Saudi Arabia Brings Energy Investment to Uzbekistan
Since Uzbekistan initiated a series of reforms in 2017 to transition to an open economy, these efforts have yielded positive results, including increased inflows of international investment. The energy industry has been an especially attractive destination for foreign investment as the country moves to reduce its CO2 emissions by 10 percent of 2010 levels by 2030. Modernization in the power sector, which is responsible for around 40 percent of CO2 emissions in Uzbekistan, along with investments in renewable energy are critical for achieving these goals.
Saudi Arabia has been particularly active in investing in Uzbekistan’s energy sector through the construction of new thermal and wind power plants. In March 2020, the two countries reached an agreement on the construction of the new thermal plant with a total capacity of 1500 MW in the Sirdarya Region. Saudi Arabia’s private ACWA Power will implement the project using state-of-the-art technology to produce energy at a low cost while also decreasing annual CO2 emissions by 2.2 million tonnes. At an estimated cost of $1.2 billion, the plant will operate at a 60 percent efficiency rate and meet around 15 percent of the country’s total energy demand. During an official ceremony attended by high-level representatives from Uzbekistan, Saudi Arabia, and ACWA Power early in 2021, the parties celebrated the start of construction on the power plant and highlighted the importance of the project in strengthening cooperation between the two countries.
In addition to the Sirdarya thermal plant, Uzbekistan and Saudi Arabia have signed two Power Purchase Agreements on the construction of the “Bash” and “Dzhankeldy” wind power plants worth $1.3 billion. It is estimated that the new wind projects will reduce annual CO2 emissions by 1.6 million tonnes and significantly contribute to Uzbekistan’s efforts to increase the power capacity from renewable energy to 30 percent by 2030. To further reduce the country’s carbon footprint, Uzbekistan has also joined ACWA Power and American Air Products to establish new research proposals and programs in the development of hydrogen and renewable energy. According to H.E. Khalid A. Al-Falih, the Minister of Investment for Saudi Arabia, Uzbekistan has all the prerequisites to become the largest energy player in the region. He also noted that Saudi Arabia is committed to attracting additional investments in new technologies, including hydrogen energy, and setting up training programs for employees.
Negotiations on the creation of a Joint Business Council held during the Uzbek-Saudi Business Forum in Bukhara in January 2021, also marked the beginning of a new chapter in the countries’ bilateral cooperation. This new platform will link the business communities of two states and coordinate their joint projects across a range of industries, including energy, food, textile, tourism, finance, and health. The exchange of experience, skills, ideas, and information will provide an opportunity for Uzbek private businesses, which are critical for further enhancing the investment climate, to learn from their Saudi counterparts. An increased partnership between Uzbekistan and Saudi Arabia also signifies a more open economic landscape unfolding in Uzbekistan and indicates its cooperative behavior. Such steps are vital to continuing not only the spirit of Uzbekistan’s post-Karimov reforms, but also achieving tangible economic results in the coming years.