MENA businesses want government to get proactive in setting regulations, legislation on climate

Good morning, nice people. From a new platform to trade plastic waste, EV assembly in Egypt, and the latest signal that MENA businesses want governments to get serious about climate legislation, it’s a brisk news day in our corner of the world.

THE BIG CLIMATE STORY is a mixed bag today: Omani investors are buying energy assets worth USD 1.5 bn — with a hefty carbon footprint. A consortium led by Omani private equity player Oman Investment Corporation is buying up Singapore’s Sembcorp Industries’ Indian unit. Why is Sembcorp selling? It wants to divest from that unit’s fossil fuel assets and hit its emission targets. The portfolio includes coal-fired power plants alongside a good-sized portfolio of renewables. We have more in this morning’s M&A Watch, below.

WATCH THIS SPACE- Possibly a win for climate: Egypt could sign contracts next month that would see the birth of a domestic EV assembly industry. Egyptian state-owned automaker El Nasr Automotive is reportedly expecting to sign final contracts for local electric vehicle (EV) assembly next month, if the Egyptian press is to be believed. Reports suggest El Nasr will sign the contracts with an unnamed Chinese company in mid-October. The Madbouly government has been tight-lipped about the identity of the company, but a source told Enterprise in June that El Nasr looked like it was going with BAIC Group.

Talks to get EV assembly in Egypt off the ground have been ongoing for years. El Nasr danced with auto giant Dongfeng back in 2019 only to pull out more than two years later apparently because the two sides were unable to agree on prices for imported components.

Want to read more? Check out Going Green, our weekly dive into Egypt’s green economy, in EnterpriseAM.

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HAPPENING TODAY-

Catch the Egyptian Center for Economic Studies’s carbon market webinar on Zoom at 11 am CLT (12pm KSA / 1pm UAE) today. Discussions will revolve around how Egypt and African countries can create an integrated carbon market. You can register for the event here.

THE BIG CLIMATE STORY OUTSIDE THE REGION- Are pockets of Europe flirting with a non renewable-friendly direction? First up, the UK will get a new Tory prime minister today, and it may be bad news for the fight against climate change if the Guardian is anything to go by. Liz Truss, who was elected yesterday to lead the Conservative Party and replace Boris Johnson as UK PM, will likely give the go-ahead to 130 new drilling projects in the North Sea, according to reports compiled by the Guardian. Truss’ advisors have also been in talks with oil and gas firms to discuss ways to secure energy supplies ahead of the winter season, the Times writes.

Solar may not be her favo(u)rite: Truss also seems to hold a bit of a grudge against solar energy, repeatedly bashing the renewable energy source on the campaign trail last month. In party hustings events, she trivialized solar farms as “paraphernalia” and suggested that her government could make it harder for energy producers to obtain land for new plants.“Our fields, should be full of our fantastic produce … it shouldn’t be full of solar panels,” she told a campaign event.

On the other side of the channel, the German government will enforce a windfall tax on electricity-producing companies in a bid to fund a EUR 65 bn relief package against inflation and surging energy prices, Deutsche Welle reports, referencing a speech by German Chancellor Olaf Scholz.

What does this have to do with climate? The tax is expected to squeeze the bottom lines of companies that generate energy from wind, solar, biomass, coal and nuclear energy, which have seen their electricity prices rise as Europe suffers an energy crunch, the Financial Times wrote, referencing the Chancellor’s remarks. The logic behind the tax is to provide German households with an ample amount of electricity at reduced prices, Scholz said. The package — the third of its kind since February — brings the total of Germany’s aid programmes to EUR 95 bn.

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YOU’RE READING ENTERPRISE CLIMATE, the essential regional publication for senior execs who care about the world’s most important industry. Enterprise Climate covers everything from finance and tech to regulation, products and policy across the Middle East and North Africa. In a nod to the growing geographical ambitions of companies in our corner of the world, we also include an overview of the big trends and data points in nearby countries, including Africa and southern Europe.

Enterprise Climate is published at 4am CLT / 5am Riyadh / 6am UAE Monday through Thursday by Enterprise, the folks who bring you Enterprise Egypt, your essential 6am and 3pm read on business, finance, policy and economy in Egypt and emerging markets.

