China pushes for bigger role in Iraqi reconstruction

China will directly invest in infrastructure assets associated with Iraq’s oil industry as the partnership between the two countries evolves. Above, an oil field in Basra. (Reuters)
Updated 02 March 2018

China pushes for bigger role in Iraqi reconstruction

LONDON: China is ramping up its role in Iraqi reconstruction, reflecting its growing reliance on oil from the war-ravaged country, but geopolitical factors are also at play, according to a new report.
A paper compiled by consultancy BMI Research, and released first to Arab News, said: “On the one hand, China will look to direct investment into infrastructure assets associated with Iraq’s oil industry, which has emerged as an increasingly important export partner over the past decade. On the other, China will aim to garner geopolitical influence by participating in broader reconstruction efforts in a country lying along a key artery of its Belt and Road initiative.”
The burgeoning Iraq-China partnership was said to be anchored by a dramatic increase in oil trade. Iraqi oil exports to China rose from zero in 2007 to 270 million barrels annually by 2017, second behind only Saudi Arabia in the Middle East and accounting for roughly 8.8 percent of total Chinese oil imports.
China’s growing investment role in Iraq’s oil sector was highlighted in January when Iraq disclosed that it intended to construct an oil refinery at the port of Fao on the Gulf with two Chinese companies. Iraq’s ministry of oil named the firms as Power China and Nerco Chinese. The ministry said that the refinery would have a capacity of 300,000 barrels per day. Similarly, Baghdad has awarded a contract to China-based Zhenhua Oil to further develop the East Baghdad oilfield.
“Given the growing importance of China as an oil export market vis-a-vis traditional export destinations like the United States, Baghdad will remain keen on deepening partnerships with Chinese companies as bilateral interests align,” BMI said.
The geopolitical research consultancy added that China would also gain indirect exposure to Iraq’s infrastructure sector by extending bilateral loans aimed at rebuilding Iraq’s economy.
In February, international donors pledged $30 billion to reconstruction efforts in Iraq, and while individual country contributions have not been divulged, reports indicated that China had been a key donor with billions committed by Chinese state-controlled enterprises over recent years.
BMI said China’s motives were also driven by its wider geopolitical ambitions. “Iraq lies along a key route of the China-backed Belt and Road initiative, which seeks to foster growing East-West overland trade by promoting greater logistical connectivity.”
BMI also highlighted the planned Basra-Aqaba oil pipeline, where the China Petroleum Pipeline Bureau is slated to play a construction role.
Yu Jie, head of China Foresight at the London School of Economics, told Arab News that “China is the world’s biggest importer of oil and the Middle East is a region for market access.” She flagged media reports that Chinese state-owned oil company Sinopec could acquire a shareholding in Saudi Aramco following the planned IPO later this year.
A recent report by the International Energy Agency said that the Middle East, which accounts for about $200 billion worth of trade, makes the region China’s fourth largest trading partner after the US, Japan and South Korea.
That said, getting the funds needed to rebuild Iraq is no easy task. At the close of an international donor conference in Kuwait last month, Iraq secured only about a third of the $100 billion that Iraq said the country needed, and much of the money pledged was in the form of investment loans (not direct aid).
Last month, the Iraqi Ministry of Defense released a video depicting Chinese-made CH-4B armed drones for use against terrorist targets. That appeared to make good on a statement following a visit by the Iraqi prime minister to Beijing two years ago when the Chinese pledged to expand its military and defense cooperation with Iraq. “We are ready to respond to support Iraq in these areas, as well as economic cooperation,” said Chinese President Xi Jinping at the time.
In an article last month on the website of China Global Television Network, professor Zhou Rong from the Chongyang Institute for Financial Studies at Renmin University of China, wrote that Chinese state-owned enterprises are the biggest oil investors in Iraq, “especially the modernization and development of Iraq’s oil infrastructure.”
About 60 percent of the electricity in the Iraqi capital Baghdad is produced by Chinese companies, he said.
“Sino-Iraqi relations benefit from the backdrop of the Belt and Road Initiative. Iraq thinks that the initiative is important for Iraq because it is historically located on the Al-Hareer Road,” Rong said.
Al-Hareer was a 12,000 kilometer land and sea road linking Asia, the Middle East and Europe hundreds of years ago that facilitated the exchange of goods and products such as silk, perfumes, incense, and spices, he said.


Rooftop revolution: Pandemic chill upends solar power industry

Updated 10 July 2020

Rooftop revolution: Pandemic chill upends solar power industry

  • Executives in US and Europe rely on tech, finance plans in battle for survival

LOS ANGELES: The booming rooftop solar panel industry nosedived overnight when the coronavirus forced homeowners to rein in spending and keep their distance from would-be installers.

