Loss and damage debate will be front-and-center in Sharm El Sheikh

Good morning, wonderful people. It’s another busy MENA climate news day, with green announcements across several sectors and a heated debate on loss and damage financing as COP27 draws ever closer. Let’s jump right in.

THE BIG CLIMATE STORY in our neighborhood- We now know more about Empower’s IPO offering next week: The Emirates Central Cooling Systems Corporation wants to offer a 10% stake next week as it gears up for its debut on the Dubai Financial Market. The district cooling firm — which is looking to raise USD 700 mn in the offering — was part of 10 state-owned firms slated for listing last November by Dubai’s government privatization program.

THE BIG CLIMATE STORY GLOBALLY? That would be COP27, it seems, given the event gets underway on 6 November.

THE COUNTDOWN TO COP (12 days to go)-

The US is in favor of a dialogue about “loss and damages,” but not so big on implementation, Bloomberg reported on Thursday, citing senior administration officials. Developing economies — including COP27 host country Egypt — are pushing for “loss and damage” financing to compensate countries that experienced major economic losses as a result of climate change. The issue gained fresh urgency after disastrous floods claimed north of 1k lives in Pakistan, caused more than USD 10 bn of damage — and displaced as many as 32 mn people.

What’s the problem? The US supports engaging in dialogue on the issue, but its negotiators are reportedly lobbying against putting any concrete funding commitments on the agenda for Sharm. In parallel, more than 100 US climate groups yesterday wrote to top US climate diplomat John Kerry to ask him to support the creation of a loss and damage fund at COP, Reuters reports.

BUT EU MINISTERS ARE DOWN WITH THE PROGRAM, having agreed yesterday to support putting climate change-driven loss and damage on the agenda in Sharm, Reuters reports. One note of caution: While the bloc said it would support talks on the subject, the purpose and focus of these discussions remain unclear, the newswire says.

There’s less and less wiggle room for wealthy countries and Big Oil on this issue as COP gets closer: Six fossil fuel companies made enough to cover the costs of climate change-induced extreme weather events in developing countries in 1H 2022, with USD 70 bn left over, a report (pdf) published yesterday by Oxfam International states. The usual rich-country argument against a loss-and-damage fund for emerging markets? That doing so would simply cost too much.

We know this will be a major theme at COP: Oxfam joins a chorus of prominent voices — including Egypt’s UN Climate Champion Mahmoud Mohieldin and the IFC’s VP of cross-cutting solutions Emmanuel Nyirinkindi, both of whom raised the issue in interviews with Enterprise Climate — who are determined to keep the conference focused on securing sustainable, long-term financing for poorer nations struggling with the effects of climate change. More than 60% of finance for climate action comes from debt instruments, and only some 12-13% of this debt-based finance is concessional, Mohieldin recently told us.

MEANWHILE- Israeli politicians will attend the global climate conference with no official backing for a verbal pledge to reach net zero by 2050, the country’s Environmental Protection Ministry said yesterday, according to the Times of Israel. As Knesset elections grow closer, the Justice Ministry ruled against passing a government decision on climate change and the Finance Ministry opposed including former Prime Minister Naftali Bennett’s net zero commitment in a climate bill earlier this year, thus backtracking from a verbal pledge made in the runup to COP26 in Glasgow. The bill instead commits the country to cutting its emissions by 85% by 2050.

AND- Egypt wants world leaders to act like grownups and put climate — not geopolitical tensions — first at COP27. That was one of the key takeaways from Egypt Foreign Minister (and COP27 President) Sameh Shoukry’s remarks with Emirati state news agency WAM earlier this week. Shoukry stressed the importance of separating international disputes from the urgency of tackling climate change concerns to avoid reaching a “point of no return.” EnterpriseAM had the full rundown yesterday.

FINALLY- Egyptian officials have reportedly canceled blue zone events on 7 November. COP27 officially gets underway on 6 November, and world leaders will be in Sharm El Sheikh 6 7 and 8 November (Monday and Tuesday) for the state-to-state negotiating track. Citing the need to maintain a high-security environment, officials have reportedly informed the UN that there will be no “blue zone” activities on the Monday; activities can go ahead as planned on Tuesday. Climate activists are not happy with the changes, according to reports in the Guardian and Reuters.