Subscribe to Enterprise Climate here or reach out to us on climate@enterprisemea.com with comments, suggestions and story tips.

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THE COUNTDOWN TO COP-

Egypt will announce its new green hydrogen regs at the COP27 summit, Egyptian Electricity Ministry spokesperson Ayman Hamza told Enterprise, keeping tight-lipped about what the government has in store. The local press had reported over the weekend that Egyptera, the country’s renewables regulator, could announce a new regulatory framework governing investments in green hydrogen projects next month. Officials have held talks with an unnamed foreign advisory firm to help draft regs and model contracts that would be signed with prospective investors.

THE DANGER ZONE- Tunisian droughts are so bad, dates aren’t even growing: Prolonged droughts, rising energy costs and constant power cuts in the Kebali Oasis in southern Tunisia are gradually transforming the date-planting oasis into a barren wasteland, activists and farmers from the region tell Reuters. Exacerbating the problem is an infestation of a new pest that thrives in dry weather. “Bunches of dates are wrapped in the webbing spun by mites as they feed. It is a new pest that we have not seen before, and its cause is drought,” a local farmer told the newswire.

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CLIMATE DIPLOMACY- Oman and South Korea discuss green hydrogen: Oman’s and South Korea’s energy ministers discussed cooperation in hydrogen projects yesterday, a South Korea’s Industry and Trade Ministry said in a statement yesterday. Talks revolved around green hydrogen and the participation of Korean companies in Oman’s energy infrastructure projects.

CIRCLE YOUR CALENDAR-

US climate envoy John Kerry will be in Egypt this week for the Egypt-International Cooperation Forum (Egypt-ICF), which runs 7-9 September at Almasa Convention Center in the new administrative capital. The three-day event will bring together global policymakers, ministers, development partners and other participants ahead of COP27 to discuss climate action and green transition, food security, and others with a focus on Africa. Check the full agenda here (pdf).

The 2022 Euromoney Saudi Arabia Conference will take place in Riyadh on Wednesday, 7 September. Besides discussing Saudi Arabia’s economy in the context of the global macro-outlook, it will also host a workshop on ESG and climate change.

PSA #1- You have until 23 September to apply for the annual UNFCCC’s capacity building hub at COP27. You can apply here.

PSA #2- If you’re in Algeria, Egypt, Morocco, Palestine or Tunisia, you could be in line for a EUR 50-200k grant: Brussels-based King Baudouin Foundation will offer grants to support “viable, entrepreneurial business initiatives with a strong social impact,” the foundation said in a statement. Priority will be given to organizations that partner with private sector companies, civil society organizations, or state agencies, the statement noted. Applications are due by 31 January 2023 here.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

A group of Omani investors will acquire 100% of Sembcorp Industries’ Indian unit as the Singaporean utilities company looks to dispose of some of its high-emission assets and transition to renewables. The consortium, led by Omani private equity player Oman Investment Corporation (OIC), has signed an agreement to buy Sembcorp Energy India Limited’s (SEIL) for USD 1.47 bn, Sembcorp said in a filing (pdf) to the Singapore stock exchange yesterday, handing it almost 5 GW of power generation capacity.

Sembcorp Energy India is one of India’s largest independent power producers and has a 4.9 GW portfolio of producing and under-construction assets — the bulk of which is powered by fossil fuels. That includes 2.64 GW from two coal-fired power stations.

…but it’s also a relatively significant player in renewables: The company owns around 1.73 GW from wind and solar assets. Another 400 MW of solar capacity is under construction.

The buyers: The OIC is joining up with the Omani Defense Ministry’s pension fund and a company owned by the head of Oman’s Capital Market Authority to purchase the company via a special-purpose fund named Tanweer Infrastructure. OIC holds a 70% indirect stake in the company, the pension fund owns 20% and Dar Investment 10%.

The transaction could close sometime in mid-2023: The sale is expected to close six months after shareholders meet in November and is subject to regulatory and shareholder approvals, the company said in a separate statement.

