LONDON: From “harvesting fog” in Oman to vertical farming in Dubai, Gulf states are looking beyond solar power in the race to develop innovative renewable technologies.
A surge in investment, triggered by a regionwide economic diversification push, is helping to transform the region into an unlikely global hub for renewables innovation.
Dubai utility DEWA this year signed an agreement to study plans to build a 400MW pumped hydro storage power station — using water from Hatta Dam to generate hydro-electric power from water pumped using solar-powered turbines.
It forms part of the Dubai Clean Energy Strategy 2050 which aims to make the emirate a global hub for the green economy and source 75 per cent of its total power output from clean energy.
But it is only one of dozens of major renewable energy projects under way as the huge investment program in solar and offshore wind power in the region extends to other technologies.
“As renewable energy costs decline, technology advances and deployment accelerates around the world, we are entering a new age of energy transformation, with renewable energy becoming a significant driver of economic growth, job creation, and socioeconomic development,” said Adnan Amin, director-general of the International Renewable Energy Agency (IRENA).
Urbanization in the Gulf is also spurring investment as the region’s big cities warm up.
Arup, the London-based engineering consultancy, warns that “arid” cities need to innovate more or become less habitable, as they become drier.
Its report “Cities Alive: Rethinking Cities in Arid Environments,” argues that as air conditioning has enabled the growth of arid cities, many are seeing an “urban heat island effect,” where they become hotter than the surrounding rural areas, increasing water use and accelerating energy consumption.
The report urges cities to adopt measures such as industrial-scale fog and dew harvesting and cooling pavements that can reduce ambient temperatures by up to 7 degrees, as well as building more energy-efficient buildings.
“Cities in arid regions are expected to experience the highest rates of natural population growth and urbanization in the coming century. Yet most are still being planned and designed based on a global city-making paradigm from the 1950s. Cities need to adopt strategies that combine technological innovation with locally adapted and climatically appropriate solutions,” said Hrvoje Cindric, an associate at Arup.
Many cutting-edge renewables technologies are being developed at Masdar City in Abu Dhabi.
Masdar City includes IRENA’s headquarters and the new Masdar Institute and aims to be the first city to operate without fossil-fueled vehicles at street level.
“The region will be exploring different applications but they will always be secondary to wind and solar. This is where the main investment is,” says Zoheir Hamedi, MENA program officer at IRENA.
The Indian Ocean coast of Oman is seen as offering strong potential for wind power, as is Saudi Arabia’s northern quarter.
But Hamedi also points to the potential which bio-energy could offer as a renewable energy source in the region.
On this front, The Emirates Waste to Energy Company, a joint venture between Masdar and Bee’ah, signed terms earlier this year with CNIM on a design, build and operate agreement for the first waste-to-energy facility in the UAE in Sharjah.
Due for completion by 2020, the plant will treat more than 300,000 tons of municipal solid waste each year and generate around 30MW of electricity.
Meanwhile, in January, Dubai Municipality signed a 2.5 billion dirhams ($680,700) contract to build a major new waste-to-energy plant at Warsan which will treat 1.82 million tonnes of waste annually and generate some 185MW of electricity.
Swiss engineering company HZI and Belgian firm Besix Group are expected to start construction this year and the plant is expected to be partially operating by 2020.
Geothermal energy also offers potential in the region, particularly in Saudi Arabia, where a study has highlighted the scope for generating energy from a series of hot springs in the Al-Khouba area of Jizan province in the south west of the country.
Fog harvesting using vast vertical sheets of canvas has proved a useful source of water in areas of scarcity such as Morocco.
The Sustainability Pavilion at the Dubai Expo 2020 will use structures that generate solar energy and capture water from humidity in the air to supply much of its water needs.
Fog technology could be useful in KSA, which combines low rainfall with high per-capita water consumption. Data collected over a year at the Rayda reserve weather station suggested fog could provide a supplementary water supply for the agriculture sector in the south west of the Kingdom, according to research in Water and Environment Journal.
Fog collection projects have also been installed in desert areas worldwide, including Oman and Eritrea.
Meanwhile, to accelerate dew harvesting techniques, the partners of the SunGlacier Challenge recently invited teams of universities worldwide to make water from the air.