SOUND SMART- The Blue Zone includes negotiating rooms, plenary space and room for side events. It’s where state-to-state negotiations take place, requires a special badge to enter and belongs to the UN. The Green Zone belongs to Egypt as COP27 host and is where business leaders and civil society members will spend time in workshops, events and other activities. The US Department of State has a nice explainer here and the COP27 website has a breakdown here.

---

WATCH THIS SPACE #1- Fossil fuel-based hydrogen is a lot more expensive now, paving the way for green hydrogen. Surging natural gas prices have driven up the cost of hydrogen produced from fossil fuels by 70% compared to global averages prior to the Russia-Ukraine war, according to a Carbon Tracker report (pdf). Fossil fuel-generated hydrogen assets totalling USD 100 bn may be stranded by 2030 due to increasing prices, making way for a rising demand for green hydrogen to the tune of USD 73 bn. The surging demand for non fossil-hydrogen and an accelerated generation rate of the low-carbon energy source could see green hydrogen priced under USD 2 per kilogram by 2030.

This is great news for MENA, which has had its sights set on green hydrogen for some time. Just yesterday, Oman announced a USD 140 bn green hydrogen strategy to be implemented by 2050. Egypt also signed green hydrogen projects worth USD 63.8 bn, while the UAE and Saudi Arabia each dedicated more than USD 10 bn to the generation of green hydrogen.

Obligatory note of caution: What’s happening now is a gold rush. Would-be builders are running around the globe signing MoUs and letters of intent to build green hydrogen / ammonium facilities, but the trick will be seeing how many of them get financing and are built. Among the deciding factors: How many rich countries roll out production subsidies as the Biden administration recently did with the Inflation Reduction Act?

WATCH THIS SPACE #2- Ins. companies are slowly phasing out fossil fuels as their impact becomes unaffordable, Insure Our Future global campaign said Wednesday. Some 62% of reins. companies and almost 40% of ins. firms have set up coal exit policies in the past five years, according to Insure Our Future’s 2022 Scorecard on Ins., Fossil Fuels and the Climate Emergency (pdf). Some 27.5% of reins. companies and 13.7% of ins. firms are also restricting oil and gas ins. The activist group said Allianz, AXA and Axis Capital were at the top of its scorecard in terms of best coal exit policies. Insure Our Future’s assessment is based on the ins. companies’ fossil fuel underwriting and divestment policies.

---

HAPPENING TODAY-

Spanish renewables firms to visit Morocco: The Spanish Institute for Foreign Trade (ICEX) is accompanying a delegation of 10 Spanish renewable energy companies to Rabat today, according to a press release. On the Moroccan side, renewable energy companies Masen, Institut de Recherche en Energie Solaire et Energies Nouvelles (Iresen), Fenelec, and Gaia Energy will be among those welcoming ICEX and Spanish stakeholders. The event aims to establish links between the countries’ private and public renewable energy players.

Get Enterprise Climate

***
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.

***

THE DANGER ZONE-

Climate change and drought are threatening crop yields and household incomes in Iraq, according to a recent report (pdf) by the Norwegian Refugee Council based on an August survey of 1.3k households across Anbar, Basra, Dohuk, Kirkuk and Ninewa. 2022 marks the second consecutive year that fruit, vegetable, and wheat harvests have declined in Iraq on the back of record low rainfall, decreased river flows and drought conditions. Drought conditions and decreasing river levels have also limited access to potable water. The combined drought and climate change conditions are affecting the ability of households to access sufficient food, leaving them increasingly vulnerable.

---

CIRCLE YOUR CALENDAR-

Egyptian law firm Matouk Bassiouny and its German counterpart Freshfields Bruckhaus Deringer will hold a webinar on 2 November that will spotlight COP27’s potential impact on businesses globally. The online event will also focus on the challenges barring the Global South from unlocking financing options for climate adaptation projects, hoping to create a roadmap that would improve the quality and scale of climate-focused investments in Africa. Representatives from Taqa Arabia, Amethis and Enko Capital will participate as speakers. Register for the webinar here.

