SunEdison partners with Saudi Arabia

Saudi Arabia plans to invest heavily into building one of the world’s largest silicon technology based integrated solar factory. The country is taking the help of SunEdison (SUNE), which is one of the biggest solar installers in the world. SunEdison was also one of the world’s biggest polysilicon and wafer manufacturers before it decided to focus on solar system development and installation. The massive crash in price of solar wafers and poly, which still continues today made SunEdison look more towards the lucrative downstream side of the business where it has been quite successful. SunEdison still continues to make poly and wafers mostly for its internal use. It makes cells and modules in JV with other companies such as JA Solar and Foxconn. This makes the company keep its business model asset light, while keeping a tight cost on the supply of solar panels to its internal business.

Now SunEdison will partner with Saudi Arabia to set up a massive $6.4 billion integrated complex over the next 3 years. Note Saudi Arabia government and its investment arms will invest the majority of the money, while the state utility will supply cheap gas to the manufacturing complex. Note Saudi Arabia wants to generate 33% of its energy requirements from renewable energy by 2030. The country currently uses oil to generate electricity, which is a bad option considering that it could sell the oil for much higher prices in the international market.

Saudi Arabia has a huge natural advantage in solar generation given its massive land area and high solar radiation. UAE and Qatar have already made some steps to starting solar manufacturing in their countries. Saudis are taking things to a different level and would want to use most of the solar products internally, given the high demand for electricity that they foresee for their growing population. I would be a buyer of SunEdison shares here.

SFGate

Saudi officials signed an agreement Tuesday with Belmont’s SunEdison Inc. to explore building a solar panel factory in the kingdom.The proposed $6.4 billion plant would be located at Wa’ad Al Shammal, an industrial city in the country’s north. The factory would use SunEdison technology to process polysilicon into wafers, then turn them into cells and modules. SunEdison inked the agreement with the Saudi government’s public investment fund and Sanabil Investments, which is also owned by the government.

But the Saudi government wants to nurture its own renewable power industry, setting a goal of getting one third of the country’s electricity from renewable sources by 2032.

Although the agreement signed Tuesday stops short of authorizing construction, plans for the plant appear to have advanced well beyond the initial stages. The government’s Ministry of Petroleum and Minerals has already agreed to supply the plant with natural gas, while the state-run electrical utility provides power. If all goes as planned, the factory would open in 2017.