Energy China plans to sign framework agreement for USD 7 bn green hydrogen plant in Egypt

Good morning, nice people, and welcome to another brisk issue for you this morning.

THE BIG CLIMATE STORY- UAE retail conglomerate Majid Al Futtaim has selected banks to coordinate and manage its upcoming benchmark 10-year USD green sukuk issuance and Egypt’s Suez Canal Economic Zone is on its way to finalizing a framework agreement with state-owned energy conglomerate China Energy for the development of a USD 7 bn green hydrogen plant in the SCZone.

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

THE BIG CLIMATE STORY OUTSIDE THE REGION- Geneva Airport flights briefly grounded due to climate protests over private jets: Some 100 climate activists from environmental movement groups stormed the European Business Aviation Convention & Exhibition private jet fair at Geneva Airport on its opening day yesterday. The protests led Switzerland’s second largest airport to temporarily close itself off to flights as protesters scaled and ripped down wire fences and glued themselves to landing gear to demand a ban on business jet air travel. Some 80 climate activists, who during their protest stuck on airplanes warning labels like “private jets burn our future,” and “private jets drown our hope,” were detained by police forces. Geneva Airport — which saw some 14 mn passengers travel through it in 2022 — delayed seven flights on the back of the demonstration, and was forced to divert others.

The story made the rounds in the international press yesterday: Bloomberg | Reuters Associated Press | France 24.

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WATCH THIS SPACE #1- COP28’s Al Jaber is facing pressure from the west: Over 130 members of the EU Parliament and US Congress have submitted an open letter (pdf) addressed to US President Joe Biden, EU Commission President Ursula von der Leyen, United Nations Secretary General Antonio Guterres, and the UN’s Climate Chief Simon Stiell calling for the removal of current COP28 President-Designate Sultan Al Jaber from his post due to concerns about his ties to the fossil fuel industry, Bloomberg writes. The letter also calls for measures to limit fossil fuel industry influence at the conference, asking for “immediate steps to limit the influence of polluting industries, particularly major fossil fuel industry players whose business strategies lie at clear odds with the central goals of the Paris Agreement, at gatherings of the UNFCCC.” The Abu Dhabi National Oil Company — which Al Jaber serves as company CEO — has a target to expand its oil and gas operations to some 7.5 bn barrels in coming years.

WATCH THIS SPACE #2- Boeing chief says the transition to SAF will not be as cost-effective as jet fuel: Government incentives aimed at making the transition to sustainable aviation fuels (SAF) affordable — including the US Inflation Reduction Act’s tax breaks for SAF adoption as well as EU, and UK policies — will not be enough to achieve price parity with conventional jet fuels, Boeing CEO David Calhoun told the Financial Times. SAF currently makes up less than one percent of the global aviation market’s energy supplies and is twice as expensive as the fossil fuels that power the industry, the news outlet notes. The International Air Transport Association maintains that SAF will account for 65% of the carbon offsets that will power its target to become carbon neutral by 2050, former IATA CEO Willie Walsh told FT.

REMEMBER- We’ve seen some movement in the regional SAF sector recently: Masdar, Emirates airlines, Adnoc, and Tadweer partnered up to launch a joint feasibility study with BP on the production of sustainable aviation fuels (SAFs) using solid waste and renewables-sourced hydrogen under an agreement signed back in January. Based on the results of the study, the companies could potentially set up the region’s first commercial-scale SAF production facility in Abu Dhabi. Masdar also signed an agreement with French aircraft manufacturer Airbus to jointly develop sustainable aviation fuels using direct air capture tech earlier this month.

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DATA POINT- Up to USD 1.7 tn needed to turn aviation sector green: Overhauling the aviation sector to run on alternative propulsion technologies — such as hydrogen, battery-electric, and hybrid-electric — will require a capital investment between USD 0.7 tn and USD 1.7 tn across the value chain by 2050, according to a white paper (pdf) by the World Economic Forum written in collaboration with McKinsey & Company. The paper concluded that global demand for alternative propulsion could require 600 to 1.7k TWh of clean energy by 2050, equivalent to the energy generated by around 10 to 25 of the world’s largest wind farms.

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CIRCLE YOUR CALENDAR-

Germany will host the second meeting of the COP27 Transitional Committee from tomorrow to Saturday, 27 May in Bonn. The meeting will build on the loss and damage fund established during COP27 with the aim of establishing institutional mechanisms and governance structures for financing, and will bring together a host of international financial institutions to discuss pathways to increasing funding capacity for climate vulnerable countries.

