Saudi Arabia’s inaugural 400MW wind project has received four bids with the kingdom likely to award the scheme late June as the world’s largest oil exporter incorporates more renewable into its grid to free up crude for export.
Acwa Power of Saudi Arabia, France’s EDF Energies Nouvelles, Italy’s Enel Green Power and France's Engie are the four bidders on the planned scheme at Dumat Al Jandal, in the northern Al Jouf region, according to a statement from the Saudi energy ministry’s Renewable Energy Project Development Office.
The bids will remain sealed until the opening bid ceremony, the statement said. Sources close to the bid process told The National that the wind project is expected to be awarded in late June.
___________
Read more:
More renewable projects in the pipeline for GCC countries in 2018
Saudi Arabia shortlists bidders for first solar power project
___________
Saudi Arabia, which largely burns oil to generate power, has set ambitious targets to add 9.5 Gigawatts of renewables by 2023, as it looks to sell more of its crude to export markets. The Saudi energy ministry’s renewables office is expected to tender 3.25GW of solar and 800MW of wind capacity this year alone.
Paddy Padmanathan, chief executive at Saudi renewables developer Acwa Power, said last month that the kingdom would break ground on the wind project this year.
"The wind project should not only be awarded this year, it should go to construction this year. I expect it to be awarded and in financial close this year,” he said in Dubai at the time.
Mr Padmanathan, whose company won the kingdom’s first 300MW solar photovoltaic project earlier this year, said Saudi Arabia would likely tender the capacities in “11 renewables tenders” - eight for PV and two for wind.
The kingdom’s upcoming wind project was likely a good combination of a bankable and low-cost scheme and is in line with the global trend towards hybrid projects that combine both solar and wind, said Cornelius Matthes, board member at Middle East Solar Industry Association.
"Saudi Arabia has very good wind spots. The average wind speed is of course crucial for getting lower costs of electricity. Wind tends to be blowing stronger when there’s no sun, so in the night for example,” said Mr Matthes.
“Wind and solar and intermittent sources are perfectly complimenting existing generation, which is oil and gas fired in Saudi Arabia."
Saudi Arabia last month signed a $200bn deal to develop the world’s largest solar power development project.
The scheme is expected to have 200GW of solar power capacity and will be developed in collaboration with Japan’s SoftBank.
The Public Investment Fund, the kingdom's sovereign wealth fund, has committed to invest as much as $45bn in Softbank's $100bn Vision Fund.
The planned scheme comes amid Saudi Arabia’s plans to develop a $500bn sustainable city called Neom straddling the Egyptian and Jordanian borders.
Saudi Arabia is set to break ground on its first ever solar plant later this year.
The $302 million facility at Sakaka will be developed on the basis of an independent power producer model and is backed by a 25-year power purchase agreement with the Saudi Power Procurement Company.
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.”
