Saudi Electricity’s dual-tranche green sukuk issuance is red-hot

Good morning, friends. The news cycle shows no signs of slowing down, bringing us plenty of regional updates from across several sectors.

THE BIG CLIMATE STORIES- Saudi Electricity’s dual-tranche green sukuk issuance is drawing huge demand, pulling in over USD 15 bn of subscriptions. Over in Egypt, Red Sea Wind Energy (RSWE) — a JV between Orascom Construction (OC), Japan’s Toyota Tsusho Corporation/Eurus Energy Holdings Corporation, and France’s Engie — has achieved financial close for its 500 MW wind farm near Egypt’s Ras Ghareb.

^^We have all the details on these stories and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- Delivering a blow to sustainable mobility, Paris votes by a landslide to ban e-scooter rentals: In a rare city-wide referendum on Sunday, 89% of Parisian voters elected to take shared e-scooters off the French capital’s streets as of September. The referendum saw low turnout, with 7.46% of the city’s eligible voters casting ballots.

Could there be recourse? E-scooter operators, including Germany’s Tier, Uber-backed Lime, and Franco-Dutch firm Dott — whose contracts will expire on 1 September and will not be renewed per the consultation’s result — hope the low turnout may persuade French lawmakers to agree to a compromise that would not see an outright prohibition of the EVs. The electric vehicles— known to locals as “trottinettes” since their introduction in 2018 — have proven to be a nuisance to Parisians who regard the devices as hazards that block up public spaces. In spite of imposing speed limits for the EVs, Paris recorded 34 deaths and some 500 serious injuries in 2022 alone from scooters and similar mobility offerings.

The story is getting widespread coverage in the international press: Associated Press | Reuters | Bloomberg | The New York Times | BBC | Financial Times | The Washington Post Deutsche Welle | France 24.

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WATCH THIS SPACE #1- The UN will receive ocean mining applications by July: The UN’s International Seabed Authority (ISA) said it would begin accepting permit applications from corporations looking to launch deep-sea mining projects in July following two weeks of negotiations on standards and requirements of the new practice, Reuters reported. The deep-sea mining projects aim to extract critical minerals essential to EV battery production including cobalt, copper, nickel, and manganese, the newswire notes. A notable sticking point in the decision is the lack of a standard mining code that would guide ISA in its application reviewing process, Deutsche Welle notes.

REMEMBER- The UN finalized its High Seas Treaty in March after prolonged negotiations on marine resources: Over 100 countries struck a landmark agreement last month to protect at least 30% of international waters by 2030. The UN High Seas Treaty reportedly took over 36 hours of negotiations before being hammered out. Notable sticking points stalling the consensus included a clause on the share of “marine genetic resources,” with negotiators reportedly locking horns on the division of rewards from new marine resources.

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WATCH THIS SPACE #2- Canada says Biden’s Inflation Reduction Act has created “an unlevel playing field”: Washington’s USD 369 bn Inflation Reduction Act (IRA) is waging a “carbon subsidy war” against Canada, the EU, Japan, and other countries scrambling to match the US government’s clean energy handouts, Canada’s Natural Resources Minister Jonathan Wilkinson tells the Financial Times. The IRA, coupled with the US’ unmatched “fiscal latitude,” could result in fiercer global trade competition between the US and its allies, Wilkinson warned. Canada’s federal budget currently has some USD 13 bn earmarked for clean energy subsidies. On Friday, the US Treasury Department laid out subsidy criteria for the USD 7.5k tax credits of the IRA, announcing that rare earths extracted from freetrade partners — including from Canada, which has lithium, cobalt, nickel, and copper reserves — would benefit from the tax breaks.

WATCH THIS SPACE #3- Ford plans to roll out its EVs in the GCC by 2024, Managing Director for the Middle East and Africa Chris Noel told Asharq Business last week. The specific timeframe of the EVs’ arrival to the region was not disclosed, nor were the specific Ford models that would be on offer. Noel noted that delays in MENA rollouts are attributable to Ford’s current limited production capacity.

