Could the disappearance of journalist Jamal Khashoggi alter relations between leading cleantech firms and the kingdom of Saudi Arabia?
The Turkish officials say that Saudi operatives killed Khashoggi and dismembered his body with a bone saw while he was inside the Saudi consulate; Saudi leadership denies this, but has yet to substantiate its claims that the journalist safely left the consulate in Istanbul. Suspects have close ties to Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia,The New York Times reported.
Prince Mohammed (also known as MBS) was once hailed as a reformer, but he is facing severe damage to his reputation. Numerous global business leaders canceled attendance at the ritzy Future Investment Initiative, to be hosted by the kingdom’s sovereign wealth fund next week.
Some relationships go deeper than conference attendance: The petro-state has pivoted hard into clean energy in recent years, and the Saudi sovereign wealth fund owns major stakes in cleantech companies including Tesla and Lucid Motors.
Ride-hailing company Uber exemplifies the complexities of the Saudi relationship. CEO Dara Khosrowshahi pulled out of the conference "unless a substantially different set of facts emerges." But he can't sever ties completely, because the Saudi Public Investment Fund invested $3.5 billion in the company in 2016 and got a board seat in the deal.
Here’s a rundown of Saudi Arabia’s clean energy industry ties, and changes that have resulted since the disappearance.
The Financial Times reported this summer that the Saudi Public Investment Fund (PIF) bought a stake of up to 5 percent in Tesla, totaling up to $3.2 billion at the time.
CEO Elon Musk confirmed the fund’s purchase of nearly 5 percent of Tesla in an August 13 blog post. In it, he explained that his fateful tweet about taking the company private with “funding secured” drew upon a series of conversations with PIF.
“Going back almost two years, the Saudi Arabian sovereign wealth fund has approached me multiple times about taking Tesla private,” Musk wrote. “Obviously, the Saudi sovereign fund has more than enough capital needed to execute on such a transaction.”
The famously opinionated Musk has stayed silent on his Saudi relationship since Khashoggi’s disappearance. He doesn’t have a choice in the Saudi ownership of part of his company, although that did not stop Uber's Khosrowshahi from taking a public stand.
Then again, Musk just settled with the Securities and Exchange Commission over his "funding secured" tweet, and had to give up his chairmanship of the board. He is operating with new constraints on his social media presence.
Tesla did not respond to inquiries about how recent events have affected its relations with the kingdom.
The luxury EV startup and Tesla challenger secured more than $1 billion from Saudi Arabia’s PIF last month to finance the launch of its first EV, the Lucid Air.
The company aims to use that money to build its factory in Casa Grande, Arizona and take its initial model to market by 2020, a hugely expensive endeavor.
Lucid announced the transaction September 17, two weeks before Khashoggi disappeared in the Istanbul consulate on October 2. At the time, a spokesperson for PIF said the investment would drive “revenue and sectoral diversification for the Kingdom of Saudi Arabia.”
“PIF’s international investment strategy aims to strengthen PIF’s performance as an active contributor in the international economy, an investor in the industries of the future, and the partner of choice for international investment opportunities,” Lucid’s press release quoted the spokesperson as saying.
When GTM inquired if Khashoggi's disappearance had affected the company's relations with Saudi Arabia, a Lucid spokesperson reported, "No change at this time."
Saudi solar renaissance?
MBS’ public commitment to a renewable energy pivot has yet to yield significant results.
That deal bucked the gradual ramp-up in solar deployment overseen by the Saudi Renewable Energy Project Development Office. The country had installed only 50 megawatts as of last year.
A 300-megawatt tender went to ACWA Power, but a second tender expected this year has not arrived.
Saudi officials reportedly planned to unveil a revised solar strategy at the Future Investment Initiative, which might address the uncertainty in the market caused by the jump from the original strategy to the botched mega-project.
“It's possible that things go back to normal, like this never happened,” said Benjamin Attia, global solar analyst with Wood Mackenzie Power & Renewables, earlier this month. “Alternatively, the lingering uncertainty and larger project size could drive a less competitive Round II tender. We'll have to wait and see the details of the new renewables strategy in a few weeks.”
Now that solar strategy announcement will roll out with reports of a grisly murder hanging over the conference, if it gets announced at all.
The billionaire who bought the L.A. Times pulled out of the FII, a spokesperson told The Daily Beast. Soon-Shiong became a cleantech owner with his recent purchase of Fluidic, the zinc-air battery company, which he renamed NantEnergy. The company produces long-duration batteries with a novel design, and is one of the few lithium-ion challengers to achieve widespread deployment.
NantEnergy's batteries could be a good fit for deployment alongside solar in the Saudi Arabian desert, but Soon-Shiong's response may complicate business prospects in that country. The company has plenty of other markets it can tap, though.
Former Energy Secretary Ernest Moniz
Moniz pulled out of an international advisory board for NEOM, a $500 billion "smart city of the future" planned for northwest Saudi Arabia, Axios reported.
His role was to advise on achieving zero net greenhouse gas emissions. The advisory board, announced October 9, included several other luminaries from the environment, urban planning and transit sectors.
An uneasy bargain
U.S. cleantech companies go to great lengths to secure capital. Venture capitalists typically lack the patience to wait around for a hardware startup to manufacture at scale, but such bets may be too risky for more patient capital.
For ambitious companies in search of serious capital, the Saudi sovereign wealth fund was a godsend: The coffers are effectively unlimited, and the professed goal of scaling clean energy fits well with these companies’ missions.
But that money comes from somewhere, and that somewhere has a rap sheet almost as deep as its exchequer. Before a dissident vanished from within the Saudi consulate, the kingdom spent years bombing Yemen, killing tens of thousands and ushering in famine and disease outbreaks. That slaughter failed to capture the imagination of the international community.
Cleantech firms can argue that the source of capital shouldn't stand in the way of the good they can achieve with it, if they feel the need to rationalize their fundraising at all. Will this international incident impact future investment strategies?
Tesla and Lucid proclaimed their alignment with the Saudis in August and September. They haven't changed their stances yet.