Wen Jiabao, the Chinese premier, flies into Abu Dhabi for the World Future Energy Summit (WFES) today.
Having emerged as the factory of the world, China is now throwing considerable resources behind clean forms of power.
Mr Wen has decreed that 15 per cent of China's energy be generated from alternative sources by 2015 and has developed a programme of incentives and regulations, including preferential prices for alternative producers, to make the sector financially viable.
China is already the world's largest producer of photovoltaic panels and wind turbines, two engines of the alternative-power revolution.
It's production of renewable energy equipment has soared. In 2010, the country accounted for about 50 per cent of all solar-cell manufacturing, the equivalent of 8,000 megawatts. It has been estimated that this rose to 18,000 megawatts by the end of last year. As a plethora of companies added their products to the market, prices for panels plummeted by about 50 per cent last year alone.
Visitors to the WFES will be aware of China's influence on the market: its companies represent the largest contingent at the event, and more than 50 of them have pitched their stands in the exhibition centre.
China's role in the renewables sector has not gone unnoticed by Abu Dhabi, which has set a target for its own renewables sector to provide 7 per cent of its electricity by 2020. Cooperation with China is one plank in its strategy, according to Masdar, the capital's clean-technology company.
"Masdar has ambitious plans to further relations and cooperation with China in the acceleration, development and deployment of renewable energy and clean technology and is involved with China on a number of levels across multiple business units," said Sultan Al Jaber, Masdar's chief executive.
Masdar Capital, the company's investment arm, has invested US$15 million (Dh55m) in UPC Renewables, a Chinese wind-power developer. In addition, half of its solar pilot project in Masdar City, a 10 megawatt array, is powered by Chinese-made panels. But Masdar's plans to build its own solar panel manufacturing plant in Abu Dhabi have been dropped as prices have fallen and a substantial market in this region has failed to materialise.
Masdar's commitment to the Chinese renewables industry will be appreciated by Chinese solar companies, which suffered bad earnings last year and are locked in fierce competition with European, and particularly German, makers for market share.
The Germans have felt the heat of Chinese competition and have brought down the price of their panels drastically.
Jose Alberich, a partner at AT Kearney, said it was not just a numbers game for Gulf nations, most of which had yet to establish a legal and commercial framework to encourage investment.
Governments in the region want to foster a domestic industry alongside the deployment of renewable-energy projects, and China has yet to establish a sustained dialogue with the relevant entities in the Gulf.
"[Governments in the Gulf] are going for the integrated model," said Mr Alberich. "They want to do that because they think this is economic development. The only way to create jobs is by the integrated model."
US and European companies have been quicker to recognise this and are already working with Masdar, the Qatar Foundation and Saudi Arabia's King Abdullah City for Atomic and Renewable Energy, the institutions that will ultimately create renewables policy in their countries.
"I haven't seen that Chinese companies have found the entry. They are not talking to the right people. They are not in the right forums," said Mr Alberich.
However, Chinese companies are in talks to set up regional offices in Masdar City.
Mr Wen's visit will be another opportunity cement relations.
fneuhof@thenational.ae
Dubai Bling season three
Cast: Loujain Adada, Zeina Khoury, Farhana Bodi, Ebraheem Al Samadi, Mona Kattan, and couples Safa & Fahad Siddiqui and DJ Bliss & Danya Mohammed
Rating: 1/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Royal wedding inspired menu
Ginger, citrus and orange blossom iced tea
Avocado ranch dip with crudites
Cucumber, smoked salmon and cream cheese mini club sandwiches
Elderflower and lemon syllabub meringue
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Squid Game season two
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