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• 
  Riyadh looks to boost FDI

  3 October 2024

  Commentary
  Colin Foreman
  Editor

  Read the October 2024 issue of MEED Business Review

  This year and next will be pivotal years for the Saudi economy. After years of heavy investment in projects by the state and its related entities – most notably the Public Investment Fund (PIF) – the economy is now shifting towards one that is more reliant on foreign investment. 

  This is partly due to the kingdom running a budget deficit due to oil production cuts and oil prices, but also because creating business opportunities and attracting foreign direct investment (FDI) was a key part of Vision 2030. 

  There are early signs of success, although the largest deals in terms of dollar value have been concentrated on sectors that Saudi Arabia is already well known for, such as oil and gas and, to a lesser extent, industry. 

  Other sectors have so far needed more convincing. The new ambitious development projects, including the gigaprojects, follow a business model that involves state actors developing the first phases of a project. The private sector then takes over once the concept or business model has been proven. 

  This is a tried-and-tested strategy. The best example in the region in recent decades was in the UAE, with Emaar building the first towers at Dubai Marina before the private sector developed many of the remaining towers.

  Many of Saudi Arabia’s projects are nearing that point today as initial phases start to be completed. Over the next few years, the hope is that the development companies leading Saudi Arabia’s projects will be ready to take a slight step sideways and allow the private sector to step in and shoulder more of the investment. 

  For that to happen, Saudi Arabia must successfully deliver the initial phases of its projects. If projects fail to meet their stated ambitions, they may risk scaring off FDI rather than attracting it.

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  Must-read sections in the October 2024 issue of MEED Business Review include:

  > AGENDA: 
  > Riyadh redoubles efforts to boost inward investment
  > Foreign investment trends align with Vision 2030

  > CURRENT AFFAIRS:
  > Iran benefits from energy disruption in Iraqi Kurdistan
  > Jordan election results in Islamist gains

  INDUSTRY REPORT: MEED's 2024 GCC Power Developer Ranking > Local firms rise in GCC Power Developer Ranking > Brisk pace of IPP awards set to continue

  > IRAQ-CHINA: Chinese companies win 95% of all Iraqi energy projects

  > PROJECT SERVICES: Bringing scale to project delivery

  > HIGH-SPEED RAIL: UAE’s high-speed rail moves ahead

  > INTERVIEW: Ducab undaunted by global market headwinds

  > SAUDI ARABIA MARKET REPORT: 

  > COMMENT: Riyadh modifies its narrative
  > GOVERNMENT: Riyadh is forced to reassess its spending priorities
  > BANKING: Saudi banks continue to lend, lend, lend
  > UPSTREAM: Aramco spending lifts Saudi upstream market
  > DOWNSTREAM: Saudi downstream programmes gain traction
  > UTILITIES: Saudi Arabia’s power sector motors on
  > CONSTRUCTION: Companies confirm Saudi gigaproject slowdown
  > TRANSPORT: Infrastructure schemes support Riyadh’s ambitions

  > MEED COMMENTS: 
  > More scrutiny for highly paid expatriates in Saudi Arabia
  > Economic change is inevitable for major projects
  > UAE bucks the trend of rising construction risk
  > Riyadh AI goals require colossal mindset and capital shift

  > GULF PROJECTS INDEX: Gulf projects index halts its decline

  > AUGUST 2024 CONTRACTS: Value of deals signed drops in August

  > ECONOMIC DATA: Data drives regional projects

  > OPINION: Desperate days drag on

  > BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts

  To see previous issues of MEED Business Review, please click here

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  Colin Foreman
• 
  Transmission and distribution sector heads for record year

  3 October 2024

  The GCC region’s power transmission and distribution (T&D) sector is set to experience its best year in terms of the value of awarded contracts.

  Based on data from regional projects-tracking service MEED Projects, the total value of awarded contracts for substations, control centres, overhead lines and cables across the six GCC states reached an estimated $13.8bn between January and September 2024.

  This figure already exceeds by 81% the total value of contracts awarded in the preceding full year.

  It also exceeds by 31% the total value of awarded contracts in 2021, which registered a record-high of $10.5bn in the 10 years starting in 2014.

  Project activity within the T&D sector is expected to remain buoyant over the next few years, with roughly $35.9bn-worth of planned and unawarded contracts.

  Of these, some $8.5bn are in the bid evaluation stage as of early October, with a further $6.5bn under tendering.

  Some $12bn of projects are in the front-end engineering and design (feed) phase.

