Could this be the week green bonds in MENA take off?

Good morning, wonderful people, and we’re glad you’re joining us in what is shaping up to be another interesting week for the green economy in MENA.

THE BIG CLIMATE STORY in our corner of the world: Could this be the week green bonds in really take off in MENA? It looks possible, if recent announcements are anything to go by.

First up, Abu Dhabi Commercial Bank, which announced that its upcoming USD 500 mn green bond issuance — its first — was 3.8x oversubscribed. It’s a first sign of significant investor appetite for the asset class. The bonds will go on sale this Wednesday.

Cue Saudi: Shortly after ADCB’s announcement, Reuters reported that Saudi’s sovereign wealth fund is looking to go to market with its maiden green bond issuance as early as this week.

Why this matters: We need green finance — and lots of it — across emerging markets to finance both mitigation (trying to slow the pace at which the planet is warming) and adaptation (figuring out how to ensure our cities stay liveable, that homes are safe, that businesses can operate) in the decades to come. Rich countries have promised to make USD 100 bn in climate finance available to developing economies by 2035. Our friend Mahmoud Mohieldin, the UN climate champion for Egypt, says the real number is in the tns, not bns.

^^ We have more on this story and more in this morning’s news well, below.

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Last week, the buzz was coming from the Egypt-International Cooperation Forum (Egypt-ICF), which wrapped on Friday. Authorities privately positioned it as a “test run” for some of the ideas and infrastructure that will back COP27.

The three-day event saw high-level talks, proposals and even some climate finance pledges, including a pledge of over USD 1 bn in financing from the EBRD. The final two days saw Egypt’s International Cooperation Minister Rania Al Mashat give a glimpse into its guidebook for “fair climate finance” set to be launched during COP27, proposals for how to tackle spiraling green borrowing costs — and a robust defense of African nations’ gas production and export ambitions despite emissions reductions targets. We have more on those outcomes in the news well below.

MEANWHILE- Saudi Arabia’s Finance Minister Mohamed Al Jadaan reiterated the kingdom’s commitment to invest SAR 700 (USD 186 bn) bn in its green economy, according to the Saudi Gazette. Speaking at a conference in KSA last week, Al Jadaan said investment in the green economy and the drive to spur npn-oil growth are moving at an “accelerated pace.” The Kingdom’s non-oil economy grew 5.4% in 2Q 2022. Saudi had committed SAR 700 bn in green economy investments through to 2030 as part of the Saudi Green Initiative, which launched last October.

HAPPENING TODAY-

UN Climate Change Champion for Egypt Mahmoud Mohieldin will be addressing the American Chamber of Commerce in Egypt today at 3 PM CLT. You can register to attend the event online here.

The Environment and development forum enters its second day in Cairo, Egypt. The event — organized by the Arab Water Council — is positioning itself on the “road to COP27” and tackles key topics including food and water security, sustainable development, environmental conservation, and sustainable transportation. The event runs through Tuesday.

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SIGN OF THE TIMES- Global oil and gas exploration hit new lows this year: Oil and gas exploration activity has significantly slowed down this year, with the number of exploration licenses, leases, and amount of land being tendered for exploration falling to new lows, according to research by energy consultancy Rystad Energy. The amount of land awarded for exploration has fallen to a 20-year low to 320k sqm between January and August. Globally, the number of lease rounds dropped to 21, down half from the 42 rounds held during the first eight months of 2021. Rystad is projecting 44 lease rounds this year (the lowest number since 2000) compared with 58 last year.

How are we looking in our neck of the woods? Licensed acreage in Africa shrank 70% y-o-y to 46k sqm in Egypt, Morocco, Angola and Zimbabwe.

What’s driving the contraction? Rystad thinks the slowdown is largely because of the lingering impact of the covid-19 pandemic, which sent oil prices below zero, promoting oil companies to sharply cut exploration and governments to cancel tender processes. Meanwhile, some governments are “pausing or halting leases and encouraging companies to wrap up exploration activity within already awarded blocks,” a trend it says could accelerate as “governments are less eager to invest in fossil fuel production and instead look ahead to a net zero future.”

