UAE’s Alcazar Energy raises USD 336.6 mn for its sustainable infrastructure fund

Good morning, ladies and gentlemen. It’s day nine of the summit — and COP27 President Sameh Shoukry reminded delegates yesterday that there’s still a lot of work to be done.

THE BIG CLIMATE STORY- Frustrations are rising as COP27 enters day nine with little consensus on how to deliver real progress on agreements and pledges made in previous years. Shoukry told the climate summit yesterday he wanted a comprehensive climate agreement with meaningful outcomes by Friday — and reminded state and other delegates that “time is not on our side and the world is watching, let us come together and deliver now,” Reuters reports.

There are just four days left of COP27: That’s just four days for negotiators from developed and developing nations to come to agree on a way forward for emissions reduction and climate finance. COP27 President Sameh Shoukry reiterated his plea for a “meaningful” climate agreement. “It is now up to us all here to rise to the occasion and respond to the demands and calls from our communities around the world. We will accept no less than meaningful outcomes at COP27,” he told the summit yesterday. “Time is not on our side and the world is watching. Let us come together and deliver now.”

“‘This could be the COP where we lose 1.5°C,” warned COP26 chief Alok Sharma, as “anxiety grows over a push from some countries to weaken the text,” the Guardian reports.

REMEMBER- The key issues at play (loss and damage, emission reduction targets etc.) are being negotiated by government delegations over the next week so we’ll likely have to wait until 18 November for a final agreement to come out of COP27.

MEANWHILE- It’s Energy Day at COP27, with sessions on renewable energy, energy efficiency, and energy transformation focusing on a just transition in the energy sector. Green hydrogen is expected to step into the spotlight as a potential energy source for the future. High-level officials and energy transition champions will kick off the day with a series of opening remarks setting the stage for the “energy trilemma” the world is facing.

WATCH THIS SPACE #1- KSA’s Public Investment Fund has signed up as anchor investor for global asset manager BlackRock’s USD 620 bn (Saudi-focused) MENA infrastructure fund, according to a statement. BlackRock will set up a “dedicated infrastructure investment team” in Riyadh if the non-binding MoU becomes reality.

What does the BlackRock fund like? Energy, power, utilities, water, environment, transportation, telecommunications and social infrastructure. While the fund will invest across the region, Saudi will be its center of gravity.

WATCH THIS SPACE #2- Masdar, Hassan Allam Utilities and Infinity are lining up a USD 2 bn, 2 GW green hydrogen plant in an agreement they’re expected to sign with the government of Egypt today.

UP NEXT: Biodiversity day is tomorrow, while Thursday is solutions day.

Detailed schedule: Download as a pdf here or check out the website here.

COP27 app for attendees: App Store and the Google Play Store.

From Sharm to the Grand Egyptian Museum — the business community will move the talk about a green transition ahead at the Enterprise Climate X Forum, which takes place at the Grand Egyptian Museum on Tuesday, 6 December 2022. We can think of no better place to discuss the world’s most important industry than in a world-class museum that stands as a testament to our nation’s ability to persevere (and innovate) for seven millennia. And it seems you can’t either, judging by the responses and statements of support we’ve been getting.

What’s the Enterprise Climate X Forum? It’s our first industry-specific conference, where CEOs, top execs, investors, bankers and development finance folks have the chance to talk about how to build a climate-centered business — and how to make sure your business continues to have access to the funds it needs to grow. You can learn more on our conference website here.

Some of the biggest names in business and finance are on board — are you? If you’re a C-suite exec, business owner, climate professional, DFI staff, investor or banker, please email us at climatexrsvp@enterprisemea.com to signal your interest, letting us know your name, title and where you work.

HAPPENING TODAY-

The Hawkamah annual conference kicks off today in Dubai, addressing governance from the perspective of investors and covering expectations and interaction with boards as well as the role of regulators and companies in preparing for IPOs to attract the right investors.

