Windmills operated by Saudi's Acwa Power in Tangier, Morocco. In 2021, the Riyadh utility developer achieved financial closes of five projects in Saudi Arabia, South Africa and Uzbekistan. Reuters
Windmills operated by Saudi's Acwa Power in Tangier, Morocco. In 2021, the Riyadh utility developer achieved financial closes of five projects in Saudi Arabia, South Africa and Uzbekistan. Reuters
Windmills operated by Saudi's Acwa Power in Tangier, Morocco. In 2021, the Riyadh utility developer achieved financial closes of five projects in Saudi Arabia, South Africa and Uzbekistan. Reuters
Windmills operated by Saudi's Acwa Power in Tangier, Morocco. In 2021, the Riyadh utility developer achieved financial closes of five projects in Saudi Arabia, South Africa and Uzbekistan. Reuters

Business

Energy

Acwa Power net profit slides in 2021

Company's operating income for the year rose 12.5 per cent to $560m

Mary Sophia
Mary Sophia

March 16, 2022

  • English
  • Arabic

Riyadh-based utility developer Acwa Power's net profit slid 17.5 per cent in 2021, mainly owing to its recognition of some share-based payments related to its initial public offering and an impairment loss.

Net profit after zakat and tax for the 12-month period fell to 743.9 million Saudi riyals ($198.2m), the company said in a regulatory filing on Wednesday to the Tadawul stock exchange, where its shares are traded.

The drop in profit was due to the company's “recognition of share-based payments expense related to its IPO; … the long-term incentive plan expense; an increase in zakat and tax charge; a net reduction in share in net results of the equity accounted investees largely on account of accelerated depreciation in two oil-fired assets in Saudi Arabia; and an impairment loss”, the company said.

The company's operating income for the year rose 12.5 per cent to 2.1 billion riyals.

“With a landmark IPO; an inaugural Sukuk issuance; several capital recycling transactions including refinancing of project finance facilities and solid steps in the decarbonisation of our fleet, including the addition of five new large-scale renewable projects into our portfolio of assets in advanced development, 2021 marked another inflection point in Acwa Power’s business,” said Paddy Padmanathan, chief executive and vice chairman of Acwa Power.

Acwa Power raised $1.2bn from its IPO last year, making it one of the biggest listings in the energy space after Saudi Aramco's record IPO on the Tadawul in 2019, which raised a record $29.4bn.

The developer plays a pivotal role in diversifying Saudi Arabia's energy sources through its investments in renewable projects. The world's largest oil exporter plans to add gas and renewables capacity equating to one million barrels of oil per day by 2030.

Saudi Arabia's sovereign wealth fund, the Public Investment Fund, is the biggest shareholder in the company, with a 50 per cent stake.

Acwa Power has seven other stakeholders, including the Saudi Public Pension Agency.

In 2021, the Riyadh utility developer achieved financial closes of five projects in Saudi Arabia, South Africa and Uzbekistan, including 1.3bn senior debt facilities for the Red Sea multi-utilities project in the kingdom.

“Looking ahead, we have a solid and diversified cash flow base with steady projected growth on account of a visible pipeline of power and water projects, as well as a large hydrogen market that Acwa Power is well placed to convert into a fair share of business growth in the coming years,” said Kashif Rana, chief financial officer and acting chief portfolio management officer of Acwa Power.

The company has 64 projects in operation, construction or advanced development in 12 countries. These projects have a value of 251.7bn riyals, with capacity to generate 42.7 gigawatts of electricity and produce 6.4 million cubic metres per day of desalinated water.

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.”

How to wear a kandura

Dos

  • Wear the right fabric for the right season and occasion 
  • Always ask for the dress code if you don’t know
  • Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work 
  • Wear 100 per cent cotton under the kandura as most fabrics are polyester

Don’ts 

  • Wear hamdania for work, always wear a ghutra and agal 
  • Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
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Treaty of Peace in Perpetuity Agreed Upon by the Chiefs of the Arabian Coast on Behalf of Themselves, Their Heirs and Successors Under the Mediation of the Resident of the Persian Gulf, 1853
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We, whose seals are hereunto affixed, Sheikh Sultan bin Suggar, Chief of Rassool-Kheimah, Sheikh Saeed bin Tahnoon, Chief of Aboo Dhebbee, Sheikh Saeed bin Buyte, Chief of Debay, Sheikh Hamid bin Rashed, Chief of Ejman, Sheikh Abdoola bin Rashed, Chief of Umm-ool-Keiweyn, having experienced for a series of years the benefits and advantages resulting from a maritime truce contracted amongst ourselves under the mediation of the Resident in the Persian Gulf and renewed from time to time up to the present period, and being fully impressed, therefore, with a sense of evil consequence formerly arising, from the prosecution of our feuds at sea, whereby our subjects and dependants were prevented from carrying on the pearl fishery in security, and were exposed to interruption and molestation when passing on their lawful occasions, accordingly, we, as aforesaid have determined, for ourselves, our heirs and successors, to conclude together a lasting and inviolable peace from this time forth in perpetuity.

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Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.

While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.

While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar. 

Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.

Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.

Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities. 

Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong. 

Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.

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