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THE BIG CLIMATE STORY OUTSIDE THE REGION-

The world may have already passed five dangerous tipping points and could be on the precipice of multiple other “disastrous” ones, several news outlets write, referring to a study published late last week. The report found evidence for 16 tipping points — where passing a particular temperature threshold automatically triggers unstoppable change in a climate system, the Guardian reports. Five of these may have already been passed thanks to the 1.1°C of global heating humanity has already caused. At 1.5°C — the threshold at which signatories to the 2015 Paris Agreement had hoped to limit global heating — another five tipping points could be passed, including the loss of almost all mountain glaciers. The final six tipping points require global heating of at least 2°C to be triggered, the study’s authors say. (New York Times | Bloomberg)

MEANWHILE- New UK Prime Minister Liz Truss plans to re-examine the country’s net zero by 2050 policy “in a way that is pro-business and pro-growth,” she said in a statement to parliament. Truss’ vision aims to ultimately provide the UK with energy security and become an energy exporter by 2040 rather than depending on “malign actors.” She wants to ramp up sources of domestic energy, including North Sea oil and gas production, and award over 100 new exploration licenses.

She’s not dismissing renewables: “We will speed up our deployment of all clean and renewable technologies including hydrogen, solar, carbon capture and storage and wind,” she said. The aim is to not have electricity prices set by marginal gas prices. Also, Great British Nuclear — a government body to bring forward nuclear projects — will be launched later this month to ensure that 25% of the UK's electricity generation comes from nuclear sources, she revealed.

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CLIMATE DIPLOMACY- Northern Ireland will be cooperating with Saudi Arabia to divert waste from landfills on a regional and global level, an executive at Invest Northern Ireland (INI) told Asharq Al-Awsat. INI — Northern Ireland’s economic development agency — will expand work with the kingdom in the fields of waste-to-energy and waste management.

CIRCLE YOUR CALENDAR-

The Egyptian Center for Economic Studies will host its a seminar tomorrow on Zoom headlined “early warning systems for natural disasters.” The virtual gathering aims to address Africa’s need for an integrated early warning system for natural disasters. You can register for the event here.

Also tomorrow: The two-day South Sudan Oil and Power Conference is also scheduled to take place in Juba, South Sudan. Check out the event’s website here to register as a speaker, attendee or a sponsor.

The UN Economic and Social Commission for Western Asia is hosting its Towards COP27: Arab regional forum on climate finance on 15 September in Beirut. The forum will explore the climate finance needs of Arab countries to ensure water, energy and food security, while showcasing projects that can accelerate climate action

The Wetex and Dubai solar show will run 27-29 September at the Dubai World Trade Center.

Dubai will host World Green Economy Summit on 28-29 September. The summit wants to provide a platform to build consensus around the potential of technologies, policies and youth that could drive the green economy transformation.

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

Abu Dhabi Commercial Bank (ADCB) has raised USD 500 mn in its first-ever green bond issuance, it said in a statement (pdf) on Thursday. The bonds will be issued this Wednesday, 14 September, the bank said. Strong investor appetite allowed ADCB to lock in better pricing on the issuance than its initial guidance, Reuters reports.

How significant was the demand? The green bond issuance drew more than USD 1.9 bn in orders and was 3.8x oversubscribed, the bank said. The issuance drew a mix of regional and international investors, with one source telling Reuters that the sale had “a very strong following from European accounts.” They added that orders surpassed the USD 1 bn mark after only 90 minutes.

Where’s the money’s going? Proceeds will go towards financing or refinancing green loans eligible under ADCB's green bond framework (pdf), which the lender released earlier this month. Projects eligible for green loans include green building projects, sustainable water treatment initiatives, clean transportation projects, and “pollution prevention initiatives,” the statement said. The bank plans on allocating AED 35 bn (USD 9.5 bn) to green finance by 2030 and separately aims to reach net-zero emissions and cutting financed emissions under to the government’s emissions goals.

Advisers: Barclays and ING were joint sustainability structuring advisers, according to Reuters. ADCB, BofA Securities, JPMorgan, Mizuho and SMBC Nikko were joint lead managers and book runners.

Why this matters: The transaction could open the green bond market for other GCC issuers. In the midst of global market turmoil, a successful issuance from the GCC — and a green one at that — isn’t very ‘2022.’ Issuance volumes in the GCC have plummeted 80% so far this year due to market volatility and rising interest rates. Saudi Arabia and Qatar have both floated the possibility of issuing green bonds in recent months but are yet to pull the trigger amid continued turbulence in the markets.

WILL KSA ALSO ISSUE GREEN BONDS THIS WEEK?

Saudi Arabia’s Public Investment Fund (PIF) could go out with its inaugural green bond offering as early as this week, sources told Reuters on Friday, a day after ADCB’s announcement. The PIF, which hopes to make bns of USD from the sale, has been monitoring the market for months to find “a window” in which to pull the trigger on the issuance, sources said.