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SMART POLICY- The UAE’s Ras al Khaimah is rolling out a program to help manufacturers cut emissions and boost competitiveness. Early adopters include RAK Ceramics, Stevin Rock, RAK Rock. The program, unveiled at an industry event, targets companies making glass, ceramics, and other building materials.

DATA POINT- Green hydrogen could earn Africa USD 120 bn in GDP by 2050 and create 3.7 mn jobs, according to a report (pdf) by Masdar and the Abu Dhabi Sustainability Week. The report outlines that 10% of the global clean fuel’s production could come from Africa — which has potential to yield 30 to 60 mn tons annually — and most can be available for export after covering the continent’s demand.

SIGN OF THE TIMES? ESG funds saw net outflows of USD 108 bn in the first nine months of the year amid fears of recession, Reuters reports citing data from Refinitiv. “Investors pulled money out of responsible investment funds … faster, relative to their size, than broader market funds for all but two months of 2022 through September,” the newswire reports.

Why is this happening? As concerns over a global economic downturn continue, rising fossil fuel prices for instance are making some investors fall back to more lucrative — not-so-climate-friendly — funds. There’s also a continuing backlash in some quarters of business and the finance industry against the mania for ESG reporting and ESG funds (background on that in Kiplinger | CNBC | Bloomberg | Wall Street Journal)

PSA #1- Climate tech startups can now get support for “scalability and growth” from PwC’s Middle East office, which PwC Middle East partner said will help “identify the top disruptive technologies addressing the biggest climate challenges facing our region that would benefit from investment and scale up.” You can learn more about the program here.

PSA #2- Recycling app Recapp is moving from home recycling into business, saying it wants businesses in the Emirates to use its new app. The Veolia-owned app is now targeting retail stores, offices, schools, sport facilities, hotels and restaurants, among others. Businesses can sign up for one-time pickups or ask for weekly collection of recycling boxes.

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THE DANGER ZONE #1- The window to meet the 1.5°C warming threshold by 2030 laid out in the Paris Agreement is abruptly closing, according to the annual Global Carbon Budget report, the authors said in a press release (pdf). If greenhouse gas emissions continue at the current rate, there’s a 50% chance that the world will breach the longstanding limit in nine years, the report says. To reach net-zero by 2050, emissions need to fall by as much as they did thanks to covid lockdowns every year.

THE DANGER ZONE #2- Emissions levels exceed 2021 forecasts amid a push for gas as countries continue to source their energy needs from gas in the wake of the Russia-Ukraine war, according to a Climate Action Tracker (CAT) report.

THE DANGER ZONE #3- Some 56 historical sites in Africa are under threat of erosion due to rising sea levels and flooding, according to a study published in scientific journal Nature Climate Change. That number is projected to increase to 198 archaeological sites by 2050, the study notes.

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CIRCLE YOUR CALENDAR-

Saudi Arabia’s Education Ministry will host the Global Conference on Sustainable Partnerships on Wednesday, 23 November to Thursday, 24 November in Riyadh, bringing together ministers and senior officials from the private and public sectors.

UAE will host The Big 5 Global Construction Impact Summit on Wednesday, 7 December at the Dubai World Trade Centre, bringing more than 2k exhibitors from 60 countries, as well as regional and global construction industry leaders together to discuss ways to meet local and global net zero and waste reduction targets.

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

UAE infrastructure investor Alcazar Energy reached a USD 336.6 mn first close for its second sustainable infrastructure fund, according to a company statement. The Alcazar Energy Partners II fund plans to invest in developing a portfolio of 2 GW worth of renewable energy projects across emerging markets, which will power up to 1 mn homes across developing countries offsetting some 3.2 mn tons of CO2 equivalent, the statement notes.

Who’s in? EBRD. Limited partners include the European Bank for Reconstruction and Development (EBRD), which kicked in USD 80 mn to the first close. And a whole bunch of DFIs: Other LPs include the European Investment Bank, the International Finance Corporation, the Asian Infrastructure Investment Bank, the German Development Institution, and the Dutch Entrepreneurial Development Bank, among others.

