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Assets sale flexes the diverging strategies of Acwa Power and Engie

19 February 2025

Commentary
Jennifer Aguinaldo
Energy & technology editor

 

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Saudi utility developer Acwa Power has signed a share purchase agreement with France's Engie for the latter's stakes in four water and power generation plant assets in Bahrain and Kuwait.

The transaction, which is subject to customary regulatory approvals, is not entirely unprecedented. It highlights the two firms' diverging net-zero strategies in the Gulf.

Offloading its stakes in these thermal assets and exiting the two markets aligns with Engie's increasingly "selective projects approach", favouring assets that can help the company meet its 2045 net-zero targets, as well as its internal rate of return. 

On the other hand, the acquisition aligns with Acwa Power's undiminished risk appetite, and entry into the Kuwaiti market.

The purchase of Engie's stake in Kuwait's Al-Zour North 1 independent water and power project (IWPP), in particular, brings Acwa Power a step closer to bagging the contract to develop and operate the Al-Zour North 2 and 3 IWPP, for which it is the sole bidder, in a team with the local Gulf Investment Corporation.

The acquisition, encompassing operating capacities of 4.61GW of gas-fired power generation and 1.11 million cubic metres a day of water desalination facilities, makes it nearly impossible for other international or local utility developers to catch up with – let alone beat – Acwa Power's dominant grip on the GCC power and water developer market.

The acquired stakes boost Acwa Power's net power generation capacity – the capacity equivalent to a private developer's equity shareholding in these assets – and decrease Engie's, by an estimated 1.5GW. 

The transaction brings Acwa Power's net power generation capacity in the GCC states to about 18.9GW, and Engie's to approximately 5.2GW, excluding its net stake in the soon-to-be-awarded 1.5GW Al-Khazna solar independent power project in Abu Dhabi.

This development closes the gap between Engie and the third-largest private utility developer in the GCC region, Japan's Marubeni, which has a net capacity of about 4.2GW.

With multi-gigawatt thermal, renewable energy and battery energy storage system plants coming to the market in the next three to five years, and as the key Gulf states endeavour to meet their 2030 renewable energy production targets, thermal assets changing hands – if winding up their operations is not commercially or contractually feasible – will likely be a key focus for the region's dealmakers in the short to medium term.

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Jennifer Aguinaldo

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