Wind

Saudi Arabia's plans make business sense

Does it matter why countries and companies choose to invest in renewables? We can read about countries that commit to renewables for environmental reasons; and companies that choose green power because are conscious about their carbon footprints.

Does it matter why countries and companies choose to invest in renewables? We can read about countries that commit to renewables for environmental reasons; and companies that choose green power because are conscious about their carbon footprints.

But that is not always the case and it doesn’t matter. In fact, it’s good because it shows that renewables make good business sense. You just need to look at Saudi Aramco.

Aramco, the Saudi state-owned oil giant and the world’s largest oil company, is reportedly looking to invest as much as $5bn in renewables. It has appointed banks including HSBC, JP Morgan and Credit Suisse to find potential acquisition targets and also advise on deals, with a first investment expected to happen already this year.

This plan fits into Saudi Arabia’s broader strategy. In January, the country announced that it plans to develop up to 10GW of renewables capacity, mainly wind and solar, by 2023 and would invest up to $50bn to do so.

This commitment to renewables has little to do with the environment. Saudi economy is heavily reliant on oil, and the drop in oil prices in the last two years has posed a serious challenge to the country. The situation shows little sign of changing even though, on 30 November, the Saudi-led Organisation of the Petroleum Exporting Countries cut its output by 2%. This caused a temporary surge in oil prices, but evidence of higher US oil drilling and forecasts of a rebound in shale production have held back oil prices since then.

So, Saudi Arabia has been forced to find a new solution. It has chosen to make its economy less dependent on oil and to invest in renewables. But how to find the money to invest in, once it has become increasingly difficult to rely on oil? Here is when the idea of the Aramco IPO came up.

Saudi Arabia plans to sell shares of its state-owned company to the public to finance its investment in renewables and, if the plan works, the proceeds from the sale would be enough to reform its economy. Indeed, Aramco’s plan to sell stake of about 5% could value the company in trillions of dollars, raising about $100bn for the government.

The purists might sneer that the country is not investing in solar and wind out of concern for the planet, but that doesn’t matter. Its approach shows that renewables make business sense, and it should also represent a tempting opportunity for developers and manufacturers to enter a new and promising market.

And it would do no harm to the environment too.

Looking to super-charge the delivery of early green hydrogen projects?

We provide a platform for developers to share knowledge, solve complex problems, forge vital connections and gain actionable insights.

Find out more

Got a brief for us?

We don’t pretend that any one client or campaign is the same as the next. Instead, we’ll design a communications programme bespoke to your business and your needs. The right strategy, the right creative and the right team.

Send us a brief

Investment expertise. High-quality events. Exclusive content. Lead generation.

Talk to the Tamarindo team today to find out how membership would benefit your business.

See member benefits

Investment expertise. High-quality events. Exclusive content. Lead generation.

Talk to the Tamarindo team today to find out how membership would benefit your business.

See member benefits

Related content