Middle East is ‘Promised Land’ for renewable energy investment

The Middle East tripled renewable energy investment last year despite fewer energy dollars being spent globally, with industry insiders characterising the region as a hot spot for green investment.

The International Energy Agency (IEA) released a report on Wednesday that showed energy investment globally reached US$1.8 trillion last year, down 8 per cent from $2tn in 2014. Investments in renewables made up about 17 per cent of that figure, the highest source of power investment.

But as less money is funnelled into the energy sector overall, Mena as a whole has markedly gained speed in renewables over the past 12 to 18 months, according to David Charlier, a partner based in Dubai at law firm Ashurst.

The firm, which was awarded an advisory position on Dubai’s newest solar project, said that the growth in the region’s renewable energy sector has resulted in more inquiries from clients spanning from governments to developers and financiers. “The proportion of our utilities sector work which relates to renewable energy has grown from around 20 per cent five years ago to well over 50 per cent now,” said Mr Charlier.

This can be seen in the movements made by the UAE in both Abu Dhabi and Dubai, but also with other GCC countries such as Kuwait procuring the Kabd waste to energy project and Saudi Arabia’s recent renewable energy commitments. Mr Charlier pointed to Jordan and Morocco actively expanding both wind and solar plans, and while Egypt is facing currency issues, some projects are still moving ahead.

For ata renewables of Spain, the region has taken on a whole new meaning. Belen Gallego, head of business development at ata, said that the company – which currently has 17 gigawatts of projects under its belt – had been watching this region for a while. “Much has been said over the years and a lot of promises made, but it seemed like one of those markets that took a long time to solidify,” she said. “It seems that now in the past couple of years things are getting built,” characterising the region as a hot spot for green investment.

Ata is waiting for a couple of projects to materialise and once that happens, it will make moves to open an office in the UAE. Ms Gallego said that this could happen as soon as the start of next year.

The IEA said that outside Asia, non-OECD countries in Africa, Latin America and the Middle East accounted for only 8 per cent of renewable energy investment last year. However, it is important to note that these areas have some of the world’s lowest global power purchase prices, which means less money is needed for investment.

In June, Dubai beat world records again with the lowest prices of solar energy at 2.99 US cents per kilowatt hour (kWh) – cheaper than the International Renewable Energy Agency’s calculation of power generation via natural gas at 5 cents. Chile came in over a month later, announcing solar power at 2.91 cents per kWh.

lgraves@thenational.ae

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COMPANY PROFILE

Company name: Letstango.com

Started: June 2013

Founder: Alex Tchablakian

Based: Dubai

Industry: e-commerce

Initial investment: Dh10 million

Investors: Self-funded

Total customers: 300,000 unique customers every month

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What are NFTs?

Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.

You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”

However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.

This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”

This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.

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Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

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Profile

Company: Justmop.com

Date started: December 2015

Founders: Kerem Kuyucu and Cagatay Ozcan

Sector: Technology and home services

Based: Jumeirah Lake Towers, Dubai

Size: 55 employees and 100,000 cleaning requests a month

Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.

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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.

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.”

Day 1, Abu Dhabi Test: At a glance

Moment of the day Dimuth Karunaratne had batted with plenty of pluck, and no little skill, in getting to within seven runs of a first-day century. Then, while he ran what he thought was a comfortable single to mid-on, his batting partner Dinesh Chandimal opted to stay at home. The opener was run out by the length of the pitch.

Stat of the day - 1 One six was hit on Day 1. The boundary was only breached 18 times in total over the course of the 90 overs. When it did arrive, the lone six was a thing of beauty, as Niroshan Dickwella effortlessly clipped Mohammed Amir over the square-leg boundary.

The verdict Three wickets down at lunch, on a featherbed wicket having won the toss, and Sri Lanka’s fragile confidence must have been waning. Then Karunaratne and Chandimal's alliance of precisely 100 gave them a foothold in the match. Dickwella’s free-spirited strokeplay meant the Sri Lankans were handily placed at 227 for four at the close.

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