Dawn of Shams is a solution and a model for UAE


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The opening today of the Shams 1 solar power plant marks the completion of a long and, in the truest sense of the word, pioneering project.

In The National today, engineers involved in the development explain how they used technological know-how and innovation to overcome obstacles of dust, sand and humidity. The stories make one marvel at the human ingenuity and persistence that brought to life an idea first mooted over 150 years ago.

Shams 1 is a remarkable achievement for the UAE. But it is also an essential one for the future. This country has been blessed with abundant hydrocarbon resources. But its population is growing and its hydrocarbon resources are - albeit slowly - diminishing.

It has long been clear that diversification is required. Increasing domestic demand for power, for desalination and all the other needs of a growing country, can in part be met via solar power, leaving more of the country's hydrocarbons to be exported at a profit.

Although Shams 1 is the largest solar energy effort in the whole of the Middle East and North Africa, it is only one stage in a much wider project. Shams 1 is part of the 2030 Vision for Abu Dhabi, which seeks, as a first step, to generate 7 per cent of the city's energy from renewable sources by 2020. But at the current output level, the capital would require 15 plants like Shams 1 to reach that target.

Fortunately Masdar, the Mubadala-owned company that owns a majority share in the Shams project, is looking at other solar-power projects, as well as windpower projects elsewhere in the world.

Mega-projects such as Shams 1 are essential to the future of the UAE. But they also herald a change in attitude about the way we use resources, a new approach that should trickle down to all of us.

Changing the way we get our energy is part and parcel of changing the size of our ecological footprint, both individually and collectively.

Weaning ourselves off hydrocarbons is part of a change that also includes reducing the amount of water we use and the amount of waste we generate. As the Shams project rises, these ideas will find themselves more openly discussed and embraced.

As more such plants are added to the deserts that surround the coastal cities, it is likely one day the UAE will be able to generate large amounts of its power from the most abundant and renewable resource of all: the sun.

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.”

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