Saudi Arabia’s Acwa Power will move ahead with its China plans despite growing concerns of a trade war and will not invest in the US in the short term, its chief executive said.
Acwa Power, one of the largest renewable energy developers in the Middle East, recently entered China’s renewable energy market with agreements for one gigawatt of projects. By 2030, the company aims to invest up to $30 billion in China – the world’s largest renewable energy market – in line with its plans to triple its overall assets under management to about $250 billion.
“We take a long-term view, and we see China as a very strong economy,” Marco Arcelli told The National in an interview. "China has a programme of installing 250-300 gigawatts of renewables per year, and the commitment there is very strong. The scale is such that even if, in theory, it slows down by 10 per cent, it is still a gigantic market.”
Since taking office in January, US President Donald Trump has levied 20 per cent tariffs on Chinese imports to the US, raising concerns of a further slowdown in the world’s second-largest economy. Beijing has responded with retaliatory tariffs on American goods, while introducing stimulus measures aimed at bolstering consumer spending.
The trade disputes and tariffs will not disrupt Acwa Power's business, which is centred on clean energy projects in the Gulf, Central Asia, Africa, South-East Asia and China. The company does not have assets in North America and Europe. “In terms of tariffs on the supply chain for renewables, I don't see that there is really an issue … there are no tariffs between Africa, Central Asia, the Gulf and China,” Mr Arcelli said.
China produces about 90 per cent of the world’s solar photovoltaic (PV) components and has by far the world’s largest wind turbine production capacity. The renewable energy executive is “more concerned” about the potential impact of a trade war on economic growth, which may lower the demand for energy in some countries.
“We're working in countries that grow at “4 per cent to 8 per cent” per year, so I still think it's a very healthy environment,” Mr Arcelli said, adding that Acwa Power will not invest in the US in the short term as it focuses on projects in territories it is already in.
Meanwhile, Saudi Arabia has pledged to expand its investments and trade with the US by $600 billion – and potentially beyond that – over the next four years.
Middle East impact
Mr Trump has pulled the US out of the Paris Agreement, the global accord to lower greenhouse gas emissions, and has sought to cement the country’s position as a major supplier of crude oil and liquefied natural gas (LNG). The new US administration is also looking to remove or weaken the Inflation Reduction Act (IRA), the landmark green bill passed by the Biden administration, which allocated billions of dollars in tax credits and subsidies to developers of clean energy projects.
This policy shift away from renewable energy in the US has raised concerns that global energy transition efforts will face more hurdles. However, Mr Arcelli does not expect a slowdown in Saudi Arabia – Acwa Power’s home market – and the wider Gulf region.
“I think that the Gulf and Saudi Arabia are becoming the centre of the world in terms of commitment and driving the energy transition, which I think is predicated on the fact that you have a lot of natural resources here,” he said. “Oman and the Emirates are going ahead with tenders … we are also working in Bahrain and Kuwait for some additional capacity there.”
Renewable energy generation in the Middle East is forecast to grow by about 14 per cent per year from now until 2027, with its share of the overall energy mix rising from 5 per cent to 7 per cent, according to the International Energy Agency.
Green hydrogen bridge
The Middle East and North Africa (Mena) region is emerging as a green hydrogen hub and Europe and Asia could be its most important markets. There is potential for an “energy bridge” between Europe and Saudi Arabia for green hydrogen and direct power exports, driven by Saudi Arabia's competitive energy costs and Europe's need to decarbonise and ensure energy security, Mr Arcelli said.
In February, Acwa Power signed an initial agreement with Germany’s Sefe (Securing Energy for Europe) for the supply of 200,000 tonnes of green hydrogen annually by 2030. The Saudi company will lead development, investment, and operation of green hydrogen and ammonia assets, while Sefe will co-invest and serve as the primary off-taker, using its position as a major European energy trader to market the hydrogen, Acwa Power said at the time.
Acwa Power is also a partner in the $5 billion Neom Green Hydrogen project, the world’s largest, which is expected to be completed next year. The other venture partners are Neom and the US-based Air Products, which has secured an off-take agreement for all the green ammonia produced at the facility. However, the hype around green hydrogen – a fuel produced using renewable energy – seems to be fading due to concerns over its high costs and potential buyers.
“There is still interest in off-takes, and we are in contact in Europe with multiple parties,” Mr Arcelli said. “Despite the fact that the hype may not be the same that you had a couple of years ago, there is still a realisation that this [green hydrogen] will need to happen in by 2030, or in the next decade,” he added.
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Sunday: South Africa v Argentina, Port Elizabeth, 11pm (UAE)
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- AI ambassadors such as MIT economist Simon Johnson, Monzo cofounder Tom Blomfield and Google DeepMind’s Raia Hadsell
- £10bn AI growth zone in South Wales to create 5,000 jobs
- £100m of government support for startups building AI hardware products
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Distance covered: 160km
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Distance covered: 130km
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Expo details
Expo 2020 Dubai will be the first World Expo to be held in the Middle East, Africa and South Asia
The world fair will run for six months from October 20, 2020 to April 10, 2021.
It is expected to attract 25 million visits
Some 70 per cent visitors are projected to come from outside the UAE, the largest proportion of international visitors in the 167-year history of World Expos.
More than 30,000 volunteers are required for Expo 2020
The site covers a total of 4.38 sqkm, including a 2 sqkm gated area
It is located adjacent to Al Maktoum International Airport in Dubai South
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.”
Dubai Bling season three
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Rating: 1/5
Company%C2%A0profile
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Global state-owned investor ranking by size
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United States
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China
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3.
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UAE
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Japan
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5
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Norway
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Canada
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Singapore
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Australia
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Saudi Arabia
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South Korea
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Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
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- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
FIXTURES
Monday, January 28
Iran v Japan, Hazza bin Zayed Stadium (6pm)
Tuesday, January 29
UAEv Qatar, Mohamed Bin Zayed Stadium (6pm)
Friday, February 1
Final, Zayed Sports City Stadium (6pm)
