Masdar could get a big stake in Iberdrola wind farm

Good morning, friends. It’s another compact, albeit interesting and varied issue this morning, with more big news coming out of Abu Dhabi and KSA.

THE BIG CLIMATE STORY- Abu Dhabi’s renewables giant Masdar is planning to purchase a 49% stake in Spanish utility company Iberdrola’s largest offshore wind project off Britain’s eastern coast for EUR 2 bn (USD 2.1 bn).

HAPPENING TODAY- The International Fair of Energy Transition is kicking off today in Tunis and running through to Friday. The event will gather global stakeholders in the energy sector and to discuss financing the energy transition and the challenges sectors face working in renewables, energy efficiency and storage, and electric mobility.

THE BIG CLIMATE STORY OUTSIDE THE REGION- IEA says the transition to clean energy is “unstoppable” and means oil demand will peak this decade: Global demand for oil, coal, and natural gas will peak this decade as the shift towards renewables and electric vehicles helps wean the world off fossil fuels, the International Energy Agency (IEA) said in its annual World Energy Outlook report (pdf). The IEA expects global oil demand to peak at around 102 mn barrels per day (bbl / d) in the late 2020s, before dropping to 97 mn bbl / d by 2050 if governments maintain their current energy policies. The agency sees that figure dropping to 93 mn bbl / d in 2030 if governments commit to their national energy and climate targets and to 77 mn bbl / d if they carry out further policy changes to reach net zero by 2050. “The transition to clean energy is happening worldwide and it’s unstoppable. It’s not a question of if, it’s just a matter of how soon,” IEA Executive Director Fatih Birol said in a statement accompanying the report.

This may be too optimistic of an outlook: The IEA’s optimistic outlook comes shortly after OPEC published its 2023 World Oil Outlook (pdf), where it upped its long-term oil demand outlook to 116 mn bbl / d by 2045, a 5% jump from its 2022 forecast. The figure has “potential to be even higher,” the alliance of oil producers said. Chevron CEO Mike Wirth told the Financial Times that the IEA’s forecast is not even “remotely right.”

The oil sector didn’t get the memo: Oil companies are racing to secure large-scale mergers and acquisitions as they rush to add more reserves to their portfolios and capitalize on surging oil demand, the Financial Times writes. The trend kicked off with Exxon Mobil announcing its plan to acquire US shale producer Pioneer Natural Resources for USD 59.5 bn, which was shortly followed by US oil giant Chevron unveiling that it will acquire rival Hess in a USD 53 bn transaction. Now analysts believe that global energy giant BP could be joining forces with Shell and that further M&As between large US producers and their smaller rivals could soon follow. KSA Oil Minister Abdulaziz bin Salman reaffirmed big oil’s forecast on the role fossil fuels will continue to play in coming years, stating during the Future investment Initiative Conference in Riyadh earlier this week that recent oil mega deals show “hydrocarbons are here to stay.” Back in July, a meeting of G20 energy ministers at the Energy Transitions Ministerial Meeting in India failed to reach consensus on a fossil fuel phasedown as several major fossil fuel producers led by Saudi Arabia and Russia blocked the move. Western nations including the EU remain divided on how hard to push for a global agreement to fully phase-out fossil fuels at COP28.

The IEA’s report grabbed headlines in the international press yesterday: New York Times | BBC | Reuters | The Wall Street Journal | Bloomberg | Financial Times | CNBC | CNN | NPR | Deutsche Welle

WATCH THIS SPACE- Saudi Arabia is committed to investing hundreds of mns of USD to transition to green energy by 2030, KSA renewable energy giant Acwa Power’s CEO Marco Arcelli tells Bloomberg. The Saudi developer says the kingdom will need to channel the investments to increase its clean energy production capacity from wind and solar to 80 GW by 2030, and will earmark a portion of the financing to establish electricity power stations with a 60 GW capacity to ready its infrastructure for the influx of power, Arcelli said. The Public Investment Fund, the country’s sovereign wealth fund and a majority shareholder in Acwa, has committed to financing 70% of KSA’s previous 58.5 GW renewables target for 2030, and has tasked Acwa with developing 70% of the new planned 80 GW clean energy assets, Arcelli noted. Acwa also announced plans to expand its battery energy capacity in the kingdom to capitalize on its solar energy capacity after its BESS projects proved successful in Morocco and South Africa, Asharq notes.