  Energy diversification 

  Ambitious national energy diversification and net-zero targets across the region, which traditionally relied almost entirely on thermal power plants, will spur significant investments in T&D infrastructure in the future.

  According to experts, the ongoing expansion of electricity generation capacity across the region, particularly from renewable energy sources, requires a more robust, integrated and stable electricity grid.

  This is in addition to the projected increase in electricity demand as most states expand their downstream and petrochemical sectors, develop new communities and megaprojects in remote regions, and build more data centres to support smart cities, and internet-of-things (IoT) and artificial intelligence (AI) applications.

  The region’s largest economy, Saudi Arabia, for instance, aims for renewable energy to account for 50% of its electricity generation capacity by 2030.

  Operational renewable installed capacity in the kingdom jumped from roughly 300MW in 2020 to 3,500MW this year, with a further 16,000MW currently under construction or about to start construction, and gigawatts more under tender.

  Crucially, the kingdom’s energy minister confirmed earlier this year that the kingdom has plans to procure up to 20,000MW of renewable capacity every year, subject to demand.

  Saudi Arabia is also ramping up its procurement programme for new gas-fired power plants, in line with a plan to decommission fleets running on liquid fuel and at the same time secure baseload as more renewable energy enters the grid.

  There is also a marked increase in terms of T&D packages or contracts interconnecting the kingdom’s various regions from central Riyadh to the eastern, northern and southern provinces.

  It comes as no surprise that the kingdom accounted for 72% of the $13.8bn-worth of T&D contracts awarded in the GCC region in the first three quarters of 2024.

  Oman, which awarded T&D contracts with the same value as the UAE between January and September this year, has also been working to integrate its smaller electricity grids with the sultanate’s main electricity grid to boost electricity supply in its smaller, remote regions.

  Unlike the noticeable peaks and throughs in T&D capital expense in other GCC states, the UAE’s spending has remained pretty consistent since 2014, averaging roughly $1.4bn annually. The exemption was in 2021 when a team comprising South Korea’s Kepco, Japan’s Kyushu Electric Power Company (Kyuden) International and France’s EDF won the contract to develop Abu Dhabi’s first high-voltage, direct current (HVDC) subsea transmission system.

  It is worth mentioning that the completion of the four units of Abu Dhabi’s 5,600MW Barakah nuclear power plant this year and the expected completion of Dubai’s first hydropower plant in Hatta mean the UAE will have the most diverse energy sources for electricity generation among its peers.   

  Power links

  The goal to expand electricity trade within the GCC member states and with other countries such as Egypt, Jordan and Iraq is another key driver for T&D investments.

  Work is under way to increase the capacity of the GCC regional grid and enable its member-states to procure backup or emergency capacity when the need arises. Kuwait availed of this in May when it purchased 500MW from the GCC grid in anticipation of its inability to meet peak demand in the summer months.   

  An HVDC network linking Saudi Arabia and Egypt is under construction, which will allow bidirectional electricity trade as well as access to the wider European and African markets.

  A second GCC link with Oman and a first link with Jordan are also planned. Another HVDC transmission project linking Neom in the northern tip of the Red Sea to Yanbu, stretching 605 kilometres, is under way.

  It turns out that the need to invest in T&D infrastructure to support electricity generation capacity buildout, following years of underinvestment, is a global phenomenon.

  Juan Diego Zuluaga, Suncolombia CEO, told the ongoing World Green Energy Summit in Dubai that there is a major mismatch between the buildout of transmission lines and electricity generation capacity.

  Experts like Zuluaga think that failing to invest in T&D can potentially lead to issues such as curtailment or wastage in renewable power, particularly in the absence of suitable energy storage systems or efficient interconnections or electricity links.

  Utility companies are under pressure not only to expand their transmission capacities and coverage but to make these infrastructure and facilities more efficient, too.

  New technologies, most of them driven by IoT or AI, for instance, can be used to improve demand and supply management and forecasting, leading to improved grid performance.

  “In this region, in particular, consumers expect 24x7 electricity supply. In fact, it is a given,” notes a senior executive with a European technology company. “The hope is for that to continue in the future.”

   

   

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  Jennifer Aguinaldo
• 
  FDI trends align with Vision 2030

  3 October 2024

  

   

  This package also includes: Riyadh redoubles efforts to boost inward investment

  ---

  Foreign direct investment (FDI) trends are typically volatile and impacted by economic and political factors.

  According to a report on FDI by GlobalData, there was a decline in both project numbers and capital investment in 2023 after a strong year in 2022. 

  While the overall numbers were down, the report highlighted global trends that include a strong investor focus on the Middle East and elsewhere in Asia, outside of China, with Saudi Arabia and the UAE identified specifically as markets that offer strong potential. 

