Centrotherm Photovoltaics is the world's No.2 maker of solar equipment.
IDEA Polysilicon, a new company set up by investors in the Gulf to produce the key solar power panel making material, did not disclose the value of the contract for Centrotherm to provide know-how and engineering for the plant in Yanbu.
The project, which is expected to cost more than 4 billion Saudi riyals ($1.1 billion), could produce up to 10,000 tons per year of polysilicon, IDEA said in a statement.
Saudi Arabia is seeking to diversify its energy resources by building solar and nuclear power plants to reduce its use of oil. Power demand in the Kingdom is growing at around 8 percent a year.
Shares in Centrotherm were up 1 percent, leading Frankfurt's technology index and outperforming a 0.7-percent drop in the OekoDAX index of Germany's largest renewable stocks.
"Along with the Algerian contract ... this may be the second major turnkey deal for Centrotherm that is awaiting order status," WestLB analyst Katharina Cholewa said, raising Centrotherm's price target to 14.7 euros from 13.8 euros.
Centrotherm last year signed an agreement as part of a consortium to build a solar module factory in Algeria, an order worth a total 290 million euros ($379 million).
