KSA’s Acwa Power looking to raise SAR 1.8 bn from sukuk issuance

Good morning, friends. The deluge of news is showing no signs of slowing down and we have a packed issue for you with a heavy serving of finance news.

THE BIG CLIMATE STORIES- Saudi Arabia’s Acwa Power plans to raise up to SAR 1.8 bn through its second sukuk issuance — part of a wider SAR 5 bn sukuk program — after a maiden SAR 2.8 bn issuance in 2021. Elsewhere, Turkey’s EV sector is getting a financial boost from the European Bank for Reconstruction and Development and Ford is moving forward with establishing an EV battery production facility in the country.

^^ We have chapter and verse on this story and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- Central bank leaders say climate is not their purview: Some of the world’s top central bankers voiced concerns at a Stockholm conference of central bankers yesterday regarding expectations that their institutions address climate change and “other important social issues of the day” even as they work overtime to cool inflation.

Our soundbite of choice? US Federal Reserve chair Jerome Powell saying the Fed “will not be a climate policymaker.” The story is attracting coverage in the international business press: Reuters | Financial Times | Washington Post

And France’s Danone is in the hot seat, with three environmental groups announcing on Monday their intention to sue the food company over alleged failure to reduce its plastic footprint and take action under a 2017 French law that makes environmental monitoring compulsory for large French companies and their supply chains. Danone — named one of the world’s top ten plastic polluters in a December brand audit (pdf) — strongly refutes the claims. The story is being picked up by the international press: Guardian | New York Times

CORRECTION- In our first major brain fog moment of 2023, we mistakenly referred to Adnoc as KSA-based in yesterday’s issue even though the first two letters of the company acronym clearly stand for Abu Dhabi. We have amended the incorrect references on our website, and will make sure to down a shot of espresso before dispatch henceforth.

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WATCH THIS SPACE #1- Jordan kicks off EBRD’s new Paris Agreement alignment mission: Jordan’s Bank Al-Etihad received a USD 35 mn loan from the European Bank for Reconstruction and Development (EBRD) after becoming the first to sign up to the international lender’s Paris Agreement alignment methodology, according to a statement. The new methodology aims to prompt the EBRD’s 300+ partner financial institutions to implement their own individual green transition plans — with the ultimate goal of limiting global warming to 1.5°C. The EBRD began implementing a “full alignment” of its work and portfolio with the goals of the Paris Agreement as of 1 January 2023.

WATCH THIS SPACE #2- Goldman Sachs Asset Management reached final close on its USD 1.6 bn first private equity fund that will invest in climate-focused companies, it said in a statement yesterday. The Horizon Environment and Climate Solutions fund — launched in 2021 — provides “growth capital” to companies working in sectors including clean energy, sustainable transport, waste, and sustainable agriculture, the statement says. So far, the fund has poured a combined USD 1 bn in 12 investments, with each ticket size ranging between USD 80-90 mn, Goldman Sachs Asset Management’s head of sustainable investing for private markets Ken Pontarelli tells Reuters.

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CLIMATE DIPLOMACY- Italy and Tunisia are studying the requirements needed to launch an interconnection project to exchange solar-generated energy between the two countries, Italy’s ambassador to Tunisia and Tunisia’s economy and planning minister said during a meeting on Monday, Tunisie Telegraph reports.

Background: The 600 MW power line — jointly developed by Italy-headquartered transmission operator Terna and Tunisia’s grid operator STEG — will stretch over 200 km between Castelvetrano in Italy’s province of Trapani to Tunisia via the Strait of Sicily, according to a statement by Terna. The European Commission’s Connecting Europe Facility will be earmarking EUR 307 mn for the project, according to Reuters and the total investment size of the interconnector is expected to total some EUR 850 mn, Terna notes in its statement.