It’s still a wait and see situation: The sources noted that the issuance could happen in October, depending on market conditions.

Who’s leading on the issuance? Probably banks that have lent to PIF over the past few years, Reuters speculates, name-checking our friends at HSBC alongside Bank of America, BNP Paribas, Citi, Credit Agricole, JPMorgan, Mizuho, MUFG, Standard Chartered and SMBC.

Background: PIF had released its own green financing framework (pdf) in February ahead of a potential green bond issuance. Projects it plans to fund with the proceeds, include renewable energy projects, green building initiatives, and clean transport projects.

More details on EBRD clean energy funding: The European Bank for Reconstruction and Development (EBRD) will provide USD 300 mn in funding to Egypt to help it decommission 5 GW of gas-fired power plants from 2023, Heike Harmgart, the bank’s managing director for the Southern and Eastern Mediterranean, told Reuters. The money will be spent on stabilizing the country’s electricity grid, adding battery storage, upgrading local supply chains for renewables, and retraining workers, she said.

This is part of the bank’s USD 1.3 bn funding pledge announced last week, which includes USD 1 bn in financing for renewable energy projects. This would account for roughly one tenth of the private funding Egypt needs to add 10 GW of renewables capacity by 2028, Harmgart said.

ALSO FROM THE EBRD-

Money for EVs in Egypt: The EBRD is also providing a EUR 10 mn loan to our friends at Egyptian auto player Abou Ghaly Motors to fund the purchase of 250 electric vehicles for its taxi fleet, it said in a separate statement. Around EUR 3 mn of that funding will come from the UK’s Foreign, Commonwealth and Development Office. The company will use the money to electrify its London Cab fleet, which are used to provide taxi services as well as airport transfers in Cairo, Sharm El Sheikh and Hurghada.

AND- Banque Misr green on-lending loan confirmed: The lender confirmed last week that it would go ahead with the USD 100 mn loan to Egyptian state bank Banque Misr approved in January. The financing will be on-lent to local SMEs looking to invest in climate mitigation and adaptation technologies and services, the bank said.

African ministers are pushing back on efforts for full and speedy divestment of fossil fuels energy sources, in large part due to climate financing pledges not being fulfilled, according to a communique from a climate conference in Cairo last week cited by Reuters. The document stressed “the need to avoid approaches that encourage abrupt disinvestments from fossil fuels, as this will… threaten Africa's development.” “If we are not getting reasonably-priced finance to develop gas, we are denying the citizens in our countries the [chance] to attain basic development,” Nigerian Finance Minister Zainab Ahmed was quoted as saying.

…And for good reason: Africa faces a climate financing gap of about USD 108 bn each year, Kevin Chika Urama, chief economist at the African Development Bank, said during the forum. “Climate finance structure today is actually biased against climate-vulnerable countries. The more vulnerable you are the less climate finance you receive,” he said. The continent receives less than 5.5% of global climate financing despite contributing less to greenhouse gas emissions than most developed countries, Egypt’s International Cooperation Minister Rania Al Mashat said.

Debt levels are reaching unsustainable levels: Developing countries with USD-denominated debt have had a tough few years due to the pandemic but things have gotten significantly worse this year as rising US interest rates and a surging greenback raise borrowing costs further. A record number of countries are now at risk of defaulting on their debt. “This is keeping us up at night — how to decrease the cost of borrowing,” Reuters quoted Egypt’s Deputy Finance Minister Sherine El Sharkawy as saying.

POSSIBLE SOLUTIONS-

A little more help from friends abroad: The European Investment Bank (EIB) pledged to provide long-term climate financing to the continent and to Egypt, the International Cooperation Ministry said.

And the use of debt swaps: The statement from African ministers noted that the creation of a “sustainable sovereign debt hub”and debt-for-nature swaps could reduce borrowing costs for developing nations.

Kuwait has finished preparing the executive regulations for electric vehicle (EV) charging stations, the country’s Electricity, Water and Renewable Energy Minister Ali Al Moussa told state media outlet Kuna on Saturday. The regs will lay out zones and facilities where EV charging stations will be placed, Moussa said. These include government and commercial buildings. Details on the regulations are scarce and the statement does not note when the new document will be issued.

Background:. The ministry has been looking into setting up infrastructure — including charging networks — to encourage widespread EV adoption in Kuwait for several years. Kuwait’s Electricity Ministry had formed a committee back in June to begin working on the regs.