  According to a GlobalData poll, the Middle East ranked as the fourth most attractive region for FDI in 2024 by investor sentiment.

  Middle East deals 

  In terms of deals, the Middle East experienced annual growth in both project activity and inbound capital investment from FDI in 2023. Companies announced 1,848 projects worth an estimated $88.3bn. Geopolitics, strategic partnerships, digitalisation, emissions reductions and artificial intelligence are the key themes causing investors to expand in the region. 

  The UAE was the largest destination country in the region with $23bn of deals across 1,277 projects, which also made it the third-largest FDI market in the world in 2023 based on project activity. 

  Saudi Arabia was the second-largest destination country in the region based on project activity. According to GlobalData, the kingdom attracted inward investment of $17.3bn from 305 FDI projects, which represents a growth of 23% in inward FDI investment in 2022-23. 

  Core sectors

  A detailed analysis of the Saudi FDI data shows that some sectors have been more successful than others. The numbers show that the core sectors of Vision 2030 have been best placed when it comes to attracting FDI.

  The most successful sector in terms of value is metals and minerals. There have been $9.5bn of metals and minerals projects announced in the kingdom, which is significantly more than the second-largest sector, renewables and alternative power, which has attracted $5.4bn of deals. 

  Metals and minerals are an increasingly important sector for Saudi Arabia. The kingdom says its natural resources are worth $2.5tn – an increase of more than 90% compared with 2016 estimates.

  To help monetise these reserves, Riyadh enacted a new mining investment law in 2021, and since then the Ministry of Industry & Mineral Resources (MIMR) has awarded more than 2,000 mining permits to local and foreign firms under its accelerated exploration initiative.

  Renewables and alternative power is also an important sector for FDI, with foreign players investing in power generation projects that are delivered on a public-private partnership basis. 

  Not all projects are announced with a value. Based on the number of FDI projects rather than the aggregate of their announced value, the best-performing sector is tourism, with 271 projects, followed closely by business and professional services, with 270 projects. 

  Tourism is another key pillar of Vision 2030. It has been identified as a focal point for Saudi Arabia’s economic transformation because it opens up the kingdom to foreign visitors, while at the same time creating jobs and investment opportunities.

  When analysed based on business function, manufacturing is the leading sector based on deal value, while construction is the largest sector when measured by the number of projects. Both of these sectors are playing a key role in delivering the objectives of Vision 2030. 

  Manufacturing investments are helping develop jobs and investment opportunities in Saudi Arabia, while also keeping Saudi spending within the kingdom and securing supply chains. This is highlighted clearly by the kingdom’s various moves into the automotive manufacturing space, which aims to establish Saudi Arabia as a key supplier of vehicles for both the local and international markets. 

  Construction underpins many of the other sectors being developed in Saudi Arabia as much of the new economic activity that is planned needs new facilities. Whether it be hotels for tourism, factories for manufacturing or office buildings for professional services, there is a wide range of construction projects planned and underway in the kingdom. 

  FDI landmarks

  Notable breakthroughs in FDI in Saudi Arabia this year highlight these trends shown by the data. The first major deal involves manufacturing and was reported in January when Turkish steelmaker Tosyali Holding revealed plans to invest up to $5bn in a new steel plant in the kingdom.

  Another manufacturing deal came when The Saudi Arabian Industrial Investments Company (Dussur) divested its 55% ownership in General Electric Saudi Advanced Turbines (Gesat) to GE Vernova, giving the US-headquartered firm full ownership of the manufacturer.

  For construction, the National Housing Company (NHC) has signed several major deals with foreign investors. In April, NHC and Urbas Middle East Real Estate Company, a subsidiary of Spain’s Urbas Group, signed an agreement to develop over 589 residential units in NHC’s Al-Fursan suburb of Riyadh.

  In March, NHC signed another deal with Egyptian real estate developer Talaat Moustafa Group (TMG) to develop over 27,000 residential units at NHC’s Banan City project, which is also in the Al-Fursan suburb of Riyadh. 

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  Colin Foreman
• 
  Bringing scale to project delivery

  3 October 2024

  

   

  A US-based project services company has quietly grown over the past seven years into a global entity with $15bn of revenue and operations in over 100 countries, including key Middle East markets.

  That company is Global Infrastructure Solutions Inc (GISI). It was founded in 2017 by a group of industry veterans, including Dick Newman and John Dinisio, who previously founded another industry giant, Aecom. 