Why the sale? Sembcorp wants to go from brown to green: Sembcorp expects the sale to reduce emissions intensity by 37%, enabling it to reach its 2025 target early. Selling the coal assets will increase renewables’ share of its energy mix to 51% from 43% currently, it said.

OIC and Sembcorp aren’t strangers: The two companies set up a joint venture firm to construct the USD 1 bn Salalah water and power plant in Oman in 2009, in which Sembcorp held a 60% stake. OIC sold some of its shares in the 2013 IPO and now owns 13% of the firm.

Metito-led consortium signs USD 1.5 bn PPP contract for sewage treatment plant: Qatar’s Public Works Authority (Ashghal) signed a QAR 5.4 bn (c. USD 1.5 bn) public private partnership (PPP) contract with a consortium led by UAE-based water management company Metito Utilities to build a sewage treatment plant near Mesaieed industrial city, Ashghal said in a statement on Sunday. This is the first drainage infrastructure project in Qatar to be implemented under a PPP framework.

In detail: The sewage treatment plant is expected to begin operating in 2026 and will serve over 306k people in its first phase, the statement notes. The consortium, which includes Qatar’s Al Attiya Motors and Trading Company and Kuwait’s Gulf Investment Corporation, will build the project under a build, operate and transfer (BOT) framework, according to a tender issued before the contract was awarded. There’s a 25-year water purchase agreement in place, and Ashghal will take over operation and maintenance of the plant after that period.

The plant’s 150k cubic meter per day (cm/d) capacity could be just the beginning: The plant is expected to expand to accommodate anticipated future need, with planned capacity of up to 600k cm/d by 2045, Ashghal’s head of treatment plants Abdulrahman Al Sulaiti is quoted as saying.

It’s all part of leveraging local and international investment to build Qatar’s private sector, Ashghal president Saad Al Muhannadi is quoted in the statement as saying. Foreign investment in the project is an estimated QAR 2.7 bn (USD 740 mn), while some 60% of the project’s fixed costs will go towards local purchases, including construction materials, equipment and building and maintenance services, he added.

Rebound launches online trading platform for recycled plastics: Rebound, a subsidiary of Abu Dhabi-based International Holding Company (IHC), launched a global B2B digital trading platform for recycled plastics, according to a report in UAE state-owned news agency WAM.

The Rebound Plastic Exchange (RPX) aims to capture some AED 56 bn (USD 15 bn) in global trade, according to a January statement from the IHC announcing the platform.

Don’t get your hopes up for plastics futures contracts just yet: RPX is, for the moment, a standard commodities trading platform with plastics being traded as bales, flakes and pellets, according to RPX’s website.

Allowing for cross-border trading in recycled plastics: Products listed on RPX will have specification sheets developed by industry experts to make it easier to sell internationally, WAM notes. These spec sheets are endorsed by plastics recycling NGO Recoup and will help develop “a universal standard for plastics to be traded on an international scale,” Recoup CEO Stuart Foster is quoted as saying.

You can register to access RPX’s trading platform here.

This won’t be the only recyclable solid waste online trading platform to hit the region: Oman’s state-owned solid waste management firm Be’ah is developing a waste trading platform, we noted yesterday. The platform will see an online auction and allow for trading in recyclable solid waste. Be’ah’s hasn’t yet set a launch date.

The ESG priorities of MENA businesses differ from those of regional governments –PwC survey: While businesses in our corner of the world have been getting better at adopting ESG goals and targets, there is a clear disconnect between what businesses and national governments in the region are prioritizing on the environment front, according to a survey (pdf) by PricewaterhouseCoopers (PwC) published earlier this year.

Private sector companies need a guiding hand on ESG: The survey, which looks at to what extent ESG strategies are embedded in the region’s private sector firms and where the challenges are in rolling them out, also showed that while climate change and covid have been key in mainstreaming ESG, most companies are still at an early-stage of planning and implementation and need more specific regulation to underpin their efforts.

This disconnect becomes evident when looking at things like water: Although USD bns are being invested in the region every year to build desalination capacity, addressing water scarcity challenges didn’t rank among the top ten ESG priorities for the survey respondents, for example. When it comes to companies’ environmental priorities alone, only 27% of respondents mentioned water scarcity and 16% listed biodiversity, though these factor heavily in national environmental policy frameworks.