The UAE will host the Electric Vehicle Innovation Summit from Monday, 29 May to Wednesday, 31 May in Abu Dhabi. The conference will bring together state representatives, industry players from the EV sector, as well as engineers and researchers to discuss policy trends and tech innovations in the industry and provide attendees with networking opportunities across value chains.

Qatar will host the Carbon Capture, Utilisation and Storage (CCUS) Forum from Monday, 29 May to Thursday, 31 May in Lusail City. The event aims to spotlight MENA’s CCUS regulations and policies, map out paths and business models that would bring down CCUS project costs, promote regional and international cooperation to advance the international carbon capture sector, and discuss the role CCUS will play in helping Gulf countries meet their net zero targets.

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

Is Majid Al Futtaim gearing up for a third green sukuk issuance? UAE retail conglomerate Majid Al Futtaim has selected banks to coordinate and manage its upcoming benchmark 10-year USD green sukuk issuance, Reuters reports, citing an indicative term sheet it has seen. A benchmark-sized issuance typically means at least USD 500 mn, the newswire notes.

Which banks are involved? Citigroup, HSBC, and Standard Chartered have been appointed as coordinators on the issuance, and they will be joined by Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, and First Abu Dhabi Bank as lead managers, according to the newswire.

Where’s the money going? Proceeds from the sukuk sale will go towards funding or refinancing green projects under the company's 2019 Green Finance Framework (pdf), through which the retail conglomerate has so far raised a total of USD 1.2 bn. The framework identified four areas for improving the company’s green performance: Green buildings, renewable energy, sustainable water management, and energy efficiency.

Al-Futtaim was the first to issue corporate green sukuk in MENA: The company’s USD 600 mn 10-year green sukuk issuance in May 2019 —- which was 4.6x oversubscribed — was a pioneering initiative in the region and set the stage for others looking to diversify their green financing instruments, according to a case study (pdf) by UK-UAE think tank Posterity Institute. The bond was priced at around 4.6% and received orders in excess of USD 2.8 bn. The company raised another USD 600 mn through green sukuks in the same year, according to a summary report (pdf) by the UAE’s Climate Change and Environment Ministry. The combined USD 1.2 bn issued by Futtaim in 2019 made up 30% of total ESG sukuk issuance by value that year.

REMEMBER- Interest in green sukuk has been on the rise in the region in recent months ahead of COP28 in the UAE. Abu Dhabi’s Aldar Investment Properties raised USD 500 mn through its debut 10-year inaugural green sukuk this week. Saudi Electricity Co raised USD 2 bn through a dual-tranche USD-denominated green and conventional sukuk in April, and Saudi Arabia’s Al Rajhi Bank also raised USD 1 bn from its five-year USD-denominated sustainable sukuk issuance the same week. Bahrain made its debut green sukuk issuance in 1H 2022, raising USD 900 mn for Infracorp.

But the IsDB still reigns in regional green sukuk issuances: Saudi Arabia-based Islamic Development Bank (IsDB) has issued a total of USD 5.1 bn between 2017 and the first half of 2022 in green and sustainable sukuks, according to a report (pdf) prepared by the London Stock Exchange. While green sukuks are issued to specifically fund projects that have a positive environmental impact, proceeds from sustainability sukuks are applied to a combination of green and social projects.

Egypt to ink framework agreement for USD 7 bn green hydrogen plant: State-owned energy conglomerate China Energy Engineering Corporation (Energy China) will sign a framework agreement within two months with Egyptian government authorities to develop a USD 7 bn green hydrogen plant in Egypt’s Suez Canal Economic Zone (SCZone), according to a statement. The expected price tag of the project has increased USD 1.9 bn from the previously announced USD 5.1 bn investment earmarked for the project back in March.The agreement was signed by SCZone CEO Walid Gamal El Din during the SCZone’s global roadshow this week to drum up investments, and a visit to India is on the agenda for next month.

What we know about the project: The green hydrogen plant — which both the SCZone and Energy China have both yet to announce a timeline for — would produce 210k tons of green hydrogen and 1.2 mn tons of green ammonia per year, the statement notes.

REFRESHER- The Egyptian government approved green hydrogen incentives earlier this month to boost the country’s green hydrogen sector and enhance foreign exchange inflows, and signed framework agreements worth c. USD 83 bn for nine green hydrogen and ammonia plants at COP27 last year. The plants would produce up to 7.6 mn tons of green ammonia and 2.7 mn tons of hydrogen a year once fully operational.