The growth of renewable energy will also increase the need for innovative energy storage methods.
“New technologies in energy storage will come to the fore, develop, evolve and become more cost-competitive,” said Dietmar Siersdorfer, chief executive of Siemens Middle East, in a recent report.
Hydrogen is seen as a ripe solution for energy storage from a range of a few kilowatts to gigawatts, for several weeks.
Decentralised systems will also allow power users in industry to produce energy independently for their facilities, reducing transmission losses and carbon emissions.
The Siemens report also highlights energy efficiency as a major area for growth in the region, potentially generating savings of up to 30 per cent.
It also notes the rise in energy efficiency services companies (ESCOs) in the region.
The UAE already has about 30 such companies, more than half of them based in Dubai.
Regional governments have stepped up efforts to remove subsidies in the energy sector in recent years as part of a broader push to wean Gulf economies off oil dependence.
However subsidies remain in place in some countries, which can deter investment in renewables, according to analysts.
“The whole thing needs to be re-thought with a proper plan,” said Rahmat Poudineh, lead senior research fellow, electricity at the Oxford Institute for Energy Studies.
For renewable resources to be integrated economically into the existing energy market, electricity tariffs need to be reformed. Letting renewables compete with existing sources of energy, on a level playing field, is the key issue, he said.
The region also needs to invest in energy efficiency. “Saving 1KWh (kilowatt-hour) of energy is much cheaper than producing 1KWh of clean energy,” Poudineh said.
Gulf states look beyond solar with foggy renewable vision
Gulf states look beyond solar with foggy renewable vision
- Fog harvesting, hydro-electricity and waste-to-energy are among the innovative technologies rolling out in the region
- The growth of renewable energy will also increase the need for innovative energy storage methods.
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Saudi PIF on track to reach $2tn in AuM, 2nd-largest globally by 2030
RIYADH: Saudi Arabia’s Public Investment Fund is set to be ranked second among the world’s sovereign wealth bodies by 2030 with $2 trillion in assets under management, according to monitoring organization Global SWF.
A report from the firm forecasts PIF will more than double its current AuM value of $925 billion by the end of the decade, and rise from its 2024 ranking of sixth among global state-owned investor funds.
According to projections from the institute, PIF’s AuM in 2030 will represent 10.5 percent of the global sovereign wealth funds’ total assets, which are set to reach $19 trillion, as it rises from sixth place
Diego Lopez, founder and managing director at Global SWF, said: “Capital attracts capital — so international financial institutions are attracted in partnering with a player with such a huge balance sheet and role in the economic development.”
According to the report, to achieve its ambitious goal of reaching $2 trillion by 2030, the PIF will depend on a combination of strategies. These include oil revenue allocations, which refer to the portion of the Kingdom’s oil earnings transferred to the PIF, debt issuance, and returns generated from its investments.
“Saudi Arabia needs to make its capital base sustainable, diversified and resilient to lower levels of oil prices,” Lopez told Arab News.
“That means raising debt, as PIF has been doing, and eventually raising equity through subsidiaries that can act as asset managers — we see this working very well in Abu Dhabi with Mubadala Capital, Lunate, etc,” he added.
According to the report, the PIF’s 10-year annualized return from 2013 to 2022 stood at 6.9 percent, outperforming the sovereign wealth fund average of 5.7 percent annually.
In 2024, the global economy showed resilience despite geopolitical risks and market uncertainties, with global GDP growth projected at 3.2 percent, slightly improving to 3.3 percent in 2025, according to the OECD.
The International Monetary Fund forecasts a subdued five-year outlook of 3.1 percent, reflecting weaker growth in China, Latin America, and the EU. Developed markets are facing slower growth due to tightening monetary policies, while developing economies maintain greater stability.
Central banks, led by the US Federal Reserve, began easing rates in 2024, responding to reduced inflationary pressures. According to the report, as the global economy adapts, sovereign wealth funds are increasingly focused on capital preservation and stimulating foreign direct investment, with those in the Middle East and North Africa region entering a new phase of growth.
Saudi Arabia offers robust economic expansion fueled by diversification initiatives and ambitious mega-projects like NEOM, the Red Sea Project, and Qiddiya.
