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Tsvetana Paraskova

Tsvetana Paraskova

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Are The Saudis Involved In The Tesla Buyout Plan?

A few days after Elon Musk shocked Wall Street and investors by tweeting that he would take Tesla private at $420 a share, speculation is still high on who could invest in what could be the biggest-ever buyout deal. One of the potential financiers of the US$82-billion taking-Tesla-private deal could be Saudi Arabia’s sovereign wealth fund Public Investment Fund (PIF), which was said to have acquired just below 5 percent in Tesla before Musk tweeted about his idea to make the EV maker private.

PIF is in talks to take part in any pool of investors that would fund the buyout, Bloomberg News reported on Sunday, citing people with knowledge of the Saudi fund’s plans. PIF explores ways on how it could be involved in the possible going-private deal, for which Musk prefers to have a larger group of investors instead of just one or two large stakeholders, Bloomberg’s sources say.

According to those sources, PIF’s talks started before Musk tweeted last Tuesday about considering taking Tesla private. The Saudi fund sees its stake in Tesla as a strategic way to hedge against oil, according to Bloomberg’s sources who noted that PIF hasn’t made any decision yet on if it would increase its interest in Tesla.

However, according to sources familiar with the plans who spoke to Reuters, PIF has not yet expressed interest in investing in a buyout, despite the fact that it has now become a minority shareholder in Tesla.

Musk’s email to Tesla employees posted on Tesla’s website on the day of the tweet explained the rationale for the going-private plan, but Musk has yet to prove that the “funding secured” part of his tweet was true.

On the day following the tweet, Tesla’s Board of Directors members Brad Buss, Robyn Denholm, Ira Ehrenpreis, Antonio Gracias, Linda Johnson Rice, and James Murdoch said that Elon Musk had opened a discussion with the board in the previous week about taking the company private.

“This included discussion as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur. The board has met several times over the last week and is taking the appropriate next steps to evaluate this,” the directors said.

The SEC has asked Tesla if Musk had facts to back up his claim on Twitter that funding is ‘secured’, people familiar with the regulator’s inquiry told the Wall Street Journal last week.

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh G Salameh on August 13 2018 said:
    I sincerely hope not. Saudi investments in the United States could be at risk of litigation by the legislation passed by the US Senate and the US House of Representative in May 2016 that would allow families of 9/11 victims to sue the Saudi government for damages. The law removes the sovereign immunity, preventing lawsuits against countries whose citizens were found to be involved in the attacks. The minute one law case is launched by an American citizen against the Saudi government, all Saudi assets in the US will be frozen.

    If the Saudis see their investment in Tesla as a strategic way to hedge against oil, then why don’t they invest in China which is now the world leader in the development of electric vehicles (EVs) and solar energy.

    More than a decade ago, China overtook the US as the world's biggest carbon dioxide emitter. Today, it’s going for a complete 360 with a hungry drive to beat the United States at the renewable energy game. After all, this is largely a technology game, and China hopes to be the global technology leader, according to its strategic state plan by 2030.

    China is now the world’s largest investor in solar energy. In fact, according to the New York Times, the country is putting up new solar power generation projects so fast that substations that would connect them to the grid aren’t keeping pace.

    The pace of China’s investment in renewables is still staggering. According to Bloomberg New Energy Finance (BNEF), nearly half of the world’s new renewable energy investment of $279.8 billion in 2017 came from China. China definitively outpaced US investment by three times.

    The game is on and the winner will be the one willing to spend loads of cash on projects, even when it’s not immediately economically viable.

    There are also new solar markets opening up: Saudi Arabia is one very ambitious new addition to the industry. The Saudi solar market is projected to expand at a compound annual rate of 30% between 2018 and 2024.

    Modern Saudi Arabia has been built on the back of the “black gold”. Under its sands lies the world’s second biggest proven oil reserves. It boasts the Ghawar oilfield, the largest onshore oilfield in the world and also the Safaniya oilfield, the world’s biggest offshore oilfield.

    Whilst the world is still heavily dependent upon Saudi Arabia contributing more than 10% to global oil demand, it has been calculated that all of the world’s energy needs could be met with solar panels on just 1.2% of the Sahara Desert. There is no greater solar resource on the planet than a broad swath extending from the Sahara Desert of North Africa to northwestern Saudi Arabia.

    Despite its endowment, Saudi Arabia is planning for the future according to its Vision 2030 launched in 2016 by Saudi Crown Prince Mohammed bin Salman the de facto ruler of Saudi Arabia to diversify the Saudi economy and reduce Saudi dependence on the oil revenue. The Kingdom recently announced that it would invest up to $7 billion this year to develop seven solar plants and a wind farm.

    Now Saudi Arabia plans to have the world’s largest solar plant. Prince Mohammed bin Salman signed a memorandum of understanding for the massive project in April this year with Japanese multinational conglomerate SoftBank.

    The scale is unprecedented. The $200-billion project would produce 200 gigawatts of solar photovoltaic power and would take more than a decade to complete.

    To put the project’s scale into perspective, total US solar PV capacity at the end of 2016 stood at 40 GW. The world’s entire installed solar PV capacity at the end of 2016 was 300 GW. This plant would be 130 times bigger than the world’s current largest solar plant, the 1,547-megawatt (MW) Tengger Desert Solar Park in China.

    The Saudi solar project is symbolic in that it denotes a country making a strong commitment to a different kind of energy future. It also denotes that Saudi Arabia aims to remain one of the world’s vital energy producers.

    If such a project enables Saudi Arabia to reduce the oil it currently consumes for electricity generation and water desalination by 50% or 1.5 mbd, then at current prices it will be able to save some $41 bn annually. This means that the project could in theory finance itself in five years.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • RBHoughton on August 13 2018 said:
    The expert comment above addresses Saudi Arabia.

    I should like to address the short-selling motor traders and investors who have no electric vehicles to sell and have tried to kill off the Tesla venture.

    I is my sincere hope that a tincture of regulation can be applied to stock brokers and stock markets to end this selling things we don't own. Its a fraud.
  • Corvettekid on August 20 2018 said:
    Short-selling is as legitimate as buying on margin.

    MGS's comments about solar are pie-in-the-sky. YOU tell homeowners they have to have their land and views obscured by hundreds of ugly solar panels.

    An announcement of a mega-solar project is not the same thing as making a FID and committing the $$$. I'll believe it when I see it. It might provide a hedge to the oil-dependent Kingdom, but where are they getting the $20 billion a year for a decade with dwindling reserves and a budget deficit of $50-$100 billion ??

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