Saudi’s Islamic Development Bank earmarks USD 403 mn for Egypt + Central Asia

Good morning, ladies and gents. It’s a busy start to the week with a lot of ground to cover, so let’s dive right in.

THE BIG CLIMATE STORY- Saudi Arabia’s Islamic Development Bank will provide c. USD 403 mn for three projects in Egypt, Kyrgyzstan, and Tajikistan with a bulk of the financing going towards Egypt’s 660 km first phase of the Sokhna-Alexandria electric high-speed rail line.

^^We have all the details on this story and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- US unveils strict EV tax credit rules: The US Treasury Department laid out subsidy criteria for the USD 7.5k tax credits of the Inflation Reduction Act (IRA) on Friday — aimed at lowering consumer costs and strengthening US manufacturing and supply chains — that will leave most automakers ineligible for the IRA’s full EV subsidy. The new guidance — which will come into effect on 18 April — stipulates that 50% of net EV battery components’ value and 40% of rare earth values be sourced in the US or from freetrade partners to qualify for the full USD 7.5k subsidy. The US will up its target to source EV minerals domestically or from freetrade allies 10% each year, eventually doubling the quota by 2027 to 80%. Automakers including Tesla — which uses Chinese batteries — have already begun informing their customers their models would not qualify for the full tax credits, and that their lineups would consequently be affected. The full list of EVs eligible for the tax credits is due to be published in coming weeks.

What does this mean for us? It could pave the way for minerals exports from the region: The subsidy criteria for the tax credits give room for battery minerals sourced from US freetrade partners including Bahrain, Jordan, Morocco, and Oman, according to the US Treasury statement.

The story made headlines in the international press over the weekend: New York Times | Bloomberg | Financial Times | Reuters | Associated Press

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OVER IN COPLAND– Could we see a loss and damage fund by November? The landmark loss and damage fund agreed during COP27 could be finalized and set in place by the time COP28 takes place in the UAE in November, Egypt’s lead climate negotiator Amb. Mohamed Nasr said Thursday, according to Reuters. His statements came during a press briefing after the conclusion of the first meeting of the COP transitional committee in Luxor meant to iron out details related to the fund. The committee will meet again on 24-27 May, 29 August-1 September, and 17-20 October, with an additional two workshops planned on 29 and 30 April in Bonn and 22-23 July in Bangkok.

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WATCH THIS SPACE #1- EU angles for a higher share of renewable energy use by 2030: The EU is aiming to raise renewables’ share of its energy mix to 42.5% by 2030 — up from a current 32% — with the potential to reach 45% after the bloc signed a provisional agreement for more ambitious climate action last Thursday, Reuters reports. The agreement breaks down targets for the different sectors, with the transport sector expected to reach a 29% share of renewable energy and the industrial sector reaching a 42% renewable energy share by 2030. The agreement is yet to be approved by the EU Parliament and countries to become law, the newswire notes. The 27 EU member states currently face major discrepancies between their renewables consumption, with Sweden for example leading with a 63% renewables share, compared with the Netherlands, where renewables make up less than 13% of its energy mix.

This could translate to big regional hydrogen exports: Some European nations are expected to turn to MENA and the GCC in a bid to secure green and blue hydrogen imports to fulfill the EU’s 2030 renewable energy targets, an extensive study conducted by Deloitte Belgium Energy for the EU’s Clean Hydrogen Partnership found. The study sees Belgium, Netherlands, Denmark, and North of Germany relying on imports from Morocco, Egypt, Algeria, Oman, Saudi Arabia, and Qatar to cover between 40% and 80% of total hydrogen consumption.