Expansion plans in the works: Acwa plans to further expand its operations in KSA beyond Neom’s USD 8.4 bn green hydrogen plant — in which it holds a 33.3% stake — and Arcelli notes that the company is currently looking to expand its foothold in the Central Asian and Chinese markets. Last week, Acwa Power signed seven cooperation agreements for solar, green hydrogen, and water desalination projects with Chinese firms during the third Belt and Road Forum in Beijing. In Central Asia, the company achieved financial close for three projects in Uzbekistan this year, including its USD 690 mn 500 MW Bash wind plant, the USD 658 mn 500 MW Dzhankeldy wind farm, and the USD 120 mn for the 100 MW Karatau wind farm.

WATCH THIS SPACE- Algeria + Germany discuss converting existing natural gas pipeline to deliver green hydrogen instead: Algeria is in talks with Germany to convert an Algeria-EU natural gas pipeline to a green hydrogen corridor instead to eventually export from the North African country, Asharq Business reported, citing a ministry statement published on the sidelines of a meeting between officials from both countries. Germany hopes to cover 10% of its green hydrogen demands from Algerian exports, in a setup similar to the H2Med pipeline project — a subsea hydrogen pipeline project that is being jointly developed by France, Spain, and Portugal by 2030. Germany also plans to modernize and expand the gas pipelines through Tunisia, Italy, and Austria so that it is able to trade and import green hydrogen to southern Germany. The statement did not provide a cost or timeline for the project. Germany is set to become Europe's largest importer of hydrogen, sourcing up to 70% from abroad by the end of the decade.

REMEMBER- Spain had recently changed its plan to connect the Medgaz — a submarine natural gas pipeline between Algeria and Spain — and chose to shift focus to H2Med, axing Algeria from the potential agreement, which would have seen Spain import green hydrogen from Algeria in 2040. At the same time, Germany said that it may join the H2Med green hydrogen corridor, which — once operational in 2030 — will supply an estimated 2 mn metric tons of the green fuel (c.10% of the EU’s hydrogen demand).

Get Enterprise Climate

***
YOU’RE READING ENTERPRISE CLIMATE, the essential MENA publication for senior execs who care about the world’s most important industry. We’re out Monday through Thursday by 5am Cairo / 5am Riyadh / 6am UAE.

EXPLORE MORE OF ENTERPRISE ON THE WEB — tap or click here to read EnterpriseAM, EnterprisePM, and The Weekend Edition on our powerful new website packed with reader-friendly features.

Were you forwarded this email? Get your own subscription without charge here or reach out to us on climate@enterprisemea.com with comments, suggestions and story tips.
***

CIRCLE YOUR CALENDAR-

Cairo Water Week is taking place from Sunday, 29 October to Thursday, 2 November. This year’s event will focus on global green developments in the water sector with sessions discussing the development of scientific solutions, practical tools, policies, and concrete measures to overcome today’s water challenges. The five-day event is organized by Egypt’s Water Resources and Irrigation Ministry, in partnership with the EU and FAO.

India will host the International Solar Alliance from Monday, 30 October to Thursday, 2 November in New Delhi. Some 96 member countries will participate and discuss mobilizing funds to accelerate solar deployments, the universalization of energy access through solar mini-grids, and diversifying manufacturing and supply chains for solar energy production.