CIRCLE YOUR CALENDAR-

UAE renewable energy firm Masdar will host Abu Dhabi Sustainability Week from Saturday, 14 January to Saturday, 21 January. The event will gather eight presidents and prime ministers and 30k participants in a series of conferences and summits including the Atlantic Council’s Global Energy Forum, the World Future Energy Summit, Masdar’s Green Hydrogen Summit, The International Renewable Energy Agency’s Youth Forum, and the Abu Dhabi Sustainable Finance Forum.

The UAE is hosting the Atlantic Council’s Global Energy Forum on Saturday, 14 January and Sunday, 15 January in Abu Dhabi. The forum will discuss the ongoing global energy crisis and its impact on the green transition, energy security, and decarbonization.

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

Acwa Power plans sukuk issuance to shore up project financing: Tadawul-listed renewables player Acwa Power pulled the trigger on a sukuk issuance to raise up to SAR 1.8 bn (USD 479 mn), according to a disclosure to the Saudi bourse yesterday. This is the company’s second issuance — part of a wider SAR 5 bn sukuk issuance program — after a maiden SAR 2.8 bn sukuk sale in June 2021.

The details: The sharia-compliant debt instruments will be issued through private placement to institutional and qualified investors. The sukuk carry a seven-year tenor with a call option after five years subject to market conditions, the disclosure notes.

Where’s the money going? The disclosure doesn’t state which projects the sukuk are intended to finance, nor does it specify the sukuk are green. However, a bulk of Acwa Power’s projects involve renewable power and water desalination assets, so it’s reasonable to assume that funds raised through the sukuk issuance will be channeled in these areas.

Advisers: HSBC Saudi Arabia and SNB Capital are acting as joint lead managers and bookrunners on the issuance, according to the disclosure.

Acwa is expanding rapidly: Acwa Power has expanded its portfolio to 58 GW from 1 GW in under a decade, according to a recent Financial Times report. CEO Paddy Padmanathan previously told Bloomberg Asharq that the company is planning to invest as much as USD 12 bn in 2023, the outlet noted yesterday.

There’s a pipeline at home… : Among Acwa Power’s Saudi-based projects is a recently inked agreement with China’s Sungrow to build a 536 MW battery storage system in Neom. It’s formed a joint venture with Neom and US-based Air Products to develop Neom’s USD 5 bn Green Hydrogen Project. Another JV between Acwa Power and PIF subsidiary Badeel signed a power purchase agreement for a 2.06 GW solar plant in December.

… And overseas: The company signed a non-binding MoU with the Bangladesh Power Development Board (BPDB) in November to develop a 1 GW solar project in Bangladesh, following recent heavy investment in southeast Asian expansion with projects in Indonesia and Thailand. It’s also eyeing a 10 GW wind project in Egypt and renewables investment in Morocco and signed power purchase and investment agreements with the National Electric Grid of Uzbekistan for a 1.5 GW, USD 2.4 bn wind energy farm. The company is also developing a 240 MW wind farm in Azerbaijan with a reported investment of USD 300 mn.

The regional green + sustainable bond market is hot: GCC green and sustainable bond and sukuk issuances saw massive growth in volume and value last year, with some USD 8.5 bn raised from 15 issuances — a sizable increase from the USD 605 mn raised from six issuances in 2021.

MEANWHILE- The Dubai branch of the Industrial and Commercial Bank of China is planning to issue a three-year green bond, Reuters reports, citing a document it has seen. The bond issuance is expected to be worth at least USD 500 mn and could go to market as early as today, the outlet adds.

Egypt will spend USD 120 mn to bankroll a waste-to-energy project: Renergtary Prody Group Partners — a joint venture between Egypt’s National Organization of Miliuction and Green Tech Egypt — will invest some USD 120 mn to launch the planned waste-to-energy (WtE) project in the country’s Abu Rawash city, according to a cabinet statement. The plant — expected to convert some 1.2k tons of municipal solid waste per day to 30 MWh of electricity — will also be awarded the country’s golden license to expedite the plant’s establishment, the statement notes.

What exactly are these golden licenses? Egypt’s golden licenses — also known as single approval licenses — fast-track new industrial and infrastructure projects, allowing investors to obtain only one approval that covers everything from establishing the project including land allocation, building licensing, and the operation and management of the project.

