Saudi Arabia this year highlight these trends shown by the data. The first major deal involves manufacturing and was reported in January when Turkish steelmaker Tosyali Holding revealed plans to invest up to $5bn in a new steel plant in the kingdom.

Another manufacturing deal came when The Saudi Arabian Industrial Investments Company (Dussur) divested its 55% ownership in General Electric Saudi Advanced Turbines (Gesat) to GE Vernova, giving the US-headquartered firm full ownership of the manufacturer.

For construction, the National Housing Company (NHC) has signed several major deals with foreign investors. In April, NHC and Urbas Middle East Real Estate Company, a subsidiary of Spain’s Urbas Group, signed an agreement to develop over 589 residential units in NHC’s Al-Fursan suburb of Riyadh.

In March, NHC signed another deal with Egyptian real estate developer Talaat Moustafa Group (TMG) to develop over 27,000 residential units at NHC’s Banan City project, which is also in the Al-Fursan suburb of Riyadh. 

https://image.digitalinsightresearch.in/uploads/NewsArticle/12604344/main.jpg
Colin Foreman

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Mitsubishi Power to supply Rumah 1 and Nairiyah 1 turbines

    21 November 2024

    The developer and engineering, procurement and construction (EPC) teams that will develop and build the Rumah 1 and Nairiyah 1 combined-cycle gas turbine (CCGT) schemes in Saudi Arabia are understood to have partnered with Tokyo-headquartered Mitsubishi Power for the gas turbines to power the plants.

    The Rumah 1 and Nairiyah 1 independent power projects (IPPs) will each have a capacity of 1,800MW.

    The principal buyer, Saudi Power Procurement Company (SPPC), previously indicated that the power plants would operate using natural gas combined-cycle technology with a carbon-capture unit readiness provision.

    A consortium comprising Saudi Electricity Company (SEC), Riyadh-based utility developer Acwa Power and South Korea’s Korea Electric Power Corporation (Kepco) won the contract to develop the two CCGT independent power projects (IPP).

    The consortium signed the power-purchase agreements (PPAs) for the two projects with the SPPC on 18 November.

    China’s Sepco 3 and South Korea’s Doosan Enerbility will undertake the EPC contract for the projects, as MEED reported.

    The SEC, Acwa Power and Kepco team offered a levelised electricity cost (LCOE) of $cents 4.5859 a kilowatt-hour (kWh) for Rumah 1, and $cents 4.6114/kWh for Nairiyah 1.

    Acwa Power said that the two IPPs will require a combined investment of approximately SR15bn ($4bn). The IPPs are expected to reach commercial operations in Q2 2008. 

    Rumah 1 is located in the Central Region in Riyadh and is part of the previously planned Riyadh Power Plant 15 (PP15). Nairiyah 1 is located in the Eastern Region.

    SPPC received bids for the contracts for four thermal IPPs – the other two being the similarly configured Rumah 2 and Nairiyah 2 – on 21 August.

    The four power generation facilities will be developed using a build-own-operate (BOO) model over 25 years. 

    SPPC’s transaction advisory team for the Rumah 1 and 2 and Al-Nairiyah 1 and 2 IPP projects comprises US/India-based Synergy Consulting, Germany’s Fichtner and US-headquartered Baker McKenzie. 

    Najm and Mitsubishi Power

    The Rumah and Nairiyah 2 orders will be the second one this year for Mitsubishi Power, which in August confirmed receiving an order from South Korea's Samsung C&T Corporation to provide its M501JAC hydrogen-ready CCGT for the Najim industrial steam and electricity cogeneration plant in Jubail in the Eastern Province of Saudi Arabia.

    The M501JAC gas turbine will enable the new cogeneration plant to generate up to 475MW of power and approximately 452 tonnes an hour of steam.

    Samsung C&T is the engineering, procurement and construction (EPC) contractor for the project, which is being developed by a team comprising Abu Dhabi National Energy Company (Taqa) and Japanese power generation company Jera, the same team that won the contract to develop and operate the Rumah 2 and Nairiyah 2 CCGT contracts.

    Photo credit: Mitsubishi Power (for illustrative purposes only)

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12964755/main.jpg
    Jennifer Aguinaldo
  • Shanghai Electric to build 2GW Al-Sadawi solar project

    21 November 2024

    A developer team that includes Abu Dhabi Future Energy Company (Masdar), South Korea's Korea Electric Power Corporation (Kepco) and China's GD Power Development has tapped a Chinese firm to undertake the engineering, procurement and construction (EPC) contract for a 2GW solar project in Saudi Arabia.

