NEW YORK • SoftBank Group's Vision Fund will invest in creating the world's biggest solar power project in Saudi Arabia, stepping up its involvement in the kingdom and expanding beyond technology.
The project is expected to have the capacity to produce up to 200 gigawatts by 2030, SoftBank chief executive Masayoshi Son told reporters in New York.
That would add to about 400 gigawatts of globally installed solar power capacity and is comparable to the world's total nuclear power capacity of around 390 gigawatts as of the end of 2016.
By investing in solar power, Saudi Arabia, the world's biggest oil exporter, can reduce the amount of crude it uses to generate power and increase its overseas shipments.
The move illustrates the commitment by the de facto Saudi ruler, Crown Prince Mohammed bin Salman, to transform the country's economic status quo.
The final investment total for the 200 gigawatts of generation, including the solar panels, battery storage and a manufacturing facility for panels in Saudi Arabia, will eventually total about US$200 billion (S$262 billion), Mr Son said on Tuesday.
The initial phase of the project, for 7.2 gigawatts of solar capacity, will cost US$5 billion, with US$1 billion coming from SoftBank's Vision Fund and the rest from project financing, he added.
Saudi Arabia's Vision 2030 reform plan, which aims to reduce the country's economic dependence on oil, was a good match for the fund's long-term vision for innovation, said Mr Son.
Despite being one of the world's sunniest countries, Saudi Arabia generates most of its electricity from oil-fired power plants. The kingdom's entire installed power capacity is around 60 gigawatts. Adding 200 gigawatts would create enormous excess capacity that could be exported to neighbours or used by industry, although the kingdom will still require other forms of power generation for night-time backup.
Industry estimates say 300,000 to 800,000 barrels per day of crude oil are burnt for Saudi power generation. Exporting that oil could increase Saudi Arabia's annual oil revenues by between US$7 billion and US$20 billion, at the current price for benchmark Brent oil of almost US$70 per barrel.
"Saudi Arabia is clearly preparing for a post-fossil fuel dependent economy in terms of domestic energy consumption, and this huge bet on renewables would free up a lot of domestic output of oil for exports, while probably saving domestic gas resources as well," said Mr Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore.
Last May, SoftBank said it raised over US$93 billion for Vision Fund, the world's largest private equity fund with backers including Saudi Arabia's sovereign wealth fund, Apple and Foxconn, formally known as Hon Hai Precision Industry.
Vision Fund has funnelled US$27.5 billion into 20 tech firms as of the end of December, transforming SoftBank from a Japanese telecoms upstart into one of the world's biggest technology investors.
The Saudi investment is SoftBank's second major global solar project. The company has said it will invest up to US$20 billion along with Foxconn and Bharti Enterprises in solar projects in India, which has a target to generate 100 gigawatts of power from solar by 2022. SoftBank has estimated the electrification drive could create a requirement for over 150 gigawatts of additional power.