Some are already in play: Several preliminary agreements for green hydrogen have been signed between a number of MENA countries and European counterparts. Oman signed agreements with companies from Belgium, the Netherlands, the UK, Japan, Singapore, and Germany last month for the establishment of green hydrogen production plants in the country. Egypt also signed a spate of agreements last year for the manufacture of green hydrogen and its derivatives, including one with Germany’s DAI. Similarly, Qatar is also going big on hydrogen production, with QatarEnergy’s renewables arm signing agreements for a USD 1 bn blue ammonia plant, which Germany’s ThyssenKrupp AG is helping build. Morocco is also joining the green hydrogen spree in the region, with the country receiving EUR 38 mn from Germany to finance its first green hydrogen plant.

Saudi Arabia in particular has big EU export targets: KSA’s Acwa Power signed an MoU with Austrian utilities firm Verbund in January to explore the establishment of green hydrogen plants in MENA, with an eye on exporting the green fuels to Austria and Central Europe. 100% of the green hydrogen produced in the USD 8.5 bn mega green hydrogen plant in Neom will be also available for export, with project co-developer US-based Air Products looking to earmark a sizable portion of Neom’s green fuels for Germany. Greece has also been exploring green hydrogen imports from Saudi’s Neom, with plans to lay a cable connecting Saudi to Europe.

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WATCH THIS SPACE #2- PIF aims to quadruple its portfolio by 2030: KSA’s sovereign wealth fund the Public Investment Fund (PIF) aims to raise the value of its assets under management to between USD 2-3 tn by 2030, SPA reported, citing statements by PIF governor Yasir Al Rumayyan during the The Global Priority Summit in Miami on Friday. PIF currently manages assets worth USD 650 bn, with plans to raise it to USD 1 tn by the end of 2025.

And renewables are a big draw: The PIF is the world’s biggest investor in renewable energy and green hydrogen under the country’s target of net zero emissions by 2050, Al Rumayyan said. He added that Saudi Arabia was the least energy emitting country globally with 10.5 grams of carbon in comparison with other energy producers who release up to 25 kg of carbon.

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WATCH THIS SPACE #3- Months later, the UK is still mulling over Morocco’s Xlinks project: The UK government is studying “without commitment” the viability of the USD 18 bn 10.5 GW Morocco-UK Xlinks renewables project, according to the Powering Up Britain – Energy Security policy paper released last week. Progress on the project — which would see 3.6 GW of clean energy generated in Morocco transported to the UK — has been “frustratingly slow,” Xlinks Executive Chairman David Lewis said last year, adding the company would divert the power produced elsewhere if the UK does not commit to financing the project soon.

REFRESHER- The Xlinks renewable energy project in Morocco is set to generate 10.5 GW of solar and wind energy once operational. Some 3.6 GW of electricity would make its way to the UK through four sub-sea cables stretching 3.8k km — potentially the world’s longest undersea electric cable connection. When completed, it is expected to supply 8% of the UK’s electricity needs. The project could be completed by 2030 if the UK delivers an assurance this year that consumers will pay a fixed price of GBP 48 per MWh for the power delivered, Lewis said in an interview with The Times last year.

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WATCH THIS SPACE #4- Emerging markets are still in play for clean energy investors: Fixed electricity prices, long term supply contracts, and risk ins. will spur renewables developments in emerging markets, The Wall Street Journal quotes panelists as saying at a conference organized by Global Private Capital Association in New York last week. Although an increase in government incentives in developed countries like the US’ Inflation Reduction Act may steer a chunk of investments away from emerging markets, long term supply agreements for renewables plants and fixed electricity prices pegged to the USD should drive significant foreign investments to developing markets, co-founder and Managing Partner at Emirati firm Alcazar Energy Daniel Calderon and Actis Partner Neil Brown said.

Good news for the region: Egypt and Jordan are named as emerging economies with significant clean energy production potential and the regulations in place to back it up, enabling long term revenue-building visibility for investors, Brown says. In spite of heftier electricity price tags in some developing countries, long term power purchase agreements ensure profitability for developers in Southern Mediterranean markets like Egypt and in Eastern European countries, according to Calderon, who said Alcazar is seeking to fill an investment gap in emerging markets’ renewables sector. Alcazar already proposed to build a green ammonia facility in Egypt and is also eyeing new renewables projects in partnership with Egypt-based construction firm Madkour Group.

