Mergers and acquisitions (M&A) in the renewables sector picked up in 2016 across the Middle East and Africa after a long period of slow activity, EY report ‘Power transactions and trends: 2016 review and 2017 outlook’ revealed.
Greenfield activities continue to dominate power and utility transactions in the region, attracting $8.7 billion of investment last year (based on disclosed values).
Key investment announcements in the last quarter of 2016 included the Kuwait Fund for Arab Economic Development has coordinated a debt financing of $115.5 million to set up a desalination plant in Egypt. Additionally, in the UAE, consortium of lenders including Islamic Development Bank, Natixis, National Bank of Abu Dhabi, and First Gulf Bank investing $924 to build 800 MW Mohammed bin Rashid Al Maktoum Solar PV Phase III. The UAE also saw new projects across coal, nuclear, and solar, funded by both local and Asian investors, to support its raised renewable energy target from 24% to 26% to help fight climate change. Separately, Dubai launched a $US 27 billion green fund to support global sustainability projects.
David Lloyd, Middle East Power and Utilities Transactions Leader, EY, said: “In 2016 we saw the continuing successful deployment of the Independent Power Producer (IPP) model to procure new generating capacity, for both conventional and renewable energy. DEWA’s achievement towards the end of 2016 in reaching financial close on the clean coal Hassyan IPP and Mohammed bin Rashid Al Maktoum Solar PV Phase III shows the pace and scale by which successful projects are coming to market in the region. The focus in 2017 will be very much on the KSA renewable energy program, now that this has been launched by the Ministry of Energy, Industry and Mineral Resources, and on potential investment opportunities from the Saudi Electricity Company’s unbundling into four generation companies.”
Middle East governments carrying out energy reforms
Governments in the Middle East are committed to energy reforms and have implemented energy reducing tactics, such as in Oman, where subsidiaries were removed and cost-reflective tariffs were introduced for customers using more than 150 MWh of electricity per annum. Also planning to increase electricity and water tariffs is Kuwait, who will target consumers of large quantities.
Saudi Arabia plans to cut electricity and water subsidies by $53 billion and by 2020, and have further plans to unbundle the state-controlled Saudi Electricity Company to eventual privatization. Moreover, a tender in 2018 for 300 MW will boost solar capacity in the kingdom, followed by other tenders for 900 MW in 2019 and 750 MW in 2020.
Egypt, one of the top 40 most attractive destinations for renewable energy, is planning to build solar plants with capacity for an estimated 250 MW. In December, Jordan, another top 40 destination, announced its third renewable energy tender for 200 MW and 100 MW wind energy capacity.
Governments are also showing a growing interest in digital and smart technologies. In November, the Bahrain Electricity and Water Authority agreed to partner with Siemens to modernize its grid infrastructure. The Qatar General Electricity and Water Corporation is partnering with Belgian consultancy Elia Grid to develop smart grid expertise.
“We see a clear intent to move on an accelerated basis to greater private sector participation throughout the power and utility value chain. This will create opportunities for both local and international investors, whether in corporate or project finance form. Our current belief is that the nearer term opportunities lie at the production end of the value chain, in both power and water, although we do see potential opportunities in the medium term in transmission, distribution and even retail,” David noted.