Saudi Arabia's Public Investment Fund completed the acquisition of a 30 per cent stake in district cooling company Saudi Tabreed as part of its efforts to diversify the kingdom's economy and boost its investments in energy efficiency solutions.
The investment supports “PIF’s efforts to grow and develop the local utilities and low-carbon sectors”, the fund said on Sunday.
The financial terms of the deal were not disclosed.
Saudi Tabreed currently manages 779,000 tonnes of refrigeration through contracts with major companies in the kingdom. This includes Saudi Aramco’s Dhahran district cooling plant, the Jabal Omar district cooling plant in Makkah, the district cooling scheme at King Khalid International Airport in Riyadh, and a centralised cooling plant at the Amaad Business Park in Dhahran.
Saudi Tabreed also serves the Red Sea project.
“Our investment in Saudi Tabreed will support the achievement of PIF’s economic diversification goals, especially in light of the anticipated growth in Saudi Arabia’s district cooling market,” said Yazeed Al Humied, deputy governor and head of Mena investments at PIF.
“The investment is also fully aligned with PIF’s strategy to enable promising sectors in the country, and supports Saudi Arabia’s transition to sustainable and more efficient sources of energy.”
The sovereign wealth fund is at the heart of the Saudi Vision 2030 initiative to diversify the kingdom’s economy and reduce its reliance on hydrocarbons.
Under a five-year strategy announced in 2021, the PIF aims to more than double the value of its assets under management to $1.07 trillion and commit $40 billion annually to develop Saudi Arabia's economy until 2025.
PIF has created 10 new sectors, set up more than 30 new companies, created 331,000 jobs in Saudi Arabia and more than tripled its assets in the past few years.
As part of its strategy to develop 70 per cent of Saudi Arabia’s renewable energy by 2030, it is focusing on investments in the low carbon sector including electric vehicles and solar energy projects.
PIF has major investments in renewable energy companies such as Acwa Power, the Sudair and Al Shuaibah Solar Energy projects, and in the development of electric vehicles through investments in Lucid Motors, Ceer and E1.
District cooling is recognised as one of the most energy-efficient cooling solutions, due to its ability to conserve natural resources, making a major contribution to the reduction of greenhouse gases, PIF said.
Saudi Tabreed offers “highly efficient solutions that drive reductions in power consumption and the costs of operation and maintenance, as well as encouraging alternatives to traditional air conditioning systems”, it added.
“PIF’s investment further enhances our position as a market leader in Saudi Arabia,” said Mohammed Abunayyan, chairman of Saudi Tabreed.
“With added credibility and stronger financial performance, being part of the PIF portfolio significantly expands our ability to support the country’s energy transition and sustainability targets. We are committed to working together as we move forward in our mission to enhance Saudi Arabia’s urban development.”
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Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
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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.
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“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.
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