    According to an industry source, Shanghai Electric will undertake the EPC work for the 2,000MW Al-Sadawi solar independent power project (IPP).

    The winning developer consortium signed the power-purchase agreement (PPA) with the principal buyer, Saudi Power Procurement Company (SPPC), for the project on 18 November.

    It offered a levelised cost of electricity of hals 4.847 ($c1.29) a kilowatt-hour (kWh) for the contract to develop the scheme, which is located in the Eastern Province.

    The second-lowest bidder is a team that includes China's SPIC Huanghe Hydropower Development and France's EDF Renewables, which offered to develop the project for $c1.31/kWh.

    SPPC received six proposals from companies for the contracts to develop and operate four solar photovoltaic (PV) IPP projects under the fifth procurement round of the kingdom's National Renewable Energy Programme (NREP) in August.

    According to SPPC, the lowest and second-lowest bidders in the remaining schemes under round five of the NREP are:

    Al-Masaa solar IPP (Hail): 1,000MW

    • L1: SPIC/EDF Renewables (France): $c1.36/kWh
    • L2: AlJomaih Energy & Water (local) / TotalEnergies Renewables (France): $c1.40/kWh

    Al-Hinakiyah 2 solar IPP (Medina): 400MW

    • L1: SPIC/EDF: $c1.51/kWh
    • L2: Masdar/Kepco/Nesma:  $c1.57/kWh

    Rabigh 2 solar IPP (Mecca): 300MW

    • L1: AlJomaih Energy & Water / TotalEnergies Renewables: $c1.78/kWh
    • L2: Masdar/Kepco/Nesma: $c1.89/kWh

    Saudi utility developer Acwa Power is not among the 23 companies that were prequalified to bid for the fifth round of NREP projects.

    US/India-based Synergy Consulting is providing financial advisory services to SPPC for the NREP fifth-round tender. Germany's Fichtner Consulting is providing technical consultancy services.

    The round five solar PV IPPs take the total capacity of publicly tendered renewable energy projects in Saudi Arabia to over 10,300MW. Solar PV IPPs account for 79%, or about 8,100MW, of the total capacity.

    Four wind IPPs, one of which has yet to be awarded, account for the remaining capacity.

    SPPC is procuring 30% of the kingdom's target renewable energy by 2030. Saudi sovereign wealth vehicle the Public Investment Fund (PIF) is procuring the rest through the Price Discovery Scheme. The PIF has appointed Acwa Power, which it partly owns, as principal partner for these projects.

    The Saudi Energy Ministry recently said that the kingdom plans to procure 20,000MW of renewable energy capacity annually, starting this year and until 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12964642/main.gif
    Jennifer Aguinaldo
  • Chinese firm wins 2.6GW Saudi inverter deals

    21 November 2024

    The engineering, procurement and construction (EPC) contractors implementing two of Saudi Arabia Public Investment Fund's (PIF) cluster-four solar photovoltaic (PV) projects have awarded contracts for the supply of inverters to China's Sineng Electric.

    The Jiangsu-headquartered company secured an order for 1GW of inverters from China Energy Engineering Group Consortium for the Haden solar PV project and 1GW from Indian contracting firm Larsen & Toubro for the Al-Khushaybi solar PV project.

    Sineng will provide its 8.8MW MV turnkey stations, each comprising 2 units of 4.4MW central inverter, a transformer and a ring main unit (RMU) for the solar projects.

    Designed to "withstand extreme temperatures [of] up to 51ºC… and strong sand-laden winds", the 8.8MW MV turnkey stations are expected to deliver consistent and reliable performance throughout the solar PV plants' operational lifespan.

    The PIF awarded the contracts to develop three cluster-four solar PV projects to a consortium led by Saudi utility developer Acwa Power earlier this year.

    The developer consortium, which includes PIF-backed Water & Electricity Holding Company (Badeel) and Saudi Aramco Power Company (Sapco), reached financial close for the three projects, which have a total combined capacity of  5,500MW, in September.

    The solar PV projects and their capacities are:

    • Haden solar PV (Mecca): 2,000MW
    • Muwayh (Mecca): 2,000MW
    • Al-Khushaybi (Qassim): 1,500MW

    The respective project companies that have been formed for the three projects are Buraiq Renewable Energy Company, Moya Renewable Energy Company and Nabah Renewable Energy Company.

