Actis seeks Middle East investment deals amid renewables and hydrogen push

Investment arm of $97bn General Atlantic evaluating four transactions that could be closed next year, Actis chairman says

Actis took a 50 per cent stake in Emirates District Cooling at an equity valuation of $653 million in 2022. Photo: Actis

Actis, the sustainable investment arm of $97 billion growth equity company General Atlantic, is evaluating several deals in the Middle East, amid the region’s push for green energy and global hydrogen ambitions, the company's chairman said.

The pipeline of potential investment deals is growing for Actis in the region, but how many the company will close, “that's the question”, Torbjorn Caesar, who is also senior partner of Actis, told The National.

“We are very active here and we're looking at deals in the region – power generation and distribution, district cooling and distributed generation, meaning solar rooftop type [assets] … we have more in the pipeline in these sectors, and we like them a lot,” he said.

"There are four active deals that we're looking at right now”, which the company expects to close next year, he added. He did not reveal the size or the investment value of the potential deals.

Actis, which was acquired by General Atlantic this year to create a global investment platform, has already invested in the Gulf region's renewable energy and district cooling assets. It has also dipped into the budding hydrogen production sector with a large-scale project in Oman.

The company invests in structural themes that support long-term, equitable growth in defensive, critical infrastructure across energy transition, digitalisation and supply chain transformation. Its energy fund invests in building renewable, power generation, elective distribution and transmission assets.

Through its real estate fund, Actis invests in data centres, warehouses and industrial parks, primarily in Asia, while its infrastructure fund seeks opportunities in existing, yielding operating assets that the company holds for a minimum of 10 years.

Renewables boost

There is significant growth potential for Actis's energy sector investments in the region. Its energy fund has a global pipeline of investment projects, with an equity value of $33 billion, from which it can “pick and choose the best deals and a part of that pipeline is here in the region”, Mr Caesar said. “Going forward … I would think that we'll probably have some 40 per cent in Asia, 40 per cent in Latin America and 20 per cent in this region and Eastern Europe.”

Large global investors choosing to come to the Middle East is an endorsement for regional economies, indicating the opportunities are “truly the best deals on the global basis”, he added. “That basically underlines the fact that you are attractive enough for the global money.”

The broader Middle East region is set to receive $75.63 billion of investment in renewable energy projects through to 2030, global energy sector trade body Energy Industries Council said in a September report.

These investments will be spread over 116 renewable energy projects that are scheduled to come on stream between 2025 and 2030, spanning solar power, onshore wind, hydro, hydrogen production, carbon capture utilisation and storage, geothermal energy, and battery and energy storage systems.

Globally, investment in renewable energy must triple to $1.5 trillion annually by 2030 to meet the global goal of tripling renewables. Despite record spending of $570 billion last year, current national plans are set to deliver only half of the required renewable power growth, the Abu Dhabi-based International Renewable Energy Agency said in a report in October.

Potential for hydrogen investments

Actis is among several global private equity companies seeking to invest in renewable energy and infrastructure initiatives, as well as the fast-developing hydrogen sector in the Middle East. Ardian, the $169 billion French private equity company, is also evaluating co-investments in green hydrogen projects with Abu Dhabi’s clean energy company Masdar, while it is also exploring a tie up for joint deals in the sector with Saudi Arabia’s Public Investment Fund.

Ardian expects to announce its first investment with Masdar next year, Francois-Aissa Touazi, senior managing director and member of Ardian’s executive committee, told The National in October.

The UAE and Saudi Arabia – the two biggest Arab economies – as well as Oman and other Gulf states, have ambitions to become global suppliers and trading hubs of hydrogen. The region, home to a third of the world’s proven oil reserves, is already investing heavily to boost its renewable energy sources, essential to produce clean hydrogen.

Saudi Arabia, Opec’s top oil producer, has started building an $8.4 billion green hydrogen plant in its futuristic Neom city. The plant, one of the few large-scale facilities around the world to enter the construction phase, is expected to produce up to 600 tonnes of carbon-free hydrogen a day in the form of green ammonia by the end of 2026.

The UAE, which updated its Energy Strategy 2050 and laid out the National Hydrogen Strategy in June last year, plans to become one of the top 10 producers of green hydrogen by 2031, hitting a production target of 1.4 million tonnes a year.

Oman is also pursuing aggressive green hydrogen plans. The sultanate aims to produce at least one million tonnes of renewable hydrogen a year by 2030, before increasing capacity to 3.75 million tonnes by 2040. By 2050, Oman aims to have a green hydrogen capacity of 8.5 million tonnes, greater than Europe's current hydrogen demand of about eight million tonnes, government data shows.

In April, Hydrogen Oman (Hydrom), a government entity driving the nation’s green hydrogen strategy, awarded the consortium of Actis and Fortescue rights to develop, build, own and operate a green hydrogen project in the sultanate.

The project, currently in the feasibility stage, is expected to involve construction of up to 4.5 gigawatts of wind and solar renewable energy resources that will power electrolysers with the potential to produce up to 200,000 tonnes of green hydrogen every year. Under the current plan, this is expected to be sold to local industrial off takers, as well as processed into derivatives such as green ammonia for exports, Actis said at the time.

Mr Caesar said the overall value of its project in Oman would be in “multiples of billions” and the company wanted to be there “so that we can dial up the investments when the market takes off”. The pace of the development will be dependent on the commercially viable pricing, as well as the eventual offtake of hydrogen. “It's slightly early days, but I think it will come," he said. “We have enough land to build something very, very large, and we want to scale it."

Importance of Middle East

The region remains a vital part of the company’s growth plans as Actis raises a sizeable amount of funding from regional investors. Capital from the region is "significant" and probably in the range of 15 per cent to 20 per cent, in terms of the company's global fundraising, Mr Caesar said. “I would say that the US is the largest [pool of capital], Asia second, and then Europe and the Middle East.”

The company could also expand its existing investment in the region. Actis agreed to acquire a controlling stake in Dubai-based renewable energy developer Yellow Door Energy in July 2022. In October that year, Yellow Door raised $400 million in a new funding round led by Actis for expansion into new markets.

Also in 2022, Actis bought a 50 per cent stake in sustainable district cooling services provider Emicool from Dubai Investments at an equity valuation of $653 million. Actis plans to help Emicool expand operations across the Middle East.

While the investment in Yellow Door is “not very large now”, Actis could put “many hundreds of million dollars behind it”, in terms of growth capital, Mr Caesar said. “Similar is the case with Emicool [Emirates District Cooling]. There can be some growth stories there.”

Actis also expects a significant increase in the demand for digital infrastructure and data centres in the wake of advancements in artificial intelligence that will create more opportunities for global investors. "With data centres comes also the need for green energy so there is a synergy between our energy and data centre deals," Mr Caesar said.