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THE GREAT DEBATE– The world will need to rely on clean energy bridges like hydrogen and natgas in its transition to renewables, World Energy Council CEO Angela Wilkinson tells CNBC. The transition to renewables won’t be perfect, Wilkinson said, noting that hydrogen and natural gas projects complemented with carbon capture and storage tech will prove essential to meeting climate targets. The International Panel on Climate Change must, when it sets climate targets, take into account that the transition to clean energy is coinciding with industrial and political transitions that require power to fuel growth, Wilkinson said. To meet climate targets, cross-border and cross-sector collaboration will be needed on a range of clean energy and carbon offsetting projects, and significant infrastructural developments upscaling grid connectivity will also be critical to realizing global climate targets, she added.

THE GOOD NEWS- Global gas flaring dropped 5 bn cubic meters in 2022: Global gas flaring levels dipped by some 3% y-o-y in 2022, dropping 5 bn cubic meters — the lowest level since 2010, according to the World Bank’s Global Gas Flaring Tracker report released last week. Global flaring intensity fell to 4.7 cubic meters (cbm) per barrel of oil in 2022 from 5.1 cbm in 2021, indicating a “gradual and sustained decoupling of oil production from flaring,” according to the report. From our neck of the woods, Algeria, Iraq, Libya, and Iran were ranked among the world’s top nine flaring countries in 2022. Between 2014 and 2018, MENA as a whole accounted for 40% of the world’s flaring, with 75% of MENA flaring contributed by Iraq, Iran and Algeria.

REFRESHER- Oil companies worldwide flared 144 bn cbm of gas in 2021, releasing around 400 mn metric tons of CO2 equivalent into the atmosphere. Capturing flare gas and using it to generate power is seen as a solution to that problem. Need a recap on why gas flaring is so bad for the environment? We’ve got you covered.

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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.

Turkey is hosting the International 100% Renewable Energy Conference from 4–6 May in Istanbul. The event will bring together experts to discuss the integration of renewables, renewable energy technologies and applications, and the Roadmap to 2050.

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.

The Saudi Electricity Company pulled the trigger on a fresh dual-tranche issuance of USD-denominated green and conventional sukuk, according to a Tadawul filing yesterday. The sale, which closes today, includes 10-year green sukuk and 30-year conventional notes, the filing says.

By the numbers: While the company did not specify the total value of its issuance in the filing, saying that this would be subject to market conditions, Reuters says the PIF-backed firm is planning to raise USD 2 bn from the sale. The 10-year sukuk are being offered at 165 basis points (bps) above US Treasuries (UST), while the 30-year notes are offered at 240 bps above UST, Reuters reports, citing a bank document. Both debt instruments will be listed on the London Stock Exchange at a par value of USD 200k. Annual returns will be subject to market conditions, according to the filing.

Strong investor appetite: The green sukuk issuance is so far nearly 7.6x oversubscribed, drawing some USD 9.2 bn in demands, while the 30-year notes have attracted some USD 6.2 bn in subscriptions, making it c. 7.8x oversubscribed, the newswire reports. The company initially offered the 10-year green sukuk at nearly 120 bps above UST, and 205 bps above UST for the 30-year conventional note, before tightening the spreads due to higher-than-anticipated demand, which totaled USD 15.4 bn for both issuances.

Attracting international interest: Demand for the green issuance was “not entirely regionally-focused, it was actually quite widespread,” a source with knowledge of the transaction told the newswire, adding that there is a “supply-demand imbalance” in the regional sukuk debt market. Both tranches mark the first SEC issuance in two years, Reuters notes.

Advisors: HSBC, Standard Chartered Bank, JPMorgan, First Abu Dhabi Bank, MUFG Securities, Mizuho International, SMBC Nikko Capital Markets Limited, SNB Capital Company, Al Rajhi Capital Company, Saudi Fransi Capital, Abu Dhabi Islamic Bank, Bank of China, Abu Dhabi Commercial bank, Natixis, and Société Générale acted as joint lead managers on the issuance.

