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Saudi Arabia, Japan Sign Agreement for Transmission Systems in Neom

Saudi and Japanese delegations signing an agreement for transmission systems in Neom (Asharq Al-Awsat)
Saudi and Japanese delegations signing an agreement for transmission systems in Neom (Asharq Al-Awsat)
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Saudi Arabia, Japan Sign Agreement for Transmission Systems in Neom

Saudi and Japanese delegations signing an agreement for transmission systems in Neom (Asharq Al-Awsat)
Saudi and Japanese delegations signing an agreement for transmission systems in Neom (Asharq Al-Awsat)

The Saudi Electricity Company (SEC) signed an agreement with Japan's Hitachi Energy agreement and Saudi Services for Electromechanical Works (SSEM) to supply three high-voltage direct current (HVDC) transmission systems to ENOWA, the utility company for NEOM in Northwest Saudi Arabia.

The agreement will provide one of the world's first 3 GW, 525 kilovolts (kV) HVDC Light transmission systems connecting Oxagon, NEOM's regional development, with the larger Yanbu area more than 650 kilometers away in Western Saudi Arabia.

- Construction and installation

Under the auspices and supervision of the Saudi Ministry of Energy, ENOWA organized the signing ceremony of the agreement, under which Hitachi Energy's scope of supply includes design, engineering, procurement of HVDC technology, and commissioning of the HVDC Light converter stations.

According to the agreement, the SSEM will design and supply the AC equipment portion and perform the construction and installation.

The converter stations convert the power from AC to DC and then back to AC for integration into the receiving grid.

The converters will be sourced by and supplied to Saudi Electricity Company, which was contracted in 2022 by ENOWA to act as their EPCM to build this first HVDC system for NEOM.

- Energy storage

Hitachi Energy and ENOWA have signed an early works and capacity reservation agreement for two additional HVDC projects, each rated up to 3 GW.

Under this agreement, both companies commit to having the resources and capacity necessary to implement these two HVDC systems.

As part of a new scalable and modular regional network design targeted to seamlessly integrate future renewables and energy storage technologies in the NEOM Energy System, it is unique in size and complexity.

The cooperation will also explore opportunities to develop local competencies in the Kingdom, including ways to assemble the necessary HVDC Light components locally and sustainably.

The Managing Director of Hitachi Energy's Grid Integration business, Niklas Persson, said that the collaboration with ENOWA will power one of the most visionary development projects of all time.

Persson added that as the world progresses towards a more sustainable future, expertise, and HVDC technologies are true enablers of the electrification of the global energy system and the transition to renewables.

For his part, the Executive Director of Grid Technology & Projects, Energy of ENOWA, Thorsten Schwarz, indicated that by securing the first capacities for this vital part of the future network within just one year since the decision to use this technology was taken, "we show ENOWA's commitment to supporting Saudi Vision 2030 in collaboration with Saudi Electricity Company and Hitachi Energy."

- Sustainable economy

ENOWA seeks, by its commitment to renewable energy and efficient water management, to become a global reference for industry leaders and set a benchmark for sustainable economic circular systems worldwide.

ENOWA, NEOM's energy and water company, produces and delivers clean and sustainable energy for industrial and commercial applications.

The company benefits from NEOM's greenfield site and strategic location in northwestern Saudi Arabia, with abundant solar and wind resources.

ENOWA will act as a catalyst and incubator for developing new, sustainable energy and water businesses while creating a robust economic sector regionally.

ENOWA is the principal shareholder in the world's largest green hydrogen production plant set to be commissioned in 2026 and will enable NEOM to be a global green hydrogen hub.

The region is designed to be a blueprint for sustainable urban living with minimal environmental impact and enhanced livability.

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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
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Saudi Arabia Raises $12 Billion in International Bonds Amid Strong Demand

Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).
Skyscrapers are seen in King Abdullah Financial District in the Saudi capital, Riyadh. (Reuters).

Saudi Arabia has raised $12 billion from global debt markets in its first international bond issuance of the year, attracting bids worth nearly $37 billion. This demonstrates strong investor appetite for Saudi debt instruments.