The UAE will host the Forbes Middle East Sustainability Leaders Summit from Wednesday, 1 November to Saturday, 3 November in Abu Dhabi. The summit will gather international leaders in sustainability, technology, finance, and policy to drive green strategies globally. The agenda includes sessions on climate-smart cities, green mobility, sustainable finance, and sustainable tourism. The summit is expected to set the tone for international and regional dialogue and decision-making, including COP28 which will kick off in late November.

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

Mubadala-backed Masdar eyes a 49% stake in UK offshore wind farm: Abu Dhabi’s renewables giant Masdar is planning to purchase a 49% stake in Spanish utility company Iberdrola’s largest offshore wind project off Britain’s eastern coast for EUR 2 bn (USD 2.1 bn), Reuters reports, citing market sources who spoke to Spanish newspaper Cinco Dias. The wind plant — called East Anglia 3 — is expected to be valued at some EUR 4 bn. Iberdrola has been raising financing to invest in new projects by selling stakes in more advanced ones. Both Iberdrola and Masdar declined to comment on the report.

About the wind farm: Construction on the East Anglia 3 farm began last year and is scheduled to be completed in 2026, according to Reuters. The plant will have a capacity of 1.4 GW and will supply green energy to around 1.3 mn homes as part of Iberdrola’s planned macro offshore wind complex in the British North Sea, dubbed the East Anglia Hub. The complex as a whole is expected to generate 2.9 GW and will require a total investment of EUR 6.5 bn.

REMEMBER- Masdar entered a similar agreement and acquired a 49% stake in Iberdrola’s EUR 1.6 bn Baltic Eagle offshore wind farm off the coast of Germany last July.

Iberdrola has a renewables and green fuels investment strategy: The sale of shares in Baltic Eagle is part of Iberdrola’s strategy to finance its EUR 47 bn investment plan, which will see it allocate EUR 17 bn to offshore wind projects in France, Germany, the UK, and the US, earmarking EUR 11.7 bn to install onshore wind farms and EUR 11.2 bn to build onshore solar energy plants. Iberdrola expects to exceed 80 GW of installed renewables capacity by 2030 on the back of planned investments ranging from EUR 65-75 bn between 2026 and 2030. The company currently has a pipeline of 3 GW worth of offshore wind projects under construction and has an operational offshore wind asset portfolio of 1.2 GW, the statement notes.

And the sales plan is already underway: Norway’s sovereign wealth fund said it is planning to invest in 1 GW of Iberdrola’s renewables plants in Spain and Portugal after it already purchased 49% of a 1.3 GW portfolio of solar and wind farms in January for EUR 600 mn. In 2019, Iberdrola sold a 40% stake worth more than GBP 1 bn (USD 1.2 bn) in East Anglia 1 to Green Investment Group, a subsidiary of Australia’s financial services company Macquarie Group, Reuters said.

Saudi Electricity Company inks USD 3 bn financing agreement with GCC banks to expand local grid: Four GCC banks have signed an agreement to extend USD 3 bn to the Saudi Electricity Company (SEC) through an unsecured loan to finance KSA’s 2030 electricity grid expansion plans, the Saudi Press Agency (SPA) reported yesterday. Earlier this month, the International Energy Agency said countries the world over need to commit USD 600 bn in annual investments by 2030 to double or upscale the world’s current electricity grid capacity to pave the road to net zero.

Who’s in? A consortium of Dubai Islamic Bank, the Kuwait Finance House, the UAE’s Mashreq Bank, and the Saudi National Bank will provide the loan, which will have a five-year tenor, SPA notes. SEC — in which the kingdom’s sovereign wealth fund the Public Investment Fund (PIF) has acquired a 25% stake — will not be putting up any guarantees or collateral for the unsecured loan. The news agency does not mention how much each lender has earmarked for the loan.