SCZone is drumming up interest in Egypt’s renewables sector: SCZone’s delegation said several Chinese firms have already expressed interest in Egypt’s renewables manufacturing sector including Sinoma Engineering, which is gearing up to establish a turbine blade manufacturing plant in the SCZone, according to a separate statement.

Energy China is looking to expand its regional foothold beyond Egypt: Back in March, the company signed an MoU with Morocco’s Gaia Energy and Saudi Arabia’s Ajlan & Bros to jointly build a green hydrogen production facility in the kingdom which is set to produce some 1.4 mn tons of the green ammonia and 320k tons of green hydrogen annually once operational.

EWEC makes its biggest single sale of clean energy certificates: The Emirates Water and Electricity Company (EWEC) has made its biggest single sale of clean energy certificates to UAE’s digital infrastructure developer Two Zero, according to a statement. The company purchased 7.3 mn MWh of clean energy through EWEC’s auction process in a bid to decarbonize its operations and reach its sustainability objectives. This marks EWEC’s first sale to the digital assets infrastructure sector. The price of the purchase agreement was not disclosed.

EWEC’s last auction sold big: EWEC sold over 9 mn certificates last January to Abu Dhabi based entities across different sectors, six months after the company’s fourth auction was held in June 2022. The equivalent of 9 mn certificates in MWh of renewables was not disclosed at the time.

SOUND SMART- Renewable energy certificates (RECs) — of which clean energy certificates fall under — are a MWh-by-MWh way of proving that you own or created renewable energy. An REC is issued when one MWh is delivered to the electricity grid from a renewable energy source, the US Environmental Protection Agency (EPA) notes. While carbon credits help reduce greenhouse gas emissions, renewable energy certificates offset non-renewable electricity use.

A major partnership ahead of COP28: Bloomberg Philanthropies and the International Renewable Energy Agency (Irena) have announced a partnership to boost clean energy deployment and capital mobilization in emerging markets and developing economies (EMDEs), according to a statement. The philanthropic organization will back Irena to accelerate efforts to drive an all-round adoption of renewable energy and minimize political, technical, and financial barriers to the energy transition.

How the partnership will work: Bloomberg Philanthropies will support Irena’s efforts on three fronts: Building capacities in Southeast Asia, Africa, and Latin America through policy recommendations, technical support, and financing solutions towards advancing decarbonization and robust climate resilience; strengthening Irena’s Energy Transition Accelerator Financing Platform, which focuses on capital mobilization to advance renewables-based energy transition technologies in EMDEs by 2030; and, in partnership with the Glasgow Financial Alliance for Net Zero, presenting readily investable energy transition projects to financial institutions committed to zero emissions and boosting investments in climate solutions in developing countries.

Much needed: Clean energy finance in EMDEs continues to face several hurdles, including a strong supply of bankable renewable energy projects in the region, according to the statement. Irena estimated investments in renewables last year at USD 0.5 tn, representing less than one-third of the average annual investments required until 2030 to reach net zero emissions goals by 2050. Bloomberg and Irena’s new partnership would help advance a pipeline of luring renewable energy projects through lowering the “risk for potential developers and investors by providing vigorous technical and financial expertise to eligible projects that meet environmental, social, regulatory, and economic factors and implementation readiness.”

Sweden’s bearing and seal manufacturing company SKF will invest SEK 50 mn (USD 4.7 mn) in a new magnetic bearing plant in Morocco, according to a statement. “As this technology is now playing a central role in green industries, we need to make sure we can maintain our leading position in terms of technical development and customer service. Our new site in Morocco is an important step in this direction,” SKF’s President for Independent and Emerging Business Thomas Fröst said.

Why this matters for green industries: Magnetic bearings have multiple uses within turbomachinery and other high-speed applications, including hydrogen gas liquefaction and oil-free industrial compressors, the statement said. Active magnetic bearings provide the same advantages to hydrogen gas liquefaction for transport and storage as they do with hydrocarbons, according to the company’s website. It can also be used in carbon capture, utilization and storage (CCUS) to help keep CO2 emissions out of the air by collecting CO2 at the source and storing it in locations like empty oil and gas wells.