The fund has a target to raise USD 500 mn, with a “hard cap” of USD 650 mn. Its investments will help mobilize c. USD 2 bn in foreign direct investment and create some 15k construction jobs in EM.

Background: Alcazar Energy Partners I — the first fund by the UAE’s Alcazar Energy — was launched in 2014 and raised a total of USD 240 mn to invest in equity for solar and wind energy projects with up to USD 700 mn poured into solar and wind farms in Egypt and Jordan, the statement says. The first fund’s portfolio was acquired in 2021 by Chinese energy firm China Three Gorges Corporation. Alcazar Energy inked an agreement to invest in a green hydrogen-based ammonia facility with a total production capacity of 230k tons annually with Egypt’s Suez Canal Economic Zone back in August.

Here’s what a global agreement on loss and damage (read: climate finance for the developing world) could look like: The UN published a draft text (pdf) for a potential pact on loss and damage financing, giving us a first glimpse of what a global agreement on climate financing could look like.

Loss and damage funding could involve:

• A new UNFCCC “fit-for-purpose” fund;
• An entity to operate the fund and strengthen existing operating entities;
• Public finance, including grants, and multi-sourced grant-based funding;
• Development finance and debt relief;
• Reform of multilateral development banks and international financial institutions;
• Humanitarian assistance.

This is still very much a work in progress and could change before being adopted at the end of the summit, Reuters reports. We won’t even begin to highlight all the areas that are going to require far more specific, concrete commitments if poorer nations are ever going to acquire the financial resources necessary to decarbonize their economies — let alone adapt to the damage that has (and will) be done.

Landing an agreement won’t be easy: Wealthy nations have long refused to discuss the subject of compensation and fought tooth and nail to try and get it off the agenda for the summit. US climate envoy John Kerry put it bluntly last week, telling the conference that “it’s just not happening.”

Progress in week one was slow, to say the least: Representatives from developing countries have spoken in harsh terms about the lack of progress in negotiations over financing, with one calling it a “betrayal of vulnerable communities” and nations. “All of the crunch issues have gotten logjammed,” another said. “You’re going into the second [week] with most of the big negotiating issues unresolved.”

Egypt thinks the summit is salvageable: Egypt wants to get all countries on board with a “cover text” by Friday, COP27 President Sameh Shoukry told the summit yesterday. This will set out agreed targets and commitments and provide a framework for negotiations to continue at next year’s COP28.

MEANWHILE- The G7 will provide (a little bit) climate disaster relief: G7 countries yesterday announced a EUR 210 mn “Global Shield” initiative that will pay out ins. to countries affected by climate-related disasters. The initiative will be backed by EUR 170 mn from Germany and EUR 40 mn from other countries and when it is set up in January 2023 will provide money to Pakistan, Ghana, Fiji and Senegal.

But some are calling it a distraction from the wider conversation on loss and damage and questioned its focus on ins: Harjeet Singh, head of global political strategy at the Climate Action Network, called it “yet another distraction strategy … to delay progress on loss and damage.” Barbados climate envoy said they are “not yet persuaded” on the ins. elements of the plan. “Using insurance is a method in which the victim pays, just in installments in the beginning,” he said, calling for grants to be issued instead.

MORE FUNDS FOR GREEN INFRASTRUCTURE-

AU, AfDB and Africa50 launch new alliance: The African Union, African Development Bank Group and Africa50 launched the Alliance for Green Infrastructure in Africa (AGIA), saying that committing some USD 500 mn in funding will help deliver another USD 10 bn in capital for green infrastructure projects on the continent, according to a statement.

Who’s on board? The European Investment Bank, EBRD, French Development Agency and others.

The details: AGIA intends to raise up to USD 500 mn to offer early-stage project development capital — with the aim to drumming up to USD 10 bn worth of green infrastructure investment on the continent, the statement says. Investment will be mobilized through co-investments, co-financing, risk mitigation and blended finance from alliance members.