Not SEC’s first green bond issuance: In 2020, the company issued KSA’s first corporate green sukuk, raising USD 1.3 bn from a dual-tranche Islamic green bond comprising a 5-year USD 650 mn note and a USD 650 mn 10-year sukuk, SEC notes.

Financing is locked in for Egypt’s Ras Ghareb wind farm: The Red Sea Wind Energy (RSWE) — a JV between Orascom Construction (OC), Japan’s Toyota Tsusho Corporation/Eurus Energy Holdings Corporation, and France’s Engie — has achieved a financial close for a 500 MW wind farm near Egypt’s Ras Ghareb, according to a joint statement (pdf). The announcement comes a few months after RSWE said it will receive a c. USD 501 mn syndicated loan for the farm from several development partners.

Refresher: Established in 2020, RSWE was created for the purpose of constructing multiple wind farms in the area, according to its website. Its ownership breakdown sees Toyota and Eurus each owning 20%, Engie holding 35% and OC owning the remaining 25% stake.

So far, so good: The consortium will operate the wind farm, on which stakeholders broke ground ahead of COP27 in November. The project will connect to the grid over two phases, and is expected to commence full commercial operations in 3Q 2025 under a 25-year PPA with the Electricity Transmission Company (EETC), according to the statement. It is part of the implementation of the energy pillar in the country’s Nexus on Water, Food and Energy (NWFE) flagship program which focuses on securing climate finance to some of Egypt’s most important green projects.

The outcome: The wind farm will help slash carbon emissions by c. 1 mn tons annually and deliver clean energy to over 800k households in the country, the statement said.

Not RSWE’s first rodeo: RSWE built Egypt’s first renewable energy IPP project in Ras Ghareb with a capacity of 262.5 MW, completing it in 2019. This brings the consortium’s wind energy capacity through the two facilities to 762.5 MW.

And there’s more in the pipeline: OC, Toyota Tsusho, and Engie signed up to build another 3 GW wind farm in Egypt on the sidelines of COP, with no details disclosed on the location or timeline for the project.

OQ the decarbonization king? Oman’s state energy company OQ has been mandated by the country’s Energy and Minerals Ministry to help decarbonize oil and gas concessions and industrial clusters nationwide by supplying clean energy, the company said in its 2022 annual report (pdf). The mandate is part of the ministry’s efforts to push for decarbonization and carbon neutrality in the Gulf country.

How it will work: The energy company’s decarbonization plan was approved by its board in December 2022, with net zero roadmaps outlined for OQ’s existing operational assets in the country. The roadmaps identify opportunities in the four areas of energy excellence, clean energy, low carbon molecules, and negative emissions under efforts to decarbonize the assets and push OQ’s portfolio towards greener energy.

Already planning ahead: OQ says a plan is in the works to decarbonize its upstream and downstream assets by swapping a share of their power from polluting energy sources to renewables. These include the Liwa Solar and Block 60 solar projects, which are currently being studied, the company said.

Decarbonize all the things: OQ’s commodity trading subsidiary OQ Trading (OQT) signed an agreement in November with state-owned solid waste management firm Oman Environmental Service Holding Company (Be’ah) to reduce greenhouse gas emissions in Oman’s waste management industry. The agreement creates a framework for the two organizations to design and develop decarbonization projects in waste management and waste-to-energy.

Speaking of clean energy: OQ is working to help the Omani government build what it described as a hydrogen-centric economy by 2040, according to the report. It has some USD 40 bn worth of investments with partners in the pipeline for extensive green hydrogen projects that could generate over 30 GW of renewable energy in the country. The projects include Hyport Duqm, H2Oman, SalalaH2, and Green Energy Oman, OQ said, adding that it expects the projects to pass the final investment decision over the next decade.

A new food packaging industry project for KSA: The Saudi Investment Ministry signed an investment agreement with UAE-based leading food packaging manufacturer Hotpack Global to set up one of the country’s biggest eco-friendly food packaging industry projects, the ministry said on Twitter. Financial details on the amount of funding or a timeline for kicking off operations were not disclosed, but the ministry estimates the value of the project will reach SAR 1 bn over the next seven years.