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AFC, Morocco partner over financing solutions for key sectors: Africa’s infrastructure solutions provider Africa Finance Corporation has signed an MoU with Morocco’s Economy and Finance Ministry to provide project development and financing solutions for projects in renewable energy and natural resources, according to a statement. Pipeline projects under discussion include cooperation under the country’s renewables strategy and the refurbishment of railway infrastructure to enhance mobility between rural towns and Rabat, the statement said.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Oman’s Nama Power and Water Procurement Company — previously OPWP — has adjusted the combined cost of its 1 GW Manah 1 and Manah 2 solar plants to USD 800 mn instead of the previously expected USD 780 mn. (Muscat Daily)
• Abu Dhabi Waste Management Company (Tadweer) is distributing new, larger-capacity green recycling containers in central locations across the UAE as part of its initiative to improve waste sorting and promote recycling. (Wam)

China on track to produce more solar panels than the US in 2023: China has tripled its solar panel production capacity between January and April on the back of government subsidies to boost the energy transition and lower solar panel production costs, Bloomberg writes. The country may install some 154 GW of solar energy in 2023 and is expected to overtake the US in terms of PV production capacity this year. The China Photovoltaic Industry Association said it expects the country to add between 95-120 GW this year, up from last year’s record of 87.4 GW in total added solar power capacity. Next year could see the country up the capacity by a further to some 300 GW. The US, through its Inflation Reduction Act, is earmarking USD 369 bn in tax credits to bolster the transition to renewables and source critical minerals for EV production .

A subsidy race between the US, China and the EU can benefit everyone: While subsidies are only second best to carbon taxes — with some of the challenges of subsidizing green tech including increasing government spending and inefficient resource allocation — a renewable subsidy race between the world’s three biggest blocks can help create economies of scale and lower the costs of nascent technologies. Adjustments to the green subsidy policies and protectionist measures put up by the big three blocks can help to ensure a more level playing field, especially for the Global South. Decarbonization efforts being conducted between the Global North and the Global South, as well as “friendshoring,” could help technology transfer to create more opportunities for smaller economies.

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Volvo signs agreement to buy renewable energy from Swedish wind farm: Swedish automaker Volvo has signed a 10-year power purchase agreement with Swedish renewables producer Vattenfall AB to buy 50% of the energy generated from the Bruzaholm wind park from 4Q 2025, Bloomberg reports. The wind park — which will break ground this summer — will supply Volvo with 225 GWh per year once operational. While the EU has set rules to cut emissions from vehicles, no such rules have been set for slashing emissions from the production of EVs. Despite this, Volvo aims to reach net zero greenhouse gas emissions in its value chain by 2040.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The EU and South Korea have launched a Green Partnership to boost cooperation on climate change and green transition. (Statement)

Can perovskite-based solar panels become an industry standard? Government-backed researchers and private sectors are looking to use perovskite — a mineral that can potentially outperform silicon — to increase the energy efficiency of solar panels, CNBC writes. Researchers from the US National Renewable Energy Laboratory have already attained a record energy efficiency rate of 31.25% from perovskite-based panels — compared to silicon-based panels’ theoretical efficiency limit of 29%. Solar panel’s average average power conversion efficiency rate ranges between 15-20% on the efficiency metric, according to Italian utilities giant Enel X. Solar energy efficiency rates measure panels’ capacity to convert solar power into usable electricity.

Perovskite is getting backing from major players: Venture capital firm Breakthrough Energy Ventures — backed by Microsoft chairman Bill Gates — has been investing in US-based solar company CubicPV, which coats its silicon solar panels’ with perovskite to reach an energy efficiency rate of 30%, the news outlet writes. The company will take part in a new Massachusetts Institute of Technology research center with the aim of utilizing artificial intelligence and automation to upscale the production capacity of tandem perovskite panels, and will set up a 10 GW US-based silicon wafer plant to hasten perovskite tandem panel deployments, the news outlet notes.

And the region is keeping up: Researchers from Saudi Arabia’s King Abdullah University of Science and Technology (KAUST) have created tandem solar systems with a power conversion efficiency rate of 33.2% — up 0.7 percentage points from previous global record holder Helmholtz-Zentrum Berlin.

Graphene-based solar panels could also quicken the transition to renewables: Engineering students at Oman’s Sultan Qaboos University have developed a solar panel production technique that relies on polyethylene and graphene instead of crystalline silicon. The new method can yield elastic, durable panels that are 60% more efficient at absorbing light than silicon-based alternatives, they say. The team will continue research with plans to manufacture solar cells at their university’s lab using locally sourced polyethylene.