PIF’s investments are strategically positioned to capitalize on these high-growth areas, making it a gateway for investors seeking exposure to dynamic emerging market opportunities.
GCC sees greater international attention
According to the report, global sovereign wealth funds have, for the first time, surpassed $13 trillion in assets under management, with capital heavily concentrated in two key regions — the Gulf Cooperation Council, holding 38 percent of the total, and Southeast Asia at 10 percent.
Interest in these powerful global investors remains strong, the report said, drawing heightened international attention to the GCC, a region with fewer than 60 million residents.
Previously named the “Region of the Year” by Global SWF, the GCC has seen a wave of global asset managers and bankers establishing local offices to capitalize on burgeoning opportunities. According to the report, the GCC-Southeast Asia axis is expected to continue driving growth across the sovereign wealth landscape.
PIF represented 7.11 percent of MENA’s sovereign wealth funds’ AuM, with assets totaling $925 billion.
Leading the rankings is Abu Dhabi Investment Authority at $1.11 trillion, followed by Kuwait Investment Authority with $969 billion.
Global sovereign wealth fund investments totaled $136.1 billion across 358 transactions in 2024. The “Oil Five” — ADIA, ADQ, PIF, QIA, and Mubadala — maintained their dominance, together accounting for 60 percent of the total investment value, amounting to $82 billion. As a result, they secured positions among the top 19 dealmakers of the year.
This marks a significant rise from $74 billion in both 2023 and 2022, $41 billion in 2021, $39 billion in 2020, and $28 billion in 2019, reflecting the accelerating investment momentum of these sovereign wealth giants.
While some Gulf sovereign wealth funds leaned toward emerging markets, including their domestic economies, developed markets remained the dominant choice for most global sovereign investors.
Saudi Arabia’s PIF, Abu Dhabi’s ADQ, and Qatar’s QIA exhibited a preference for emerging markets, reflecting their strategic focus on regional and high-growth economies.
PIF investments
According to the report, a significant factor driving the PIF’s growth is its projected boost in domestic spending to $70 billion annually by 2025.
The fund’s investment strategy is focused on high-growth sectors, including infrastructure, digitalization, AI, and renewable energy.
Among the top 15 largest global investments by sovereign wealth funds in 2024 was PIF’s $3 billion acquisition of a 51 percent stake in Saudi Arabia’s TAWAL and $2.16 billion of a 40 percent stake in Selfridges in the UK.
Other significant investments for the PIF include a 15 percent stake in Heathrow Airport for $1.8 billion.
According to the institute, the largest deals are consistently pursued by a select group of funds known for their substantial firepower and risk appetite. This group includes the top 10 spenders, with the GCC’s “Big 5” leading the way.
Mubadala emerged as the leading sovereign investor in 2024, deploying $29.2 billion across 52 deals, a 67 percent increase from the previous year. It was followed by GIC at $26.6 billion, CPP with $21.1 billion, PIF at $19.9 billion, and ADIA at $17.1 billion.
PIF has also ventured into artificial intelligence and space, co-investing in Databricks and launching Neo Space Group to advance Saudi Arabia’s satellite industry.
These initiatives reflect the fund’s commitment to positioning Saudi Arabia as a leader in global digital and technological innovation.
PIF saw a 24 percent decline in its US equity portfolio, the report said. At the beginning of 2024, the fund sold shares in 18 companies worth nearly $13 billion, including pandemic-era investments like gaming giant Activision Blizzard, cruise leader Carnival, and entertainment company Live Nation, which yielded strong returns.
According to Lopez: “The sale of the listed equities was about monetizing a huge upside from their purchase during covid, rather than about decreasing the overseas portfolio.”
The expert noted the importance to recognize that while PIF’s domestic portfolio may be growing relative to its international holdings, the overall assets under management continue to expand, with significant investments being made outside the Kingdom.
PIF has also made significant investments in the electric vehicle sector, despite facing challenges with earlier ventures.
In 2019, PIF divested from Tesla but doubled down on Lucid Motors, placing a major bet on the EV manufacturer.
This strategic move has required substantial funding, including $2.8 billion in 2024 alone. Despite the financial commitment, PIF remains focused on its long-term vision for Saudi Arabia, supporting Lucid’s growth with a manufacturing facility in King Abdullah Economic City.