Where is the money going? SEC will channel the funds toward expanding and upscaling grid infrastructure to ready the country for the influx of renewable energy coming its way under national targets of producing 80 GW of clean energy by 2030, for which PIF-backed Acwa Power will develop 70% of the targeted capacity. SEC’s development strategy falls in line with KSA’s national strategy of investing as much as SAR 500 bn (USD 133.2 bn) by 2030 to expand and improve its grid capacity. A portion of the loan will be earmarked to boost SEC’s regulatory asset base.

SEC is looking to get into the solar power sector: SEC’s CEO Khaled Al Kanun says the company plans to expand its portfolio to get into the solar energy market, with a focus on PV panel manufacturing, and would work on developing the kingdom’s EV infrastructure.

REMEMBER- SEC has been making moves in the EV market: The company acquired earlier this month a 25% stake in the Electric Vehicle Infrastructure Company to expand fast-charging infrastructure across the kingdom. SEC snapped up the shares for SAR 254 mn (c. USD 67.7 mn).

IN OTHER SEC NEWS- SEC plans to double its investments to meet KSA’s electricity demands, Zawya quotes Senior VP Finance and CFO Abdulaziz Al Muhaiza as saying. The company’s capital investments have exceeded SAR 30 bn (USD 8 bn) since 2020, Al Muhaiza said, noting SEC channeled between SAR 28- 35 bn (USD 7.5 bn) over the past three years on modernizing its electricity and distribution network. SEC would mainly rely on freecash flow — instead of debt instruments — to finance its planned projects for 2024, but has not completely ruled out raising funds through green loan and sukuk issuances. SEC’s freecash flow ranges between SAR 10 bn and SAR 20 bn (USD 2.7-5.3 bn.)

Egypt’s Infinity Power sets 10 GW renewables target: Egypt-based renewable energy developer Infinity Power — a joint venture between our friends at Infinity and UAE renewables player Masdar — has set out a target to grow its clean energy portfolio to reach 10 GW by 2030, equating to some USD 5 bn in expected investment tickets to realize the strategy, according to a company statement (pdf). The company currently has a portfolio of 1.3 GW in operational capacity from solar PV and wind farms in Egypt, Senegal, and South Africa.

Impact of the target: Infinity’s planned 10 GW production capacity would power some 12 mn households across the continent, and offset between 15-20 mn tons of carbon emissions annually. The company “aims to operate across all corners of Africa within the next 10 years,” according to the statement.

Infinity already has a considerable foothold in Africa: Infinity Power, along with Masdar and Hassan Allam Utilities, signed back in June a land allocation agreement with the Egyptian government for their USD 10 bn, 10 GW wind farm in Sohag. Infinity is also among seven consortiums that have bought the tender and conditions booklet for several planned renewables-powered desalination projects on Egypt’s North Coast, and is among interested in acquiring a stake 580 MW Gabal El Zeit wind farm. The company’s acquisition of Lekela — which at the time made it the largest renewable energy company in Africa — saw it snap up its 1 GW portfolio of wind projects in Egypt, Senegal, and South Africa as well as its planned 1.8 GW clean energy pipeline. The company notes its acquisition of Lekela “resulted in improvements in the efficiency of project development, team enhancement, stronger procurement leverage and the optimization of growth projections.”

And has export plans: The company signed back in May an agreement with Greece-based Copelouzos Group to explore the feasibility of jointly developing renewable energy projects clean energy to Europe via its 3 GW Greece-Egypt Interconnector (GREGY).

KSA’s Aramco and Enowa partner up on e-fuels: Saudi oil giant Aramco and Enowa — Neom’s energy and water utility subsidiary — have signed a joint development agreement (JDO) to establish an e-fuel demonstration plant in KSA’s Neom, according to a company statement. The e-fuels demonstration plant aims to make a case for the technical feasibility and commercial viability of e-fuel production in the kingdom, the statement notes. The financial details of the agreement and an expected launch date for the planned facility were not provided.

