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Local firms rise in GCC Power Developer Ranking

24 September 2024

 

Two Saudi Arabia-headquartered firms have joined Acwa Power in the top 10 of MEED’s 2024 GCC Power Developer Ranking.

Aljomaih Energy & Water Company and Ajlan & Bros have entered the list, occupying the sixth and ninth spots, respectively.

The latest developer ranking included a survey of 109 privately owned and financed power generation plants in the six GCC states, including those with attached water desalination facilities. These plants have a collective gross electricity generation capacity of approximately 112,400MW.

These projects include seven solar, two wind and two gas-fired plants, as well as one industrial steam and cogeneration facility, with a total combined gross capacity of 19,635MW, for which contracts were awarded between September 2023 and August 2024.

Of the total capacity awarded during the 12-month period, solar photovoltaic (PV) and wind capacity accounted for 58%, or 11,400MW. Three solar PV contracts with a total capacity of 5,500MW, directly negotiated between Saudi Arabia’s Public Investment Fund (PIF) and a team led by Riyadh-headquartered Acwa Power, comprised nearly half of the awarded renewable IPP capacity.

These three contracts, along with a fourth for the development and operation of the 3,800MW Taiba 1 and Qassim 1 combined-cycle gas turbine (CCGT) IPP, helped boost Acwa Power’s dominance over its competitors.

Acwa Power's 35.1% stake in the 2,000MW Haden, the 2,000MW Muwayh and 1,500MW Al-Khushaybi solar PV projects, and its 40% share in Taiba 1 and Qassim 1, increased the company's total net capacity by 3,200MW, up 23% from last year’s 13,340MW. This figure takes into account the dilution of its shares in Rabigh Arabian Water & Electricity Company. As a result of the contracts it won, Acwa Power’s gross capacity also rose by 8,800MW to reach a total of 45,150MW.

Acwa Power has occupied the top spot in MEED’s GCC Power Developer Ranking in terms of net capacity since 2021, but it overtook its main rival, French utility developer and investor Engie, in terms of gross capacity only the following year.

Excluding the capacity of the directly negotiated solar IPP contracts that Acwa Power secured with the PIF in the past
three years does not change the company’s dominant position in the ranking, although it decreases its net and gross capacities by 25% and 24%, respectively.

Contenders

With no new contracts won, Engie still managed to retain second place in the ranking, with a net capacity of close to 8,000MW.

The successful bids of a team comprising Japan’s Marubeni Corporation and Ajlan & Bros for the contracts to develop and operate the 600MW Al-Ghat and 500MW Waad Al-Shamal wind schemes in Saudi Arabia increased Marubeni’s net capacity to 4,257MW, up 555MW compared to the previous year.

As with Engie, Japan’s Mitsui did not win any new contracts but retained its fourth place in the ranking, just above EDF, which climbed two positions to claim this year’s fifth spot and registered a net capacity that nearly doubled to reach 2,047MW.

EDF’s impressive performance accrued from its equities in three contracts: the 1,100MW Hinakiyah solar PV and the 3,960MW Taiba 2 and Qassim 2 CCGT projects in Saudi Arabia, and Abu Dhabi’s 1,500MW Al-Ajban solar PV scheme.

EDF knocked Japanese developer Sumitomo down the ranking; it landed in the seventh spot this year. Saudi Arabia’s Aljomaih Energy & Water Company – which was not part of the top 10 last year – rose past Sumitomo to claim sixth position.

Aljomaih’s 30% shareholding in the Taiba 2 and Qassim 2 IPP increased its net capacity by close to 1,200MW from just 775MW in the previous 12-month period.

Previously ranked sixth, Japan’s Jera fell to eighth place, despite having won the contract to develop the Najim cogeneration plant catering to Saudi Arabia’s Amiral petrochemicals complex, which it secured along with Abu Dhabi National Energy Company (Taqa).

Below Jera in the ranking is Ajlan & Bros, which is Marubeni’s partner for the contract to develop the Al-Ghat and Waad Al-Shamal wind IPPs. Ajlan is also understood to have taken a 30% stake in the consortium that won the contract to develop the Taiba 2 and Qassim 2 CCGT project.

China’s Jinko Power rounded out the top 10. It led the team that won the contract to develop the 400MW Tubarjal solar IPP in Saudi Arabia in November last year.

Local developers

The rise of Aljomaih and Ajlan & Bros, which led to South Korea’s Korea Electric Power Corporation (Kepco) and Singapore’s Sembcorp dropping out of the power developer ranking’s top 10 this year, confirms the improving profile of regional utility developers.