ADIPEC will run from 31 October to 1 November in Abu Dhabi, UAE. Some 40 ministers from around the world, including eight from MENA, will attend the event. Those include energy and oil ministers from the UAE, Kuwait, Bahrain, and Egypt. Discussions will partly focus on the transition toward carbon neutrality, a statement picked up by Zawya says. You can register as an exhibitor here, and as an attendee here.

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

Empower plans to offer 10% of its shares in an IPO: The Emirates Central Cooling Systems Corporation (Empower) is looking to pull the trigger on the initial public offering of a 10% stake on the Dubai Financial Market (DFM) next week, the company said in its intention to float (pdf) yesterday. The district cooling firm — which is looking to raise USD 700 mn from the IPO — was one of 10 state-owned firms slated for listing last November by Dubai’s government privatization program.

What’s being sold? The 1 bn ordinary shares being offered are held in aggregate by Dubai Electricity and Water Authority (DEWA) — which owns 70% of the company — and Emirates Power Investment (a Dubai Holding subsidiary). DEWA is selling 7% of its shares and Emirates Power is selling 3% in the IPO, according to the ITF.

The time frame: The company plans to price the offering and kick off its subscription period next Monday, 31 October. Subscriptions will close on 7 November for UAE retail investors and 8 November for other qualified investors, the statement notes. Empower’s shares are expected to begin trading on the DFM on 16 November, its website says.

Empower plans to pay out dividends twice a year post-IPO, flagging April and October every year as payment periods, the ITF says. It intends to pay a minimum dividend amount of AED 850 mn (almost USD 231.5 mn) per year in the two fiscal years following the IPO, spanning April 2023 to October 2024. After 2024, it plans to pay “a sustainable dividend” aligned with business growth, the statement adds. DEWA and Emirates Power were paid AED 2.9 bn (USD 790 mn) in dividends from a pre-IPO special payment. Empower borrowed USD 1.5 bn from Emirates NBD Bank for the special dividend payment ahead of the IPO, we noted yesterday.

ADVISORS- Empower appointed Merrill Lynch, Citigroup and Emirates NBD as joint global coordinators on its IPO, with our friends at EFG Hermes acting as joint bookrunner. Moelis and Emirates NBD are acting as financial advisers. Emirates NBD is the lead receiving bank for the transaction, while Abu Dhabi Islamic Bank, Ajman Bank, Commercial Bank of Dubai, Dubai Islamic Bank, Emirates Islamic Bank, First Abu Dhabi Bank, Mashreq Bank, MBank, and Sharjah Islamic Bank are receiving banks.

MENA waste management gets another push: Egypt and the UAE each added another waste management plant to their roster yesterday.

Egypt opened the doors to a solid waste recycling plant… Egypt’s environment and local development ministries inaugurated a USD 165 mn solid waste recycling plant in the country’s Dakahlia governorate, according to a cabinet statement yesterday. The plant will have a daily capacity of 640 tons. The government has so far allocated EGP 1.4 bn (USD 71.1 mn) for a waste management program in Dakahlia dedicated to reducing and repurposing waste, the statement notes.

…while the UAE’s Renov8 will invest USD 150 mn to set up a mixed plastic recycling facility in Abu Dhabi: The UAE’s trade, logistics, and industry hub Khalifa Economic Zones Abu Dhabi (KEZAD) Group signed an agreement with industrial recycling player Renov8 Polymer Industries to establish an AED 552 mn (USD 150 mn) mixed plastic waste recycling facility at KEZAD’s Polymer’s Park, according to a WAM statement yesterday. No information was given about the time frame for getting the facility up and running.

Carbon trading is also in the mix: The facility will make use of Abu Dhabi’s planned carbon trading exchange platform, which is set to be the world’s first, according to the statement. But it’s not UAE’s only one: Rebound — a subsidiary of Abu Dhabi-based International Holding Company (IHC) — also launched a global B2B digital trading platform for recycled plastics in September.