E-fuels? Synthetic e-fuels — also known as electro fuels — are generated from a mix of green hydrogen and captured carbon dioxide or monoxide. Low-carbon e-fuel is already compatible with 28 mn European-made cars across 24 engine families in circulation since 2014, and could offset 400 mn tons of emissions by 2050, according to a recent report by Aramco and Dutch automaker Stellantis.

The details: Under the JDO, Neom will oversee construction for the plant which will be located in Enowa’s Hydrogen Innovation and Development Center (HIDC), while Aramco and Enowa will jointly manage operations and investment for the project and “relevant research programs.” The companies are initially targeting a 35 barrel daily production capacity from green hydrogen and captured CO2. If proven viable, the companies plan to up daily production volumes to some 12 tons of synthetic methanol, which would then be converted into low-carbon gasoline using ExxonMobil’s Fluidized-Bed Methanol-to-Gasoline (MtG) technology. Aramco plans to utilize its e-fuels to help decarbonize the transport sector.

Locally produced green hydrogen: The e-fuels plant in Neom will develop an undisclosed number of solar and wind power farms and will leverage HIDC’s planned 20 MW electrolyzer capacity to provide feedstock for the e-fuels production, according to Aramco.

Aramco has the carbon capture infrastructure down: Last month, Aramco signed an agreement to build one of the world’s largest carbon capture and storage hubs with the capacity to store up to 9 mn tons of carbon dioxide a year by 2027. The facility, which will be located in Jubail, will get some 6 mn tons of CO2 from Aramco, with the rest to come from other industrial sources.

Not Aramco’s first e-fuels demo plant: Last year, Aramco and Repsol signed a partnership agreement to similarly establish an e-fuels demonstration plant in Spain that will initially have an 8k liter daily production capacity. The production demonstration of low-carbon synthetic diesel and jet fuel for automobiles and aircraft.

IN OTHER KSA NEWS- NEOM launches its tech-focused investment fund: Saudi Arabia’s Neom yesterday launched its investment arm, the NEOM Investment Fund (NIF), in a bid to help expand its technology-focused portfolio, SPA reports. NIF — a wholly owned subsidiary of Neom — plans to establish joint ventures with global next-gen companies as well as “multinationals and institutional investors,” and says it will also look to snap up shares in tech-focused startups through equity investments, the news agency notes. The company — which has already announced investments in companies including Regent, Pony.AI, Boom Technology, BlueNalu, and Animoca Brands — will also look to expand its global tech foothold through mergers and acquisitions agreements.

Global energy giant BP has appointed Wail Shaheen (LinkedIn) as Egypt Vice President effective 1 November, according to a statement (pdf). Within his new role, Shaheen will advance BP's investments and projects in Egypt including the exploration of new investments in sustainable energy to support the country’s energy transition plans, the statement notes. Shaheen has over 30 years of industry experience working in Canada, Indonesia, Italy, Oman, Trinidad and Tobago, USA, and Egypt. He has been with BP for 27 years in commercial, technical, and leadership roles, the latest of which was VP of subsurface operations in Trinidad and Tobago, where he led the country’s first utility-scale solar project and signed onto a carbon capture and storage research project.

DECARBONIZATION-

Tunisia signs MoU with EBRD to reduce carbon emissions: The Tunisian Industry, Mines, and Energy Ministry has signed an MoU with the European Bank for Reconstruction and Development (EBRD) to reduce carbon emissions in the electricity sector and energy transition, Tunis Afrique Presse (TAP) reports. The agreement will see the integration of Tunisia into the European electricity market through technical assistance for the Tunisian Electricity and Gas Company (STEG) and the development of the national electricity grid as part of the planned Elmed electrical interconnection project.

REMEMBER- The European Commission signed off on the EUR 307 mn Tunisia-Italy Electrical Interconnection Project (ELMED) in August. The 600 MW subsea interconnector will connect Tunisia and the EU's power grids to allow the transfer of renewable energy between Europe and Tunisia. The EBRD is also expected to sign off on a EUR 45 mn loan to the STEG for the project.

