Saudi Arabia’s Public Investment Fund (PIF) is planning to bolster hydrogen production by turning a little known subsidiary, the Energy Solutions Company (ESC), into a national champion, adding to its large and growing suite of industrial subsidiaries that seek to diversify the Kingdom’s economy, according to MEED.
ESC has operated quietly since it was formed. Its only reported investment has been the acquisition of 6% of the share capital of Nucera, worth around EUR150 million, following its IPO. Saudi Arabia is a major growth market for Thyssenkrupp’s hydrogen division Nucera, which has supplied a 2GW electrolysis plant to produce green hydrogen for the NEOM project.
At the same time, PIF has signed an MoU with French utility company Engie for the joint development of green hydrogen projects and its derivatives in Saudi Arabia, which would include serving export markets. The Saudi investor is also integrating hydrogen into other domestic industries, such as the automotive sector and steelmaking where it is forging joint ventures with industry leaders or setting up its directly owned ventures.
The launch of a domestic hydrogen chain producer comes after PIF launched green bonds to raise funds for low carbon energy production. PIF raised US$5.5 billion from a three-part green bond sale February 2023 with maturities of seven, 12 and 30 years with notes priced at a yield of 115, 145 and 185 basis points over US Treasuries. In October 2022, it raised US$3 billion with its debut US dollar green bond sale, including maturities of five, 10 and 100 years. The 100-year bond raised US$500 million and was the first century-long green note, signifying that Saudi Arabia is keen to break with its emerging market designation.
The SWF is mandated to develop 70% of Saudi Arabia’s renewable energy program and expects to make more than US$10 billion of investment in green projects in 2022-2026. It plans to increase solar and wind energy in its local grid to 50% by 2030, with the rest comprising natural gas – and potentially hydrogen.
It is unclear how the hydrogen subsidiary will relate to other companies established by the fund to support hydrogen production. ACWA, which is 44% owned by PIF and listed on the Tadawul in October 2021, is seeking to use the funds for low carbon energy production – from solar to green hydrogen – in Saudi Arabia and the MENA region, with annual investments projected at US$2.5 billion.
In December 2023, it signed a framework agreement for the development of the first phase of a green hydrogen project in Egypt, with capacity of 600,000 tonnes per annum tpa of green ammonia with a potential second phase scaling up to 2 million tpa. Development is also underway at the NEOM Green Hydrogen Project, a joint venture between ACWA Power, Air Products, and NEOM to create the world’s first utility-scale green hydrogen plant in the northwest of Saudi Arabia. The project will be capable of producing 1.2 million tpa of green ammonia with the first wind turbines delivered to the site in October 2023. It is also engaged in projects in Uzbekistan, Jordan and Indonesia.
PIF is keen to attract inward investment in domestic hydrogen production, while at the same time looking for commercial opportunities in the sector abroad, which could be chanelled by a national champion. In July 2023, PIF signed an MoU with Japanese energy company JERA to explore opportunities for the development of green hydrogen projects and derivatives. Last month, PIF announced it intends to invest some US$15 billion in Brazil, in infrastructure with green hydrogen and renewables cited as target sectors.