Who is Hotpack? The company provides food packaging solutions and disposable products in eco-friendly and biodegradable categories. It currently operates in over 28 locations across the region, UK, North America, and Africa, according to its website.

The use of biowaste is on the cards: The project aims to incorporate agricultural waste as one of the components of basic raw materials during their production process, according to the Tweet.

And we know the kingdom is ramping up efforts in biowaste recycling: Saudi Arabia’s state-owned National Agricultural Development Company signed an agreement with the Saudi Investment Recycling Company to jointly recycle 400k tons of biowaste yearly with the goal of converting the refuse into organic fertilizers in February. KSA produces the world’s largest amount of food waste on a per capita basis with over a third of food produced or imported by the kingdom going to waste, according to a study (pdf) published by King Saud University.

The Dubai Supreme Council of Energy (DSCE) has approved the final stage of laws regulating district cooling in the Emirate of Dubai, Wam reports. The laws aim to ensure contract efficiency between customers and service providers in Dubai’s district cooling sector to ensure cooling energy is produced and distributed at an appropriate cost, according to Dubai Supreme Council of Energy Secretary-General Ahmed Buti Al Muhairbi.

The UAE’s district cooling market is growing: The value of the Emirates’ district cooling market stood at some USD 27 mn in 2022, and is expected to grow at a CAGR rate of 7.9% through to 2030, totaling some USD 46 mn by the end of the decade, according to research by consulting firm by P&S Intelligence. The Middle East’s collective district cooling market was valued at more than USD 5 bn in 2021, and is similarly projected to grow at a CAGR of 9% through to 2030, according to Global Market Insights.

What they said: “Regulating the district cooling sector enables the grant of licenses to service providers in line with the regulatory frameworks approved by the council to raise the efficiency of operations and ensure the quality of services provided to consumers in Dubai,” Al Muhairbi said.

Significant projects have kicked off this year: Emirates Central Cooling Systems (Empower) signed an agreement with real estate developer Sobha Realty to provide district cooling services for eight of Sobha Harland’s buildings in Dubai last month. The firm will extend its distribution network to supply 17k refrigeration tons (RT) of cooling capacity from its nearby Meydan station. Earlier in February, Empower invested USD 122 mn to provide 63k RT of cooling capacity to the Dubai Maritime City project, its first signed project after the company was IPO’ed on the Dubai Financial Market in November.

Dewa explores Chinese support on energy: Dubai Electricity and Water Authority (Dewa) CEO Saeed Mohammed Al Tayer and Vice Consul General of China in Dubai Liu Zhengjie met to discuss potential cooperation in energy and infrastructure, Wam reports. The two parties explored potential avenues for the authority and a number of unnamed Chinese companies to collaborate in several fields including the production, transport, and distribution of energy.

Expanding on existing ties: Several Chinese companies are cooperating with Dewa in its wide-scale projects including the Mohammed bin Rashid Al Maktoum Solar Park — the world’s largest single-site solar park using the IPP model. The solar park will have a production capacity of 5 GW by 2030 and will help slash 6.5 mn tons of carbon emissions annually upon completion. Production capacity at the park hit over 2 GW last December, accounting for c. 14% as a share of Dubai’s total electrical energy production.

Some progress for Saudi’s RSP: Saudi Arabia’s luxury Red Sea Project (RSP) has tapped Germany-based ILF Consulting Engineers as an independent engineer for the construction of its USD 1.5 bn multi-utility system, Zawya reported. The RSP — developed by Red Sea Global, a global multi-project developer fully owned by Saudi Arabia’s sovereign wealth fund (PIF) — will have a net-carbon utility system providing renewable energy, potable water, wastewater treatment, district cooling, and solid waste treatment for 16 hotels, an international airport, and related infrastructure for the project’s first phase.

Net-carbon how? The renewable energy for the project will be generated through a 340 MW solar plant, a 1.2k MWh battery energy storage system (BESS) facility and an internal combustion engine with a capacity of 108.98 MW capacity. Potable water will be delivered using a seawater reverse osmosis (SWRO) desalination plant, with district cooling made possible with a capacity of 32.5k refrigeration tons.