In January, Lucid Motors became the first global automotive company to join the Kingdom’s “Made in Saudi” program, reinforcing the country’s push to strengthen its industrial capabilities.
The program also supports Vision 2030’s goals of attracting investments, boosting non-oil exports, and creating sustainable jobs, while positioning Saudi Arabia as a hub for innovation and manufacturing in the EV sector.
PIF’s debt financing
On Jan. 6, PIF announced the completion of its inaugural $7 billion murabaha credit facility, supported by a syndicate of 20 international and regional financial institutions.
This Shariah-compliant financing structure is part of the fund’s medium-term capital raising strategy, aimed at diversifying its funding sources to support transformative investments both globally and within Saudi Arabia.
According to another report published by Global SWF in January, PIF’s use of debt financing mirrors a growing trend among sovereign wealth funds and public pension funds, which have raised around $700 billion over the past two decades.
Despite strong credit ratings from Moody’s and Fitch, PIF faces pressure from surging domestic investment in giga-projects like NEOM and Qiddiya, with annual funding needs expected to rise from $40 billion in 2023 to $70 billion by 2025.
Sustaining investor confidence will depend on its ability to manage financial obligations and execute Vision 2030 goals.
While markets currently support PIF’s sovereign-backed debt, delays or disruptions could strain resources and affect its ambitious agenda, making its financing strategy critical for both national economic transformation and global sovereign investment trends.
However, PIF’s diversified funding strategy, coupled with its ability to attract global partnerships, positions it as a transformative force capable of reshaping Saudi Arabia’s economic future and reinforcing its role as a leading driver of global investment innovation.
Oil Updates — crude jumps on concerns about more sanctions on Russia and Iran
LONDON: Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.
Brent crude futures gained $2.50, or 3.3 percent, to $79.42 a barrel by 3:48 p.m. Saudi time, reaching their highest in more than three months. US West Texas Intermediate crude futures advanced $2.39, or 3.2 percent, to $76.31.
“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the US, driving up demand for fuels.”
Ahead of US President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.
This could materialize even earlier, with US President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil industry.
The US weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by ... demand for heating oil, kerosene and LPG,” they said in a note on Friday.
Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.
Inflation worries are also delivering a boost to crude oil prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.
Oil prices have rallied despite the US dollar strengthening for six straight weeks, making crude oil more expensive outside the US.
SABIC, Almarai, SEC able to absorb fuel price hike: S&P Global
RIYADH: Major Saudi companies, including chemical company SABIC, dairy firm Almarai, and Saudi Electric Co., are well-positioned to handle the impact of higher fuel and feedstock prices introduced on Jan. 1, according to a new report.
Released by capital market economy firm S&P Global, the analysis reveals that those corporates will be able to absorb the marginal increase in production costs by further improving operational efficiencies as well as potentially via pass-through mechanisms.
This came after Saudi Aramco increased diesel prices in the Kingdom to SR1.66 ($0.44) per liter, effective Jan. 1, marking a 44.3 percent rise compared to the start of 2024. The company has kept gasoline prices unchanged, with Gasoline 91 priced at SR2.18 per liter and Gasoline 93 at SR2.33 per liter.
Despite the hike, diesel prices in Saudi Arabia remain lower than those in many neighboring Arab countries. In the UAE and Qatar, a liter of diesel is priced at $0.73 and $0.56, respectively, while in Bahrain and Kuwait, it costs $0.42 and $0.39 per liter.
“For SABIC and Almarai, the increase in feedstock prices will not affect profitability significantly. In the case of utility company, SEC, additional support will likely come from the government if needed,” the report said.
The capital market economy firm projects that SABIC will continue to outperform global peers on profitability.
“We don’t expect the rise in feedstock and fuel prices to materially affect profitability, since the company estimates it will increase its cost of sales by only 0.2 percent,” the report said.
It further highlighted that SABIC is considered a government-related entity with a high possibility of receiving support when needed.
The report also underlines that Almarai anticipates an additional SR200 million in costs for 2025, driven by higher fuel prices and the indirect effects of increased expenses across other areas of its supply chain.
“We believe Almarai will continue focusing on business efficiency, cost optimization, and other initiatives to mitigate these impacts,” the release stressed.