The issuance comes just two days after the approval of the 2025 annual borrowing plan by Minister of Finance Mohammed Al-Jadaan. The plan estimates financing needs for the fiscal year at SAR 139 billion ($37 billion). The funds will be used to cover the projected SAR 101 billion ($26.8 billion) budget deficit for 2025, as well as repay SAR 38 billion ($10 billion) in principal debt obligations due this year.

The National Debt Management Center (NDMC) announced on Tuesday that the issuance includes three tranches: $5 billion in three-year bonds, $3 billion in six-year bonds, and $4 billion in ten-year bonds. Total demand for the bonds reached $37 billion, exceeding the issuance size by three times and reflecting robust investor interest.

The NDMC emphasized that this issuance aligns with its strategy to broaden the investor base and efficiently meet Saudi Arabia’s financing needs in global debt markets.

According to IFR, a fixed-income news service, the initial price guidance for the three-year bonds was set at 120 basis points above US Treasury yields. The six-year and ten-year bonds were priced at 130 and 140 basis points above the same benchmark, respectively.

Strong demand allowed Saudi Arabia to lower yields on the shorter-term bonds, further demonstrating investor confidence. Economists noted that the pricing above US Treasuries is attractive in the current market, showcasing trust in Saudi Arabia’s economic stability and financial strategies.

International confidence

Economic experts view this successful bond issuance as a testament to international confidence in Saudi Arabia’s robust economy and financial reforms. Dr. Mohammed Al-Qahtani, an economics professor at King Faisal University, said the move underscores Saudi Arabia’s commitment to diversifying financing tools both domestically and internationally. He added that the funds would support Vision 2030 projects, reduce pressure on domestic resources, and attract strong international investor interest.

The issuance strengthens Saudi Arabia’s ability to meet financial needs, expand its investor base, and establish a global financing network, he said, noting that it also facilitates entry into new markets, enabling the Kingdom to accelerate infrastructure projects and capital expenditures.

Dr. Ihsan Buhulaiga, founder of Joatha Business Development Consultants, described the 2025 budget as expansionary, aimed at meeting the financing needs of economic diversification programs. He stressed that the budget deficit is an “optional” one, reflecting a deliberate choice to prioritize Vision 2030 initiatives over immediate fiscal balance.

Buhulaiga explained that the Kingdom’s approach balances two options: limiting spending to available revenues, which would avoid deficits but delay Vision 2030 initiatives, or borrowing strategically to fund Vision 2030 goals. He said that the annual budget is just a component of the larger vision, which requires sustained funding until 2030.

He continued that Saudi Arabia’s fiscal space and creditworthiness allow it to borrow internationally at competitive rates, explaining that this flexibility ensures financial sustainability without compromising stability, even during challenges like the COVID-19 pandemic.

Saudi Arabia’s debt portfolio remains balanced, with two-thirds of its debt domestic and one-third external. As of Q3 2024, public debt stood at approximately SAR 1.2 trillion, below the 30% GDP ceiling. According to the Ministry of Finance, the budget deficit is expected to persist through 2027 but remain below 3% of GDP.

Buhulaiga highlighted the importance of capital expenditure, which reached SAR 186 billion in 2023 and is projected to rise to SAR 198 billion in 2024, a 6.5% increase.

He emphasized the government’s pivotal role in economic diversification, supported by investments from the Public Investment Fund (PIF), the National Development Fund, and its subsidiaries, including the Infrastructure Fund.

The PIF recently announced a $7 billion Murabaha credit facility, facilitated by Citigroup, Goldman Sachs International, and JPMorgan. Meanwhile, the NDMC arranged a $2.5 billion revolving credit facility earlier in January, compliant with Islamic principles, to address budgetary needs.

In November, Moody’s upgraded Saudi Arabia’s credit rating to Aa3, aligning with Fitch’s A+ rating, both with a stable outlook. S&P Global assigns the Kingdom an AA-1 rating with a positive outlook, reflecting a high ability to meet financial obligations with low credit risk.

The IMF estimates Saudi Arabia’s public debt-to-GDP ratio at 26.2% in 2024, describing it as low and sustainable. This is projected to rise to 35% by 2029 as foreign borrowing continues to play a key role in financing deficits.