WtE projects are gaining traction in Egypt: Egypt-based energy industry contractor Korra Energi inaugurated the country’s first trigeneration waste-to-energy facility late last month to repurpose waste generated by the company’s power plant and flare gas projects.

And the WtE train is picking up steam regionally: Bee’ah Recycling — a subsidiary of Emirati waste management company Bee’ah — added a new solid recovered fuel processing facility to its integrated waste management complex in Sharjah, producing some 85k tons of green fuel annually. Bee’ah also signed an MoU with US- and UK-based waste-to-energy focused tech company Chinook Sciences and Japanese gas conglomerate Air Water to form a consortium aimed at setting up a waste-to-hydrogen plant in Sharjah. Egypt’s Suez Cement is investing USD 25 mn in plans to generate some 20 MW of power from the waste heat recovery facility at its Helwan plant. Kuwait Municipality also approved a refuse-driven fuel project to power up its main cement production plant in October, and Saudi Electricity Company is reportedly planning waste energy-powered projects.

EBRD is helping Turkey to expand EV charging infrastructure: The European Bank for Reconstruction and Development (EBRD) is providing Turkey's main electricity distributor Enerjisa Enerji S.A. with a USD 110 mn loan to support an expansion of the country’s EV charging infrastructure, according to a statement.

What’s planned: Enerjisa will update its power distribution network with smart-grid applications and extend its EV charging infrastructure as part of a wider capital investment program the nation’s energy regulator has approved, the statement notes. The investment will also enable Enerjisa to grow through its subsidiary Enerjisa Customer Solutions, which offers sustainable and cutting-edge energy solutions. The upgrade and modernization will cut nearly 20k of CO2 emissions per year by reducing electricity losses and increasing renewable energy generation.

ALSO IN TURKISH EV NEWS- Ford Motors is switching partnerships on Turkish battery plant: The US car manufacturer is reportedly swapping Seoul-based battery maker Sk On Co. with LG Energy Solution Ltd. as a partner on its new Turkish battery plant, Bloomberg reports, citing sources close to the matter. While the change has not been officially announced, an agreement between the new partners is expected to be signed within weeks.

The details: The new Turkish facility is expected to come online in 2025 with an annual production capacity ranging between 30 to 45 GWh according to the original agreement between Ford, SK On, and Turkish Koc Holding, the business information service reports. No financial details have been disclosed.

What’s the story behind the switch? Sk On and Ford signed an MoU for the establishment of a new plant in Turkey last March. While the facts are yet to be confirmed, sources claim the Korean battery producer is mulling pulling out of the project citing unsatisfactory macroeconomic conditions, the newswire reported, citing Korean newspaper Dong-A Ilbo.

The US carmaker isn’t calling off all transactions with SK On: The American car maker will continue to work with the Korean outfit on additional projects including two factories in the US and increasing capacity at a third one in a bid to produce 2 mn electric vehicles annually by the end of 2026, according to Bloomberg.

Ford is ramping up investments in the EV sector: The company has pledged USD 50 bn towards EV development and production, Bloomberg reports. The automaker is stepping up the manufacture of EVs and batteries, building its first entirely new assembly factory in 50 years along with a new SK On Co. battery plant in Tennessee. Ford is also planning to establish a battery manufacturing facility in the US with Contemporary Amperex Technology Co. of China.

Meanwhile, Turkey’s EV push is growing: The country launched its first locally-produced electric car last October and plans to release five models by the end of the decade, with an SUV rolling out at the end of 3Q 2023.

Egypt’s KarmSolar secures funding for new microgrid: Egypt’s cleantech firm and electricity distributor KarmSolar has secured a EGP 83 mn (USD 3 mn) loan from HSBC for the first phase of its new Farafra solar grid in the Western Desert, according to a statement (pdf). Egypt-based debt advisory firm Ezdaher Financial Advisory consulted on the project, the statement noted.