Lamprell inks USD 200+ mn Scottish wind farm contract: UAE-headquartered energy construction firm Lamprell has signed a contract worth more than USD 200 mn to supply turbine components to Scotland’s Moray West offshore wind farm, it said in a statement (pdf) on Thursday. Lamprell will provide 60 wind turbine generator transition pieces — reinforced parts of the wind turbine support structures — and two transition pieces for Moray West’s two offshore substations, the statement said.

About the Moray West wind farm: The Moray West wind farm will consist of 60, 14.7-MW turbines, giving it a total capacity of 882 MW. It aims to be fully operational in 2024-2025. The wind farm is principally owned by Spain’s EDP Renewables (EDPR) and France’s Engie, with a small minority stake held by Lithuania’s UAB Ignitis Renewables. The project is being developed by Ocean Winds, a 50-50 joint venture between EDPR and Engie.

About Lamprell: Lamprell’s renewables arm “focuses on foundation fabrication and other services to offshore wind projects,” according to its website. Its primary facilities are in the UAE’s Hamriyah but the group also has operations in Saudi Arabia through a joint venture agreement.

SOUND SMART- Lamprell is in play: The company’s board agreed this summer to be taken over by a Saudi consortium that includes Blofeld Investment Management and Al Gihaz Holding (pdf) and has “strongly encouraged” shareholders to accept the offer before the company is delisted. Lamprell is listed on the London Stock Exchange; its share price is down 75% year-to-date.

Morocco’s Agriculture Ministry issued a tender for a MAD 2.5 bn (USD 233 mn) wind-powered desalination plant in the Wadi Al Dahab province in the far south of the country, according to a ministry statement on Friday. The project is part of a wider desert reclamation project that would help irrigate 5.2k hectares of land. The plant is expected to have an annual capacity of 30 mn cubic meters of water per year, and is hoped would produce around 415k tons per annum of produce.

Scatec and Fortescue are kicking the tires on 12.2 GW worth of projects in Egypt: Egypt’s President Abdel Fattah El Sisi discussed potential 12.2 GW of clean energy projects with Norwegian renewable energy provider Scatec and Australian green energy provider Fortescue Future Industries (FFI), according to two statements (here and here). Scatec is looking at a 3 GW wind power project, while FFI is eyeing the production of 9.2 GW of renewable energy.

MEANWHILE- Bechtel-led coalition to study unified power system of Egypt’s Idku Energy Hub: Shell Egypt, the Egyptian Natural Gas Holding Company and Malaysia’s state oil company Petronas commissioned US engineering company Bechtel to study merging the power systems of a gas field and LNG export terminal in Egypt’s northern Idku, which if implemented, would reduce the plant’s emissions, according to a statement by Bechtel. The study, which will be conducted by Bechtel, Enppi and Petrojet, and financed by our friends at HSBC, is expected to be completed within the year.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• General Motors’ Cadillac is looking to launch its first electric vehicle in Saudi Arabia in 1H 2023, a company representative told Arab News.
• Bahrain’s Oil Ministry signed an MoU with the Bahrain Institute of Banking and Finance (BIBF) to cooperate on promoting sustainable development and achieving climate security, according to a BIBF statement.
• Morocco is set to double the number of electric vehicles (EVs) it produces to 100k per annum within 2-3 years, Morocco's Industry and Trade Minister told MENA-focused news outlet Asharq Business.

Our friends at OCI have kicked off the construction of a blue ammonia facility in Texas with an annual capacity of 1.1 mn tonnes, the company said in a statement (pdf) on Thursday. The company expects to double its production by 1Q2025. The facility’s location in the US Gulf will facilitate exports of clean ammonia to markets in Europe and Asia. The recent US climate bill made this project attractive for the company, OCI executive chairman Nassef Sawiris said.

US Climate Bill? What’s that, you say? Check out our explainer on it and its impact here.

The world’s first close-to-zero-emissions ferry, French company La Méridionale’s Piana, launched in Marseille last week, Euronews reports. The ferry’s engines have been equipped with particle filters that cut air pollution, capturing 99% of sulfur oxides and eliminating 99.9% of fine and ultrafine particles — the most dangerous for human health — in what’s being hailed as a first for maritime transport, according to French news station RFI. It reduces emissions to “practically zero,” Euronews adds. La Méridionale runs passenger and freight lines from Marseille to Morocco and Corsica.

The catch? It still creates lots of waste and it’s expensive: Though no emissions are being pumped into the atmosphere, the Piana will still produce tons of waste that will then need to be buried, according to Euronews. Getting her off the ground (or onto the water) was also pricey — costing an estimated EUR 15 mn.