With regards to SEC, S&P said that an unrestricted and uncapped balancing account provides a mechanism for government support, including related to the higher fuel costs.
“We believe any increased fuel cost will be covered by this balancing account,” the report said.
The study further highlights that the marginal increase “could significantly affect wider Saudi corporations’ profit margins and competitiveness.”
The S&P data also suggests that additional costs will be reflected in companies’ financials from the first quarter of 2025.
“Saudi Arabia is continuing its significant and rapid transformation under the country’s Vision 2030 program. We expect an acceleration of investments to diversify the Saudi economy away from its reliance on the upstream hydrocarbon sector,” the report said.
“The sheer scale of projects — estimated at more than $1 trillion in total — suggests large funding requirements. Higher feedstock and fuel prices would help reduce subsidy costs for the government, with those savings potentially redeployed to Vision 2030 projects,” it added.
Lenovo to produce ‘Saudi Made’ PCs by 2026 following $2bn Alat deal closure
RIYADH: Chinese tech giant Lenovo is set to manufacture millions of computer devices in Saudi Arabia by 2026, following the completion of a $2 billion investment deal with Alat, a subsidiary of the Public Investment Fund.
First announced in May, the partnership has now received shareholder and regulatory approvals, paving the way for Lenovo to establish a regional headquarters and a manufacturing facility in the Kingdom.
The deal marks a significant step in aligning Lenovo’s growth ambitions with Saudi Arabia’s Vision 2030 goals of economic diversification, innovation, and job creation, the company said in a press release.
The factory will manufacture millions of PCs and servers every year using local research and development teams for fully end-to-end “Saudi Made” products and is expected to begin production by 2026, it added.
“Through this powerful strategic collaboration and investment, Lenovo will have significant resources and financial flexibility to further accelerate our transformation and grow our business by capitalizing on the incredible growth momentum in KSA and the wider MEA region,” Yang said.
He added: “We are excited to have Alat as our long-term strategic partner and are confident that our world-class supply chain, technology, and manufacturing capabilities will benefit KSA as it drives its Vision 2030 goals of economic diversification, industrial development, innovation, and job creation.”
Amit Midha, CEO of Alat, underscored the significance of the partnership for both Lenovo and the Kingdom.
“We are incredibly proud to become a strategic investor in Lenovo and partner with them on their continued journey as a leading global technology company,” said Midha.
“With the establishment of a regional headquarters in Riyadh and a world-class manufacturing hub, powered by clean energy, in the Kingdom of Saudi Arabia, we expect the Lenovo team to further their potential across the MEA region,” he added.
The partnership is expected to generate thousands of jobs, strengthen the region’s technological infrastructure, and attract further investment into the Middle East and Africa, according to the press release.
In May, Lenovo raised $1.15 billion through the issuance of warrants to support its future growth plans. The initiative, which was fully subscribed by investors, signals confidence in Lenovo’s strategic approach and its plans for global expansion.
The investment deal was advised by Citi and Cleary Gottlieb Steen & Hamilton for Lenovo, while Morgan Stanley and Latham & Watkins represented Alat.
Lebanon’s bonds climb as parliament elects first president since 2022
LONDON: Lebanon’s government bonds extended a three-month long rally on Thursday as its parliament voted in a new head of state for the crisis-ravaged country for the first time since 2022.
Lebanese lawmakers elected army chief Joseph Aoun as president. It came after the failure of 12 previous attempts to pick a president and the move boosts hopes that Lebanon might finally be able to start addressing its dire economic woes.
Lebanon’s battered bonds have almost trebled in value since September when the regional conflict with Israel weakened Lebanese armed group Hezbollah, long viewed as an obstacle to overcoming the country’s political paralysis.
Most of Lebanon’s international bonds, which have been in default since 2020, rallied after Aoun’s victory was announced to stand between 0.8 and 0.9 cents higher on the day and at nearly 16 cents on the dollar.
They have also risen almost every day since late December, although they remain some of the lowest priced government bonds in the world, reflecting the scale of Lebanon’s difficulties.
With its economy still reeling from a devastating financial collapse in 2019, Lebanon is in dire need of international support to rebuild from the war, which the World Bank estimates to have cost the country $8.5 billion.