Where will the funding go? AGIA is focusing on the energy, transport, water and sanitation sectors, as well as health, broadband, urban and rural infrastructure. Both large-scale projects — like huge solar or green hydrogen plants — and smaller initiatives like cleantech, energy storage or e-mobility projects will be eligible for support.

IN COP POLICY NEWS-

Egypt’s COP27 Presidency launched the Aware (Action for water adaptation and resilience) initiative yesterday in partnership with the World Meteorological Organization in a bid to address inclusive cooperation to water related challenges and solutions, according to a statement (pdf). The program aims to develop policies that will ultimately help improve and preserve access to water as communities adapt to water scarcity. Its focus will include support for sustainable wastewater management, sanitation policies and strategies, and improve early warning systems for extreme weather events.

DECARBONIZING THE GULF OF SUEZ-

Egypt to work on decarbonizing the Gulf of Suez: The Egyptian Natural Gas Holding Company (EGAS) signed an MoU with US conglomerate General Electric and subsea robotics firm Seasplit Technologies to explore developing 1.5 GW of offshore wind power in the Gulf of Suez, according to a joint statement. The facilities will be used to power offshore oil and gas facilities.

Climate change is set to cost Egypt some 2-6% of its GDP by 2060, further exacerbating the country’s development challenges, according to a report (pdf) from the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). This figure is based on the impact climate change is expected to have on “water resources, tourism revenue, coastal resources, agriculture and human health,” according to the report.

Egypt’s biggest challenges? Impending water scarcity, a rapidly-increasing population and the current strong relationship between economic growth and rising emissions are all areas of particular concern, the report notes.

Sobering stats show the road ahead without reform: Without increasing agricultural water efficiency, “water scarcity will increase net virtual water imports by 15% by 2030, reaching 45% in drought periods,” the report says. And though Egypt is on track to meet emissions-reduction targets in its Nationally Determined Contribution (NDC) commitments by 2030, projected annual power sector emissions are later expected to grow — reaching 121 metric tons (MT) of CO2 equivalent in 2050, up from a current estimated 78 MT, unless policies change.

An alternative vision: Low-carbon growth and increased global competitiveness. The report identifies key short- and medium-term policies and investments to mitigate climate change impact and improve resource allocation efficiency and global competitiveness.

Egypt’s taken important policy steps to address climate change… The country’s overall climate change policy has shifted to a long-term strategy linked to its aspirations to be a regional green leader, the report notes. Updating its NDCs, issuing green bonds, and launching its National Climate Change Strategy 2050 (NCCS) and Nexus of Water, Food and Energy (NWFE) Program were all key developments, it notes.

…But lags on implementation: Climate action has so far been fragmented, regulation needs to be more comprehensive and applicable — rather than a series of decrees — and governance, institutional and human capacity needs to be built, the report says.

Key action recommendations outlined in the report:

1- Build resilience to prepare for future uncertainty — especially stemming from water shortages: Climate change resilience needs to be built through targeted strategies, focusing on coastal areas, ports and logistics, cities and infrastructure, and transport. Overall risk can be managed through better information sharing, early warning systems, population behavior change, and resource allocation. In rural areas, investing in storage infrastructure for strategic grains will be essential. Drought management and other information systems should be made use of. Investment and innovation in “key adaptation sectors” — water, agriculture, urban development and environmental management — needs to be streamlined. All of this needs to be underpinned by effective policy.

2- Move to a “low-carbon trajectory” to enhance export competitiveness and avoid carbon-intensive lock-in… Egypt should move full steam ahead towards decarbonization, particularly in energy, transport and industry. Renewable energy should be scaled up and integrated further into the national grid, which could “reduce exposure to external price shocks, shift domestic use of surplus gas production to value chains with higher value added, and potentially expand exports.” Egypt’s “significant” potential in blue hydrogen, and carbon capture utilization and storage (CCUS) should also be leveraged.

…through targeted investment and regulatory reform: Transitioning to a low-carbon economy requires more private investment, underpinned by more scope for competition in the energy sector and regulatory reforms, such as setting decarbonization and carbon-intensity targets, measurement standards, and reporting requirements. It would also require better strategic use of public funds.