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CIRCLE YOUR CALENDAR-

The UAE is hosting the International Conference on Green Energy and Environmental Technology (ICGEET) on 18 and 19 April in Dubai. The event will bring together stakeholders from academia, the healthcare industry, and the private sector to discuss energy conservation among other topics.

The first MENA Solar Conference is accepting applications from published researchers specialized in PV technology until Sunday, 30 April. The Dubai Electricity and Water Authority will be hosting the conference from 15 to 18 November, in conjunction with the Water, Energy, Technology, and Environment Exhibition and the Dubai Solar Show 2023. Researchers can submit their papers here.

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

KSA’s IsDB is backing sustainability projects: The Islamic Development Bank (IsDB) will provide c. USD 403 mn for three projects in Egypt, Kyrgyzstan, and Tajikistan under efforts to back socio-economic development and promote sustainable energy and transport, according to a statement released on Saturday.

Egypt’s high-speed rail is getting a boost: Egypt is set to receive the biggest chunk of the earmarked funds, with the IsDB set to provide EUR 318 mn (USD 344.5 mn) in financing to its 660-km first phase of the Sokhna-Alexandria high-speed rail line, the statement notes. The sixth-longest rail network in the world — described as a “climate-resilient electric express railway system” — will connect 60 Egyptian cities with trains running at up to 230 km/h, slashing greenhouse gas emissions by c.250k tons of CO2 annually. The IsDB will be joining several unnamed European banks who will be providing international funding for the high-speed rail link.

And Central Asia is getting support: IsDB will provide additional financing to the tune of USD 13 mn for Kyrgyzstan's Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) under a bid to meet growing demand for electricity in Afghanistan and Pakistan through cross-border energy exchange, the statement notes. The IsDB has already approved an initial USD 50 mn for the project. The project will use Kyrgyzstan and Tajikistan’s hydropower resources, paving the way for sustainable electricity trade between Central and South Asia when it goes live.

Al Rajhi Bank — Saudi Arabia's second-largest lender by assets — has raised USD 1 bn from its five-year USD-denominated sustainable sukuk issuance, according to a disclosure to Tadawul on Thursday. The bank issued 5k bonds at a par value of USD 200k, with the sukuk carrying a yield of 4.75% per annum, the disclosure notes. The sukuk will be listed on the London Stock Exchange’s International Securities Market, with the settlement of the issuance set on Wednesday, 5 April.

Advisors: Al Rajhi Capital Company, Citigroup, Emirates NBD Bank, Goldman Sachs, HSBC, JPMorgan Securities, KFH Capital, and Standard Chartered Bank were appointed as joint lead managers and bookrunners for the issuance.

ERG is eyeing mining in the Arabian-Nubian Shield: Luxembourg-headquartered Eurasian Resources Group (ERG) is looking to build up a portfolio of energy transition minerals by investing in mining activities in MENA and the GCC, CEO Benedikt Sobotka said in an interview with S&P Global last week. The group identified the Arabian-Nubian Shield — a geological phenomenon located in parts of Jordan, Egypt, Saudi Arabia, Sudan, Eritrea, Ethiopia, Yemen, and Somalia — as one of the regions with potential.

ERG is pumping big money in Africa in the next 5 years: ERG plans to invest some USD 1.8 bn over the next five years to double its copper and cobalt production in Africa. Copper, cobalt, nickel, and lithium are critical minerals for EV and battery storage production, which are expected to see a massive jump in demand in the coming years as countries roll out their plans for energy transition, S&P writes.