What do we know about the Farafra solar grid project? The project will generate solar energy, store it using a battery storage system, and supplement it with diesel power where needed — all in a centralized location, operating under a usufruct agreement — and then distribute the electricity to a variety of offtakers, the statement notes. It is expected to be fully operational by 3Q 2023.

Masdar signs renewables agreement with Kyrgyzstan: UAE renewables player Masdar has signed an agreement with Kyrgyzstan's energy ministry to develop clean energy projects with a total capacity of up to 1 GW in the Central Asian country, according to a statement. No information was given on the size of Masdar’s prospective investment in the projects. Masdar first agreed to explore renewable energy prospects in Kyrgyzstan back in April 2022.

What’s in the pipeline: Masdar will kick off the agreement with the construction of a 200 MW solar PV plant set to begin operations in 2026, yesterday’s statement noted. It’s unclear whether this is the same solar plant that we reported on in mid-December when we noted that the UAE and Kyrgyzstan had signed an agreement to begin the first phase of construction, amid a slew of agreements signed between the two countries in various sectors.

What else is planned? Masdar will explore and invest in a variety of potential renewables projects including ground-mounted solar PV, floating solar PV, and hydropower, the statement notes.

This is all part of Masdar’s ambitious expansion plans: Masdar was established by the UAE’s sovereign wealth fund Mubadala, which recently sold stakes in the clean energy firm to the UAE’s state-owned Abu Dhabi National Energy Company (Taqa) and Abu Dhabi National Oil Company (Adnoc) as part of a push to grow the company both within and beyond MENA. Masdar is aiming for a renewable energy capacity of at least 100 GW by 2030 with a production quota of up to 1 mn tons of green hydrogen, and ultimately plans to expand its renewable energy portfolio to over 200 GW, it noted in December.

And its growth in Central Asia: Masdar signed a joint development agreement with Turkmenenergo State Power Corporation in November to build a 100 MW solar plant in Turkmenistan. Back in September, Masdar achieved financial close on Central Asia’s largest wind farm in Uzbekistan, boasting a capacity of 500 MW.

The South Korean government is planning to import green hydrogen from the UAE by 2027, Business Korea reports. The announcement comes ahead of South Korean president Yoon Suk Yeol’s planned visit to the UAE next Saturday to attend the World Future Energy Summit, Wam reports.

How much hydrogen are we talking about? The country is looking to source some 200k tons of green hydrogen per year from the UAE to be supplied by Korean-headquartered firms Samsung C&T and Korea Electric Power Corporation, which will build a green hydrogen at the UAE’s KIZAD Industrial Area at a cost of USD 1 bn alongside Korea Western Power, and the UAE's Petrolyn Chemie, Reuters reported in June.

South Korea’s been on a MENA green hydrogen hunt: South Korea’s Kepco and four other firms headquartered in the country signed an agreement with Saudi Arabia’s Public Investment Fund (PIF) in November worth some USD 6.5 bn to build a hydrogen and ammonia plant. Saudi Arabia’s Saudi EXIM also signed in December an MoU to export green hydrogen and ammonia to the Korea Trade Ins. Corporation (K-Sure). Saudi Aramco and Sabic Agri-Nutrients shipped the world’s first commercial load containing 25k tons of blue ammonia to South Korea and it arrived to Korean shores late in December.

Plans are expanding: China State Construction Engineering Corp (CSEC) and Korea’s SK Ecoplant are reportedly eyeing Egypt as a potential hub for green hydrogen projects. SK Ecoplant will facilitate loans for the projects and provide CSEC with green hydrogen tech.

OQ enters into a green hydrogen production agreement with Shell: Oman’s OQ signed an agreement yesterday with Oman Shell to jointly produce some 1.8 mn tons of green hydrogen in Oman following Shell’s acquisition of a 35% stake in the country’s planned Green Energy Oman project, according to the Times of Oman. The timeline and financials of the agreement have not been disclosed. Green Energy Oman will generate green hydrogen utilizing 25 GW of energy sourced from wind and solar power, according to the project’s website.