MENA companies also named challenges in rolling out effective ESG strategies: Among the biggest challenges cited by survey respondents were workforce/culture issues (which 45% of respondents reported), covid-19 (36%), the lack of a well-defined company ESG strategy and the lack of effective ROI measurement (both of which were reported by 31%). Other challenges include a lack of shareholder demand for ESG policies, lack of leadership buy-in and regional economic uncertainty.

Businesses say they want to take more action on ESG, but need more government support: Some 86% of large companies surveyed said more regulation would accelerate the implementation of their ESG strategies. Having the right signals, policies and regulations from governments would prompt more action from businesses to help achieve national ESG commitments, the survey found.

Particularly for environmental issues: Some 54% of survey respondents said they would welcome policies targeting sustainable procurement to spur environmentally-friendly production. Companies also want detailed policies and implementation plans for national net-zero plans — including energy efficiency, renewable energy investment, measuring carbon emissions, and water conservation.

There are, however, some positives: Waste and climate change top the environmental priorities for regional businesses, the report tells us. Looking ahead to the next 12 months, 54% of all surveyed companies plan to focus on waste, 54% on climate change, 42% on air pollution, 27% on water, 16% on biodiversity, and 15% on other unnamed topics. Only 4% of the firms surveyed had no plans to focus on any environmental issues within 12 months.

Sustainability is also becoming more important as a factor in consumer purchasing decisions, according to PwC’s most recent Global Consumer Index Survey. Some 53% of regional respondents say they always or frequently buy eco-friendly or sustainable products, compared to a global average of 42%.

Companies focused on sustainability will have the edge over competitors in attracting eco-conscious buyers, the report notes.

Who took part: Participants included executives from businesses headquartered in nine MENA countries as well as the US, France, Greece and Germany. Over 70% of respondents were C-suite level execs at MENA-headquartered companies, with 50% of all surveyed companies large (over USD 100 mn in annual revenue) and 50% small (less than USD 100 mn). Participants were in the manufacturing, retail and consumer, financial services, tech and energy sectors.

Saudi-based agritech startup Red Sea Farms is partnering with Saudi Arabian Airlines to provide the national flag carrier with sustainably sourced foods, a company statement details.

MEANWHILE- Green hydrogen developer CPH2 grants license for its products to be manufactured and sold in the GCC: UK green hydrogen manufacturer CPH2 signed an agreement with a subsidiary of the UK’s Kenera, allowing it to manufacture and sell CPH2 products across the Middle East, according to a CPH2 statement issued yesterday. Under the agreement, CPH2 has granted Kenera an exclusive license to manufacture and sell its products in the region — in countries including Oman, Saudi Arabia, the UAE, Qatar, Iraq and Kuwait, the statement notes.

Background: CPH2 has developed an electrolyzer that doesn’t use membranes, which it claims is a faster, more reliable and more cost-effective form of producing green hydrogen than using other kinds of electrolyzers. Kenera is a “significant investor” in CPH2, according to the statement.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Saudi Arabia’s King Saud bin Abdulaziz University for Health Sciences signed a five-year operation and maintenance contract for its sewage treatment plant with Alkhorayef Water and Power Technologies, according to a Saudi Exchange disclosure.
• The Kuwait Fund for Arab Economic Development provided USD 2.5 mn to the United Nations Development Programmeto supply healthcare facilities in Yemen with clean energy, a UNDP statement tells us.

Cause for shell-ebration: An endangered species of aquatic turtles hatched over 200 eggs near the shorelines of Emirates Global Aluminium’s (EGA) Al Taweelah site in Abu Dhabi, WAM said in a statement. Hawksbill tortoises are seafaring critters that migrate to the UAE once a year to lay their eggs on Emirati coastlines. EGA’s sustainability team closely monitors the turtles to minimize their risk of being devoured by predators during their nesting season. They also conduct daily inspections to make sure that environmental waste washed up on their shores doesn’t disturb hawksbills. Hawksbills turtles live an average of 30 to 50 years, and females typically lay 100-150 eggs per year.