The EU’s 2050 net-zero targets could shift air transport east and bankrupt Europe’s aviation sector, industry leaders said at the Airlines for Europe (A4E) aviation summit in Brussels last week, AFP reports. The shift to sustainable aviation fuels and carbon emission taxes would cost the EU’s aviation sector some USD 629 bn by 2050, the news outlet quotes A4E interim chief Laurent Donceel as saying. Investments toward designing and manufacturing aircraft catering to sustainable aviation fuels could cost the EU some USD 820 bn between now and 2050, Dutch-based research firm SEO noted in a recent study.

EU climate targets may see our aviation sector growing: The EU Commission’s target to source 63% of aviation fuel from sustainable sources, including biogas, by 2050, coupled with carbon taxes levied for trips departing from and to the EU, could see intra-European passenger numbers shrink 14% by 2050, according to SEO. Markets such as Qatar, Saudi Arabia, and Turkey — where accountability measures on carbon monitoring, disclosures, and verification are not as strict as in the EU — could capitalize on their strategic locations and relatively lax environmental regulations to become transport hubs, the newswire quoted former President of France’s National Aviation Federation Alain Battisti as saying at the event.

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India is trying to make up for its missed renewables target: India plans to tender green energy projects producing a combined 250 GW by March 2028, Reuters reports, citing a government memo. The projects will contribute to India’s goal of cutting emissions by 45% from its 2005 levels. While the country missed its target of installing 175 GW of renewable energy capacity by 2022, it is now turning its focus on climate investments and hopes to boost its renewable and nuclear energy capacity to 500 GW by 2030. As of February 2023, its renewables capacity — excluding hydroelectric and nuclear power — stands at 122 GW. Including hydro and nuclear would bring the capacity up to 175 GW, according to government data cited by Reuters.

Timeline: India plans to issue 15 GW of non-hydro or nuclear renewables — solar, wind, and low-carbon hydrogen — and 15 GW of nuclear and hydro power in each of the first two quarters of the current fiscal year. Another 10 GW of tender will be issued in the following two quarters, according to the memo.

The share of clean sources in India’s power generation is set to double by 2047: The country’s share of energy generated from renewables will double by 2047 to reach 90% of total generated capacity, Federal Power Secretary Alok Kumar said, according to Bloomberg. A combination of reducing coal generation and speeding up the roll out of green projects will together contribute to this goal.

Tunisia sets the bar for effective marine protection management: Despite recent analysis showing that Posidonia seagrass meadows have declined by 34% over the past 50 years, conservation efforts on Tunisia’s Kuriat Islands has succeeded to protect the fragile marine prairies due to effective co-management of the Marine Protected Area (MPA), conservationist Yassine Sghaier said in interview published in Oceanographic Magazine.

Seagrass is the third most valuable ecosystem in the world: Seagrass meadows — often referred to as “lungs of the sea” — absorbs the most carbon, produces vast amounts of oxygen, and offers coastal protection through the entrapment of sediment, Oceanographic writes. Due to its importance for the ecosystem, it is estimated to be worth over USD USD 19k per hectare per year. The meadows host around 20% of marine life in the Mediterranean.

The lack of protection spans across the Mediterranean, but the south lags further behind: Currently, around 2.5% of the Mediterranean is covered by MPA management plans. While 90% of protected areas are found in EU countries, 96% of Europe’s MPAs still allow destructive activities within its borders, a report by Oceana found in 2020.

What can we learn from the Kuriat Project? The Kuriat Project found that a co-management approach between local NGO Notre Grand Bleu and national agencies was an effective method of establishing a communication and outreach plan, and implementing monitoring and training programmes, the magazine writes. Yassine has collected data on bird diversity, sea turtle nesting grounds, and mapping the seagrass surrounding the islands for a decade. “The coast here is rich in diversity and that, in part, is thanks to the Posidonia surrounding the island,” Sghaier tells Oceanographic.