What’s Renov8? A subsidiary of UAE manufacturing firm Just Right, Renov8 offers industrial recycling solutions to global businesses. It also provides services that include plastic recycling, aluminum composite panel (cladding) manufacturing, and plastic granule production.

IN OTHER WASTE MANAGEMENT NEWS-

Imdaad and Dubal Holding eye green projects in Dubai: Dubai-based facilities management company Imdaad and investment firm Dubal Holding signed an MoU to co-invest in and develop environmentally-friendly projects in the UAE, WAM reports. Imdaad is a subsidiary of the Investment Corporation of Dubai.

Egypt’s KarmSolar secured a 10-year EGP 47 mn (USD 2.4 mn) loan for a financed solar power purchase agreement (PPA) battery storage system in Egypt from QNB Alahli, KarmSolar CEO Ahmed Zahran told Enterprise Climate. The PPA is part of phase two of KarmSolar’s solar microgrid for the Cairo 3A Poultry Farm in the Bahariya Oasis in Egypt’s Western Desert, the company said in a statement (pdf).

About the project: The second phase of the project expands the solar station’s capacity and adds a battery storage system supplied by PV power company Sungrow. The upgrade brings the project’s share of solar-generated power to 50% from 30%, the company reported.

Background: KarmSolar signed a USD 90 mn, 100 MW PPA agreement with Cairo 3A Poultry in 2019 to establish an on-site, off-grid solar station for the farm. Phase one saw the company supplying electricity to the farm through a hybrid microgrid of PV solar and diesel generators, covering 30% of the farm’s needs through renewables.

ADVISORS- Egypt-based debt advisory firm Ezdaher Financial Advisory consulted on the project.

GCF earmarks EUR 220 mn to bolster energy efficiency in buildings globally — and Morocco and Tunisia are included: The Global Climate Fund (GCF) board approved EUR 220 mn in loans and grants to fund energy efficiency in buildings, some of which will be geared towards Morocco and Tunisia, according to a French Development Agency (AFD) statement last week. The statement does not specify how much of the funding would be dedicated to the two MENA countries.

The funding package comes as part of the Program for Energy Efficiency in Buildings (PEEB Cool), implemented by German development agency GIZ in cooperation with the French Environment and Energy Management Agency (ADEME) and AFD. The aim is to reduce carbon emissions generated by construction (which accounts for 40% of global GHG emissions) and cooling, and refurbish a total of 35k buildings to be more climate resilient.

The UAE’s Circular Economy Council inaugurated Lootah Biofuels’ cooking oil reprocessing plant in Dubai Industrial City on Friday, WAM reports. The facility, which will collect used cooking oil and process it into biodiesel, will contribute 100 tons per day to the UAE’s biodiesel production. During the same meeting, the UAE’s Climate Change and Environment Ministry signed an MoU with Union Cement to begin using alternative fuels from the Emirates RDF municipal solid waste plant.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The European Investment Bank (EIB) wants to guarantee sustainable loans for Morocco’s exporting SMEs, the EIB said in a statement last week. The agreement aims to help exporting SMEs in the automotive, textile, agro-industry and agricultural sectors.
• Saudi oil giant Aramco launched a program to bolster the growth of sustainability-driven SMEs in KSA through five funds with a combined capital of USD 800 mn, according to a company statement on Thursday
• Dubai-based sustainable food packing firm Avani Eco Middle East is set to receive AED 2.5 mn in funding from the Mohammed Bin Rashid Innovation Fund, the fund said on Sunday.
• Italy will provide Egypt with a EUR 2.3 mn grant to bolster the country’s water management and upskill the sector’s employees as part of the Italian-Egyptian Water Training Program, according to a cabinet statement published yesterday.

An array of stingrays dumped on Omani shores: Much to the ire of locals and animal rights activists, hundreds of honeycomb stingrays have been ditched on Seeb beach in Muscat, the National reported on Wednesday.

The reason? Some Omani fishermen discard stingrays on the country’s beaches because the local population hasn’t developed a taste for the species, rendering them of no economic value to the fishermen. “There is no market for them because nobody buys them. So why should we waste our time putting them back into the water?” a local fisherman told the National.