The resurgence of gas-fired power generation IPPs – in part due to Saudi Arabia’s liquid fuel displacement programme and the overall demand for baseload to address rising renewable energy capacity – is helping local developers to strengthen their footing.

“The reduced interest from European and Japanese contractors in bidding for gas-fired power generation projects could present an opportunity for local developers and investors,” says a senior executive with an international developer.

“As these firms are less constrained by their 2040-50 net-zero targets, they might focus on efficiency and quick deployment rather than on adhering to decarbonisation timelines, allowing for more flexibility in CCGT projects.”

The fact that only two teams submitted bids for the contracts to develop the next pair of CCGT IPPs in Saudi Arabia supports this observation. Similarly, Qatar’s General Electricity & Water Corporation (Kahramaa) received only one bid from a team led by Sumitomo for the contract to develop the Facility E independent water and power producer (IWPP) project earlier this year.

Conscious of its own net-zero targets, and those of its partners, Abu Dhabi state utility Emirates Water & Electricity Company (Ewec) is adopting a slightly different approach for its next CCGT project in Taweelah by announcing that a carbon-capture facility will be installed as part of the project once such solutions become commercially viable.

In addition, the power-purchase agreement (PPA) for Taweelah C is expected to expire by 2049, making it several years shorter than previous PPAs and in line with the UAE's plan to reach net-zero carbon emissions by 2050.

So far, the market has responded positively, with nine companies having met Ewec’s prequalification requirements for Taweelah C.

However, the scale and volume of gas and renewable energy projects planned by Saudi Arabia, which has said it could procure up to 20GW of renewable energy capacity annually starting this year, is expected to continue to boost the net capacity of local developers and their less net-zero-constrained counterparts for the foreseeable future.

There is also an expectation that the exclusion of Acwa Power from the latest round of tenders for Saudi Arabia’s National Renewable Energy Programme (NREP) could further open up opportunities for other companies, regardless of their origin and net-zero targets.   

Tariffs

There are mixed expectations in terms of how levelised electricity costs (LCOE) will behave over the next 12 months. Compared to the preceding decade, when unsubsidised renewable energy production costs consistently and sharply declined, tariffs have become less predictable since 2022.

In the region, solar PV tariffs in particular have trended upward since Acwa Power offered to develop the Shuaibah 1 solar IPP scheme for $cents 1.04 a kilowatt-hour (kWh) in 2020-21.

These tariffs have remained highly competitive relative to those seen in other, less renewable energy-intense regions, however, disincentivising some developers that felt they could not compete on price.

The next six to 12 months could prove decisive, according to one industry expert.

“It is possible that the surge in renewable projects could limit the availability of competent engineering, procurement and construction (EPC) contractors. The combination of aggressive national targets and competition for EPC services may drive up prices and slow project timelines,” the Dubai-based executive tells MEED.

“With raw materials and commodity prices trending downward, it's feasible that renewable energy tariffs could remain low in the short term. However, sustained record-low tariffs will also depend on the availability of financing, local regulations and grid integration costs.”

The LCOE trend for gas-fired power generation schemes seems more predictable.

According to the executive, the limited capacity of original equipment manufacturers, particularly for turbines and other key components of CCGT plants, will likely push tariffs up over the next 12 months.

“Limited availability of high-efficiency equipment will increase procurement costs and construction timelines, influencing the overall project cost.”

This extends to CCGTs incorporating carbon capture, where the LCOE will likely increase due to additional capital and operational expenses. “Whether these costs are absorbed through renegotiation or passed on to the state offtaker will depend on the power-purchase agreement structure,” he says.

Brisk pace of IPP awards set to continue

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Jennifer Aguinaldo

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    The comments by ministerial speakers and business leaders at the event underscored how the GCC has grown closer both politically and economically since the signing of the Al-Ula declaration in 2021, which effectively ended the Qatar diplomatic dispute that began in 2017, and kickstarted a new era of regional cooperation. 

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    The political backdrop is very different in 2024; the six GCC states enjoy warm relations, and tensions with Iran have cooled following a series of diplomatic rapprochements involving Tehran, Riyadh and Abu Dhabi. 

    These diplomatic efforts have resulted in a more stable business environment that has produced robust economic growth, record levels of inward investment and record spending on projects. 

    “As with every great moment in history, our region’s progress depends on continued unity and collaboration with current geopolitical complexities. A unified GCC can serve as a stabilising force shaping not only our own future but influencing the future,” said Bahrain’s Finance & National Economy Minister, Sheikh Salman Bin Khalifa Al-Khalifa, during his opening address at Gateway Gulf. 

