A consortium led by Abu Dhabi’s renewable energy company Masdar submitted the world’s lowest-ever bid for the first solar power project in Saudi Arabia as Opec’s top crude producer diversifies its economy away from hydrocarbons.

Masdar and its French partner EDF submitted the lowest offer for the project at 1.79 US cents per kilowatt hour (kWh), according to Saudi Arabia’s Renewable Energy Project Development Office (Repdo), which read out the submissions from eight firms in a live webcast yesterday, with Masdar’s bid coming in 24 per cent cheaper than the second lowest bid from Saudi Arabia’s Acwa Power.

If successful, Masdar’s bid will break the 2-cent global threshold for the kingdom’s first commercial scale solar photovoltaic (PV) plant totaling 300 megawatt. The Sakaka solar power project, part of the kingdom’s first round of the National Renewable Energy Programme, is expected to total 300 megawatts.

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However, that figure could change should Repdo decide to choose a bid for a larger amount of solar power, such as French firm, Engie’s bid to build a 381MW plant at 2.77 cents per kWh.

“We applaud Repdo on the transparency and detail of the tender process, which is reflected by the number of participating companies. The tender is ongoing, with the technical and commercial proposals now under review,” Masdar said in a statement.

According to Paddy Padmanathan, chief executive of Acwa Power the “tariff level will make this such a competitive value proposition that the kingdom will procure much more than what they have announced so far.” There can be “no doubt that solar is the most competitive solution by far to deliver electricity when compared to any other alternative.”

The Repdo bid announcement detailed the company names as well as technical partners, and financial backers for each bid. However, some submissions - including Masdar - did not list any banks.

The announcement of these bids do not mean that the lowest submission will win the project. Repdo, which falls under the energy ministry, will now evaluate bids and make a final decision in the coming weeks.

In comparison to Masdar’s bid Abu Dhabi’s Sweihan project, totaling 1.17 gigawatts, will produce solar power at 2.94 cents. That is nearly 40 per cent higher than what the UAE-based firm has submitted in Saudi Arabia.

Saudi solar prices

In comparison to Masdar's bid Abu Dhabi’s Sweihan project, totaling 1.17 gigawatts, will produce solar power at 2.94 cents. That is nearly 40 per cent higher than what the UAE-based firm has submitted in Saudi Arabia.

"We need more banks to close those deals or build up more leverage," Frank Beckers, head of project finance at First Abu Dhabi Bank, said last week in Dubai. "At a certain stage, some of us may run into risks. The more banks you need, the more you have to include banks that don’t agree on the same aggressive structures.”

With interest rates slowly rising, refinancing will also increase, said Mr Beckers.

Last month Federal Reserve Chair Janet Yellen signaled more rate hikes are ahead in 2018. because of concerns over inflation.

The industry would see an increase in bank debt pricing, according to Charlie Seymour, a financial advisor for Abu Dhabi Electricity and Water Authority.

“The Sweihan project is US$600 million and Marubeni and Jinko raised cheap money and they got the last dollar of that cheap money,” he said.

*A correction was made to show Engie's bid at 2.77 cents per kWh