3- Reduce energy inefficiency in electricity and industry: Egypt needs to remove or reduce the “sizable explicit subsidies” in the electricity sector (standing at some USD 8 bn) and diesel for transport (around USD 4 bn). “This USD 12 bn total (about 3% of GDP) would alone finance most of the annualized adaptation investment needs for cities,” the report says. Egypt should also remove non-tariff barriers — including price controls and technical barriers to trade — which affect renewable energy, waste management and recycling product imports.

4- Bring the private sector on board, strengthen green finance, and use policy instruments to reduce investment needs: Egypt could boost green public investment by ensuring better coordination between public sector bodies through public-private partnerships, and using more innovative green financial instruments. More private investment could be spurred by “leveling the playing field for private sector participation” and ensuring more transparency in emissions reporting. Various policy instruments should be used to help reduce investment needs, including carbon pricing, regulation and taxation. And financing sources — including taxes, debts and reprioritization — should be balanced.

The UAE’s Taqa Group reported AED 2.2 bn in net income in 3Q 2022, up 59% y-o-y, according to its management discussion and analysis presentation (pdf). The company saw AED 13.7 bn in gross revenues during the quarter, rising 14.3% y-o-y. On a nine-month basis, Taqa’s bottom line rose 53% y-o-y to AED 6.5 bn on AED 38.7 bn in revenues, up 14% y-o-y, according to its earnings release. Oil and gas was “a significant contributor to bottom line growth,” the earnings release noted.

Taqa Group has also committed to a 2030 ESG strategy that will see a 25% reduction of scope 1 and scope 2 emissions across the Group, “including a 33% reduction of UAE portfolio emissions compared to the 2019 baseline,” it added. Scope 1 and scope 2 emissions are defined by the GHG Protocol Corporate Standard (pdf) as “direct emissions from owned or controlled sources” and “indirect emissions from the generation of purchased energy.”

Morocco, Belgium ink agreement on renewables: Morocco and Belgium will collaborate on a project for the production and storage of solar thermal energy (STE) from renewable sources, Morocco World News reports. The facility will harness the thermal energy produced from Morocco’s 580 MW Noor Ouarzazate solar energy farm and transform it into electricity to offset carbon emissions, the news outlet notes. STE converts radiant solar energy into heat to be repurposed for power generation, according to research published in Science Direct.

The EU is earmarking EUR 8 mn annually for more sustainable fishing in the Mediterranean, according to a statement. The EU and a number of its Mediterranean neighbors agreed on five multi-annual management plans to make fishing more sustainable in the basin. The measures proposed include “[managing] and [controlling] fisheries, aquaculture and the protection of sensitive habitats.”

KSA and Indonesia explore hydrogen and ammonia value chain: Saudi-based energy company Aramco signed an agreement with Jakarta-headquartered oil company Pertamina to individually conduct feasibility studies on the creation of a hydrogen and ammonia value chain in Indonesia, according to a statement. Both firms will also work on developing a carbon capture, storage and utilization facility in Pertamina’s existing plants. The statement does not disclose whether the ammonia referenced will be green or blue.

Step into the future of the planet through art: Egyptian-Lebanese artist Bahia Shehab partnered with art studio Fine Acts for an art installation dubbed “Heaven and Hell in the Anthropocene” where COP27 attendees could envision two different climate change outcome scenarios based on their climate action choices, according to a statement. Attendees answered a few questions on what they would be willing to do to mitigate climate change, and were sent to either the “heaven” or “hell” room based on their answers. The dark hell room’s temperature was hot and smelled like decomposing fruits and hospital rooms, while the bright heaven room’s weather was around 24°C and smelled like fresh blossoms, engulfed with natural sounds, the Washington Post reports. The aim was to make participants see how their daily actions can affect climate change.

The good news? Shehab sent 537 individuals to “hell” and 969 to “heaven.”