    The stability that the Gulf offers has enhanced its appeal to investors at a time of war and instability in other areas. 

    “We have become one of the most promising destinations, not only for those looking to raise capital, but also for those looking to deploy it,” said Sheikh Salman. “Dynamic transformation is sweeping across the region.”

    Saudi Arabia’s Investment Minister Khalid Al-Falih also highlighted how the GCC has managed to prosper while other regions struggle with challenges. “GCC countries come out of these tensions stronger. We know how to navigate unfortunate difficulties. We’ve seen it over many, many decades … and if you look at the numbers, our credit ratings are going up, our stock markets are strong, unemployment is coming down across the region,” he said.

    Regional integration will be crucial to the GCC’s ongoing economic success story

    Attracting investment

    Investment funds also play a key role in the region’s success. “The GCC also has [Saudi Arabia’s Public Investment Fund] the PIF and the Emirati, Qatari and Kuwaiti funds that are all well-capitalised sovereign funds that can co-invest with global investors,” said Al-Falih. 

    Over the past year, some of the world’s leading investment companies have formed joint ventures with the GCC’s sovereign wealth funds. 

    In November, US-based Apollo and Abu Dhabi’s Mubadala Investment Company extended their multibillion-dollar partnership, initially formed in 2022, to capitalise on global private debt and equity opportunities. This extension enhances Apollo’s Capital Solutions division, supporting large-scale investment origination to meet rising demand for private financing. 

    The partnership aligns with Apollo’s goal to reach $275bn in annual originations, with a focus on sectors like clean energy and digital infrastructure.

    In April 2024, BlackRock and the PIF agreed to establish BlackRock Riyadh Investment Management, a multi-asset investment firm based in Riyadh. The venture began with an anchor investment of up to $5bn from the PIF, aiming to accelerate the growth of Saudi Arabia’s capital markets by supporting foreign institutional investment.

    Al-Falih also highlighted changes in how sovereign wealth funds that traditionally used to invest overseas to offset volatility in the oil markets are increasingly looking to domestic investment within the GCC. 

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    Sheikh Salman echoed Al-Falih’s comments. “I chair Mumtalakat, [Bahrain’s] sovereign wealth fund, and we look at where we deploy capital. What we have found is that the most compelling investment opportunities, with the highest return on equity, are increasingly at home or in the region. 

    “Mumtalakat has in effect turned itself into the joint venture partner of choice for inward investment because it provides a higher return on equity versus other investments in other places,” he said.

    Many of those investments have involved infrastructure, with notable transactions in oil infrastructure, the power and water sector and real estate. 

    An example came in September, when Bahrain’s state-owned Bapco Energies sold a stake in the Saudi Bahrain Pipeline Company (SBPC) to a fund managed by BlackRock. SBPC owns a portion of the 112-kilometre pipeline supplying crude oil from Saudi Aramco to Bahrain’s Sitra refinery.


    Sheikh Salman and Saudi Investment Minister Khalid Al-Falih met at Gateway Gulf 2024. Credit: Bahrain News Agency

    Another emerging trend could be cross-border mergers and acquisitions across the GCC. Over the past decade, there has been a steady stream of consolidation as companies combine their operations. This has remained within national borders and typically involved government or government-related entities. 

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    The new trend is for companies to merge with other players outside their national boundaries, but within the GCC. Also at Gateway Gulf, Aluminium Bahrain (Alba) chairman Khalid Al-Rumaihi provided an update and insight into the proposed merger of Alba with the aluminium business of Saudi Arabian Mining Company (Maaden). 

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    The GCC’s projected growth will provide plenty of opportunities for everyone

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  • Bahrain’s projects sector drags on economy

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    Photo credit: Mitsubishi Power (for illustrative purposes only)

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12964755/main.jpg
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    Four wind IPPs, one of which has yet to be awarded, account for the remaining capacity.

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    The Saudi Energy Ministry recently said that the kingdom plans to procure 20,000MW of renewable energy capacity annually, starting this year and until 2030.

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    Jennifer Aguinaldo
  • Chinese firm wins 2.6GW Saudi inverter deals

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    The PIF and its partners are currently developing several solar PV projects with a total capacity of 13.6GW, involving over $9bn in investments. These joint projects – including Sudair, Shuaibah 2, Ar Rass 2, Al-Kahfah and Saad 2 – are intended to enable and support the local private sector through domestic supply-chain participation.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12963512/main.jpg
    Jennifer Aguinaldo