ERG looks to KSA to establish its regional presence: The group announced that it will invest USD 50 mn in Saudi Arabia’s mining sector last January. ERG said it is planning large-scale and tech-driven, early-stage exploration for battery transition materials in KSA’s Dawadmi region and has already secured licenses. ERG will set up two offices in KSA — one in Riyadh and the other in Jeddah — with its presence on the ground serving as a springboard for the company’s growth in MENA.

ERG is not the only one eyeing the kingdom’s minerals: The UK formed its first-ever partnership on critical minerals with Saudi Arabia in January in a bid to collaborate to diversify sources of critical minerals and shore up its critical mineral supply chains and reduce its dependence on China. The kingdom launched the pre-qualification stage for five mining exploration sites in February, and a potential 10 other mining licenses may be up for grabs this year, Reuters reported. The kingdom says it has untapped metals and minerals — including copper, zinc, phosphate, and gold — collectively worth USD 1.3 tn.

And KSA is reportedly sinking bns in the sector: A joint venture between Saudi mining company Maaden and the Public Investment Fund (PIF) established in January is preparing to deploy over USD 15 bn of capital for investments in global mining investments over the coming years. The kingdom said at the time that it has untapped metals and minerals — including copper, zinc, phosphate, and gold — collectively worth USD 1.3 tn.

More progress on Egypt’s nuclear plant: The Egyptian Nuclear & Radiological Regulatory Authority (ENRRA) has granted permission for the construction of the third 1.2 GW reactor at Egypt’s 4.8 GW Dabaa nuclear power plant, according to a statement last week. No timeline has been released on when construction will begin. The approval comes after construction of the second reactor began in November.

REMEMBER- Egypt and Rosatom began construction on the USD 30 bn plant in July 2022, kicking off an eight-year construction timeline that is expected to see it come online at the beginning of the next decade. The plant’s construction had faced delays in schedule in recent years due to the covid-19 pandemic. Rosatom was contracted in 2015 to handle the construction and provide fuel for the plant which features four 1.2 GW reactors. 85% of the facility’s financing is through a USD 25 bn loan from Russia, with Egypt scheduled to begin repaying the sum in October 2029.

Morocco’s UM6P secures nearly USD 1 bn in financing: Morocco’s Mohammed VI Polytechnic University (UM6P) has raised USD 986 mn from the OCP Foundation to support green expansion plans and smart city projects in Morocco’s green city of Benguerir, Morocco World News reports.

What we know: UM6P will channel the funds provided by OCP to expand campuses Rabat, Benguerir, and Laayoune focusing on smart city and green construction projects, including the Smart Health Care City project it is building in partnership with Moroccan health care firm Akdital.

UM6P is invested in the green building: In February, the university opened its USD 23.5 mn Green & Smart Building Park in Benguerir as it looks to establish the park as a research and development hub focused on green building, clean energy, and sustainable mobility solutions.

Egypt discusses expanded partnership with the EU: Egyptian International Cooperation Minister Rania Al Mashat and Directorate-General for Neighborhood and Enlargement Negotiations at the European Commission Geert Jan Koopman met to discuss expanding the strategic partnership between the EU and Egypt, including joint work on green hydrogen production, according to a statement released on Friday. This comes as the EU continues to ramp up plans to establish the MENA region as a major future exporter of the green fuel under its REPowerEU strategy to reduce dependence on Russian fossil fuels and push forward the bloc’s green transition.

AND- Pakistan is seeking Emirati investments in its renewable sector: Pakistan’s Prime Minister Shehbaz Sharif met with a delegation from the UAE’s Hayat Bio-tech to discuss ways in which it can invest in Pakistan’s renewable energy sector, Pakistan Observer reported on Saturday. Pakistan has been looking towards the region as both a source and a destination for investments in renewables. Pakistan’s Netline signed an agreement for 20 MW of solar power in Saudi Arabia last February. Hayah Biotech is a joint venture between pharmaceutical company Sinopharm and Abu Dhabi-based Artificial Intelligence and Cloud Computing company G42. It is not clear how the company’s activities can be integrated for use in renewable projects.