GREEN FINANCE-

Egypt and Germany sign off on EUR 54 mn debt swap agreement: Egypt signed off on a tranche of the EUR 54 mn debt swap agreement with Germany, out of the EUR 104 mn allocated to Egypt's energy transition under the Nexus on Water, Food, and Energy (NWFE) program, according to a statement released earlier this week. Germany agreed on the debt exemption in June on the basis of the fund being funneled towards linking the 500 MW Ras Ghareb and the 500 MW Gulf of Suez wind farms to the national grid. EBRD is also considering the extension of a green loan worth USD 200-300 mn to help enhance Egypt’s electricity distribution grid.

Two times a charm? The International Cooperation Ministry also inked a MoU on a debt swap with the China International Development Cooperation Agency (CIDCA) at the Belt and Road Forum last week. The specifics and value of the agreement were not disclosed.

SOLAR-

Iran breaks ground on 100 MW solar power plant: The Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) started construction on a EUR 60 mn, 100 MW solar power plant for the Chadormalu mine in Yazd, the Tehran Times reports. The plant — which is expected to begin operations within 16 months — will have the capacity to generate 190 mn KWh of electricity annually and reduce greenhouse gas emissions by 115k tons a year.

Iran has been increasing its solar portfolio: Iran's Renewable Energy and Energy Efficiency Organization (Satba) announced earlier this year plans to re-tender 2.2 GW of solar projects, aiming to have one solar farm in each province. It also announced a 1 GW solar farm in Qazvin.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Morocco gets its first energy transition fund: Valoris Capital, a subsidiary of the Valoris Group, has launched the Valoris Alternative Investments Fund with Asafo & Co as advisor. The fund will help Moroccan companies with financing, installing, and maintaining photovoltaic farms for agricultural and industrial businesses. (Statement)
• KSA calls for a balanced, carbon-conscious approach to AI: The Governor of Saudi sovereign wealth fund PIF called for a measured approach toward global AI expansion plans, noting the carbon footprint AI chatbots and image generators like Open AI’s ChatGPT have. (Asharq Business)

Japan and Denmark are set to collaborate on research and development for floating offshore wind power tech, an unnamed official at Japan’s Industry Ministry told Reuters. No further details on the collaboration were disclosed yet both countries are aiming to create a global standard for the industry.

Japan has been planning to capitalize on its massive potential: Japan is planning to have a capacity of 10 GW from offshore floating wind power by 2030 and 45 GW by 2040, according to the Renewable Energy Institute. Japan also explored new partnership opportunities in wind power during the Japan Wind Conference last week.

Can coral reefs be revived with the help of 3D printing? Hong Kong-based startup Archireef is using 3D-printed clay tiles to help restore marine ecosystems 4x more effectively than traditional methods, the National reports. Archireef’s tiles are currently used off the coast of Hong Kong and the UAE, with possible expansion to Jordan, Egypt, Saudi Arabia and others.

How is it made? The tiles have a biometric layer inspired by the shape of the Platygyra coral — a type of coral with one of the best characteristics for tolerating sedimentation stress — to allow corals to latch on the Reef Tiles and “easily adapt to the new environment,” Archireef describes. After the 3D-printing process is completed, the tiles are then installed with the help of divers from the local communities. Within a few months, the impact and reef development are already visible, according to Archireef.

A pilot project was carried out in Abu Dhabi: About 160 reef tiles were placed near Umm Khorah island in Abu Dhabi's Al Dhafra region in March with the help of ADQ and the support of Environment Agency Abu Dhabi, the National said. “You could see the immediate impact,” Tekerek said, adding that the titles have successfully attracted fish and sea urchins for shelter.

And the company has UAE backing: Abu Dhabi Developmental Holding Company (ADQ), Aldar Properties, and Abu Dhabi Porta are all partners of Archireef’s, according to their website. The start-up is also hosted by Hub71, the Emirate's global technology ecosystem accelerator.