  “The founders are legends in the industry. Dick Newman, in many respects, shaped the modern engineering and consulting business. John Dinisio is another key leader, and so is Jeff Kissel. They are a group of highly experienced, very accomplished leaders that got together in 2017 and founded the business, and in that short period built a business of over 15,000 staff,“ says Derek Amidon, chief operating officer of GISI.

  Business structure

  The business is structured into four broad segments: infrastructure, earth and environment, international development and infrastructure in Asia. 

  The main business for infrastructure is Hill International, which merged with GISI in December 2022. Hill has a strong track record of delivering major projects in the Middle East, including the Palm Jumeirah, Abu Dhabi Airport and Riyadh Metro. 

  The Middle East is also an important region for GISI and, having grown up in the region as a child, one that holds a special place for Amidon. “I have always been interested in the Middle East, and it is a key area of focus for us. We are strengthening our presence and serving important clients. Hill International has worked on some of the most transformative projects that have helped define the modern Middle East,” he says. 

  Global spending on infrastructure right now is at record levels” 
  Derek Amidon, GISI

  The Middle East is just one global market offering strong promise for GISI. “Global spending on infrastructure right now is at record levels, and the demands from clients for our services are very high,” says Amidon. 

  Using a sporting reference, Amidon highlights GISI’s scale and the ability to call upon the experience of its global network of staff as a key differentiator. “We are a firm with a very deep bench of capability. Our global footprint has positioned us well to support our clients and their projects.” 

  People are crucial for successfully delivering projects. “In the Middle East, we are becoming a valuable resource for clients. We are working on key programmes and that will continue to fuel our growth. Our growth has been phenomenal up until now, and that is tied to our ability to attract the best talent in the industry,” says Amidon.

  Looking ahead, GISI is committed to the region and is mindful that it will have to negotiate challenges along the way. “Clearly, there are tensions in the Middle East, but I think we are experienced enough to roll with those tensions. Challenges do not daunt us. We seek to make smart decisions and have good collaborative relationships with our clients,” says Amidon. 

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  Colin Foreman
• 
  UAE’s high-speed rail moves ahead

  3 October 2024

  Etihad Rail asked contractors over the summer to submit prequalification forms by October for a contract to design and build the civil works packages for the high-speed rail (HSR) line connecting Abu Dhabi and Dubai.

  The design speed of the trains running on the network will be 350 kilometres an hour (km/h) and the operating speed will be 320km/h.

  The proposed HSR programme will be constructed in four phases, gradually adding further connectivity to other areas within the UAE.

  The first phase involves the construction of a railway line connecting Abu Dhabi and Dubai, which is estimated to be operational by 2030.

  The second phase will involve the development of an inner-city railway network with 10 stations within Abu Dhabi city.

  The third phase of the railway network involves the construction of a connection between Abu Dhabi and Al-Ain.

  The fourth phase involves the development of an inter-emirate connection between Dubai and Sharjah.

  The 150-kilometre (km) first phase of the HSR line will stretch from the Al-Zahiyah area in Abu Dhabi to Al-Jaddaf
  in Dubai.

  The project’s civil works have been split into two packages comprising four sections, the scope of which includes:

  • Phase 1A: Al-Zahiyah to Yas Island in Abu Dhabi (23.5km)
  • Phase 1B: Yas Island to the border of Abu Dhabi/Dubai (64.2km)
  • Phase 1C: Abu Dhabi/Dubai border to Al-Jaddaf in Dubai (52.1km)
  • Phase 1D: Abu Dhabi airport delta junction and connection with Abu Dhabi airport station (9.2km)

  The HSR project is also expected to include significant tunnelling works totalling 31km.

  Five stations

  The rail line will have five stations. These will be in Al-Zahiyah (ADT), Saadiyat Island (ADS), Yas Island (YAS), Abu Dhabi airport (AUH) and the Al-Jaddaf (DJD) area of Dubai.

  The ADT, AUH and DJD stations will be underground, while ADS will be an elevated station and YAS will be at grade.

  The overall HSR package also includes provisions for the rolling stock, railway systems and two maintenance depots.

  The high-speed project will slash journey times between the UAE’s two largest cities and economic centres. The journey time between the YAS and DJD stations will be 30 minutes.

  Dubai-based Matcon Testing Laboratory and Abu Dhabi’s Engineering & Research International are conducting drilling tests to ascertain the ground conditions in areas through which the HSR line will pass.

  Spanish engineering companies Sener and Ineco are the project’s engineering consultants. French engineering firm Systra has been confirmed as the project management consultant for the first phase of the project.

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  Yasir Iqbal