Not everyone is happy with Jordan’s fresh renewable energy fee: A recent decision by the Jordanian government to impose a JOD 2 / kWh fee on users with renewable energy systems has sparked criticism among involved stakeholders, Jordanian daily Al Ghad newspaper reported last week. A statement by Jordanian NGO Edama picked up by the media outlet said the decision will have a negative repercussions on Jordan’s renewable energy sector, with the fees imposed by the Energy and Minerals Regulatory Commission on the systems’ net metering and transmission being decided without consultations with related stakeholders in the private sector.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The Dubai Electricity and Water Authority (Dewa) met with representatives from General Electric and Siemens to collaborate on climate related projects. Dewa discussed general renewable energy developments with GE, and the Siemens meeting focused on smart grid technologies and methods to improve its performance. (Wam — here and here)
• The UAE has been tapped to host the third edition of the UN aviation agency International Civil Aviation Organization’s Conference on Aviation and Alternative Fuels (CAAF). CAAF is organized every seven years, with the last edition held in Mexico in October 2017. (Wam)
• Qatar’s Gulf Organisation for Research & Development and Egyptian real estate developer GV Investments Group signed an MoU to implement Global Sustainability Assessment System standards for Tarboul Industrial City — the largest Egyptian industrial city covering an area of ​​109 mn sqm. (Statement)
• Oman’s Energy and Minerals Ministry has opened tenders for three copper, gold, and silver mining concessions in the country’s Ash Sharqiyah North Governorate, with bids set to close on 28 May. (Zawya)

The UK sets out its climate strategies: The UK unveiled its new energy strategy laying out the government’s approach for investments in renewable energy, carbon capture, and nature-based carbon mitigation projects, according to an energy security plan (pdf) released last week. The government also issued a flurry of announcements for a host of climate-focused sectors including EVs, nuclear, and green hydrogen, and announced its green finance strategy as it looks to become a “net-zero aligned financial center.”

Targets: The UK will launch a GBP 160 mn fund to boost offshore wind energy deployments through increased port infrastructure development, will fund the first tranche of new green hydrogen projects in the country under its GBP 240 mn Net Zero Hydrogen Fund, and will back incentives for renewables projects through a separate GBP 205 mn financing package, according to a government release. The UK also announced it would count nuclear energy as a “key technology” towards achieving its net-zero target for 2050, and lobbied for its inclusion under the UK Green Taxonomy, pending consultations.

The new plans have been drawing criticism: The new strategy — which was expected to rival the Biden Administration’s USD 370 bn Inflation Reduction Act — did not see the government commit to new investment that would advance the UK’s green energy capacity and net-zero targets, critics tell Reuters and the Guardian. Last month, UK Finance Minister Jeremy Hunt said his country would not rival the EU’s Green Deal Industrial Plan and Biden’s IRA by channeling USD bns to provide green subsidies, and instead incentivizing private sector investments in green energy and climate mitigation projects.

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Australia cracks down on big polluters: Australia plans to have 215 of the country’s biggest polluting facilities slash their emissions by 30% by 2030 as part of a newly approved climate policy coming into effect on 1 July, Reuters reported last week. All fresh gas projects in the Beetaloo Basin would also be required to hold new zero carbon emissions, with new gas fields supplying existing LNG plants to have new zero reservoir emissions per the legislation. The new legislation is part of the center-left Labor government’s push to curb emissions by 43% by 2030.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• US-based gas supplier Air Products — which is part of the JV developing NEOM’s USD 8.5 bn green hydrogen plant — secured USD 130 mn in green hydrogen supply contracts from NASA. (Statement)
• US-based EV manufacturer Lucid is laying off 18% of its workforce as part of a restructuring plan to cut expenses. (Reuters)
• The UK has selected the first wave of its carbon capture projects under a GBP 20 bn plan that the government plans to spend on the technology in the coming years. (Bloomberg)