    Acwa Power’s effective shareholding in each of the three projects is 35.1%. Badeel owns 34.9% and Sapco, a subsidiary of state majority-owned oil giant Saudi Aramco, owns the remaining shares.

    The project companies signed financing documents amounting to SR9.7bn ($2.6bn), Acwa Power previously announced. The financing duration is 27.3 years.

    The three projects are being procured under the National Renewable Energy Programme's (NREP) Price Discovery Scheme, which is being implemented by the PIF.

    Under this scheme, the projects are directly negotiated with Acwa Power and its selected partners.

    The three new solar PV facilities have a combined value of SR12.3bn ($3.3bn) and are expected to become operational in the first half of 2027.

    The PIF and its partners are currently developing several solar PV projects with a total capacity of 13.6GW, involving over $9bn in investments. These joint projects – including Sudair, Shuaibah 2, Ar Rass 2, Al-Kahfah and Saad 2 – are intended to enable and support the local private sector through domestic supply-chain participation.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12963512/main.jpg
    Jennifer Aguinaldo
  • Marubeni-led team reaches 1.1GW wind financial close

    21 November 2024

    A developer consortium led by Japan's Marubeni Corporation has reached financial close with a team of lenders for the contracts to develop two wind independent power producer (IPP) projects in Saudi Arabia.

    Marubeni and the local Ajlan & Bros won the contracts to develop the first two wind schemes of the kingdom's National Renewable Energy Programme (NREP) round four, the 600MW Al-Ghat and the 500MW Waad Al-Shamal wind IPPs, in May this year.

    According to an industry source, the following lenders will provide financing for the two projects:

    • Japan Bank for International Cooperation (Jbic)
    • Standard Chartered Bank (UK)
    • Sumitomo Mitsui Trust Bank (Japan)
    • Commercial Bank of Dubai (UAE)

    The consortium agreed to develop and operate the 600MW Al-Ghat wind IPP project with a new world-record-low levelised electricity cost (LCOE) from wind power of $cents 1.56558 a kilowatt-hour (kWh), or about 5.87094 halalas/kWh.

    The 500MW Waad Al-Shamal project has also achieved a second world-record-low tariff for wind power of $cents 1.70187/kWh or 6.38201 halalas/kWh, the energy ministry announced in May.

    The tariff achieved for Al-Ghat is almost 22% lower compared to the LCOE agreed for Saudi Arabia's first wind IPP, the 400MW Dumat Al-Jandal scheme, which a team comprising the UAE's Abu Dhabi Future Energy (Masdar) and France's EDF Renewables won in 2019.

    Marubeni will own 51% while Ajlan will maintain a 49% stake in the project company that will implement the projects.

    The Japanese-local team has appointed Power Construction Corporation of China (Power China) and Sepco 3 to undertake the wind projects' engineering, procurement and construction (EPC) contract.

    MEED previously reported that the same developer team is expected to win the contract to develop and operate the third wind scheme of NREP round four, the 700MW Yanbu wind IPP.

    The contract could be awarded before the year-end, according to a source.

    It is understood that other teams, separately led by local utility developer Acwa Power, France's Engie and EDF Renewables, submitted proposals for the contract to develop the Yanbu wind IPP scheme.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12959899/main.jpg
    Jennifer Aguinaldo
  • L&T signs $400m Riyadh-Kudmi transmission contract

    20 November 2024

    India-headquartered contracting firm Larsen & Toubro (L&T) has signed a contract with state utility Saudi Electricity Company (SEC) for the construction of a new 500-kilovolt (kV) high-voltage direct current (HVDC) project in Saudi Arabia.

    The contract is valued at SR1.51bn ($400m).

    The project involves constructing a section of the HVDC transmission lines from the Riyadh Power Plant 14 (PP14) in the capital to the southwest coastal region of Kudmi.

    MEED understands that the contract was awarded on a lump-sum turnkey basis.

    The other two sections of the HVDC transmission project, which has a total length of 1,089-kilometres (km), have been awarded to South Korea's Hyundai Engineering & Construction Company and Saudi Services for Electro Mechanic Works (SSEM).

    Earlier this month,  Hyundai E&C announced winning a KRW1tn ($725m) contract as part of the PP14-Kudmi HVDC network project. Hyundai E&C's portion of the total package extends over 369km, and is expected to be completed by January 2027.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12955076/main.jpg
    Jennifer Aguinaldo