Now, in their struggle to survive, companies on both sides of the Atlantic are turning to online marketing rather than knocking on doors, using drones to inspect roofs, arranging digital permits and coming up with attractive new financing plans, according to interviews with 12 executives.

At stake is the future of a key driver of the global transition from fossil fuels to renewable energy: solar power was the second-fastest growing renewable source after wind in 2019, according to the International Energy Agency.

And rooftop installations, which generate electricity used by homes or businesses rather than feeding into the grid, made up more than 40 percent of the market before COVID-19 struck.

Energy research firm Wood Mackenzie has slashed its rooftop solar installation forecasts for Europe and the US by a whopping 30 percent this year, while lifting its forecast by 3 percent in Asia, where China provides strong government support.

Joana Palau, 42, a council worker on the Spanish island of Ibiza, was one of the few in her neighborhood who pressed ahead with a plan to install 12 solar panels on her farmhouse in June: “If I had not been working and did not have the stability of a salary every month, I definitely wouldn’t have done it.”

A housing estate with solar panels in Duesseldorf, Germany. European firms are offering innovative finance plans to entice wary clients amid rising job insecurity. (AFP)

By contrast, large-scale solar installations that power the grid have fared relatively well. Wood Mackenzie trimmed its forecast by less than 10 percent for Europe and barely touched its US outlook as rock-bottom prices, subsidies and government mandates helped insulate larger projects from the pandemic. In the US, the third biggest rooftop solar market after China and Japan, about 80 percent of the 100,000 job losses in the solar sector so far have been at rooftop installers, the Solar Energy Industries Association said.

Many of the staff who were not laid off, however, began to focus on one of the industry’s most persistent challenges: How to cut the cost of identifying homeowners with suitable roofs, and then persuading them to buy panels, executives said.

Quickly, companies made sales appointments virtual.

Leading US installers SunPower Corp., Vivint Solar Inc. and Sunrun Inc. said that reassured potential clients worried about the virus. It also cut the cost of acquiring customers, which Wood Mackenzie puts at nearly $4,000, or 22 percent of the average $18,000 cost of a US system.

Normally reliant on door-to-door visits, an effective but expensive sales tactic, Vivint trained hundreds of salespeople to canvass by phone as its sales slumped 60 percent following state lockdowns, CEO David Bywater said.

By early May, sales were down only 30 percent. “It was a radical shift,” said Bywater, adding that it had hastened Vivint’s plan to diversify sales strategies and cut costs: “I hope we never lose that and we accelerate that.”

In fact, the strategy was so successful that larger rival Sunrun announced on July 7 that it had agreed to buy Vivint in an all-stock deal valued at $3.2 billion, saving $90 million a year and creating a solar player with half a million customers.

Sunrun bought Vivint because of its focus on direct selling, a model Sunrun CEO Lynn Jurich said had become even more durable during the COVID-19 pandemic: “Both companies are delivering above where we expected.”

HIGHLIGHTS

  • Solar panel firms go digital as lockdowns hit sales.
  • New sales strategies cut costs as firms battle to survive.
  • Solar power seen as key driver in climate change fight.

Rival SunPower has also seen a massive shift to digital sales, with about three-quarters of consultations now happening via video chat, up from a 10th previously.

CEO Tom Werner said he expected half of its sales would be digital from now on. He said it was harder to close deals in virtual chats but that was offset by cutting out travel time between appointments.

“Ideally, you have the day when solar is like Amazon, so you can buy and be fulfilled in a very efficient process,” he said.

Sunrun, meanwhile, had to pull its salespeople out of stores such as Costco and Home Depot during lockdowns, outlets that had been bringing in nearly a third of its sales. Within two weeks, Sunrun had moved its field sales team online and launched a promotion offering six months of home solar power for $6. While initial online commitments were lower, the percentage of customers following through was higher.

Sunrun said innovations like virtual sales and automating permits to avoid physical processing by authorities will trim about $2,000 off the cost of an array over the next year or so.

EmPower Solar, a rooftop installer based in Long Island, spent New York’s lockdown on “game-changing initiatives” such as digitising sales and paperwork, and using satellite imagery and drones to inspect roofs, said CEO David Schieren.

However, he said that it was harder to build rapport with customers without face-to-face contact.

In Europe, rooftop solar firms developed more enticing finance plans as the pandemic made clients wary about spending.

SotySolar in Gijon in northern Spain accelerated the roll-out of a “Netflix-style” subscription model. It installs panels and charges a monthly fee though homeowners can buy them or end their contract when they like, said co-founder Daniel Fernandez.

“We have been thinking about doing this for a while, but we brought it forward because of this situation,” he said, adding that he expected to triple installations with the offer.

In Barcelona, renewable energy utility Holaluz has accelerated an initiative to install panels free for people with available roof space — and use them to generate power for all its customers. It aims to extend the plan to apartment blocks and commercial buildings.

Holaluz expects to boost clients to one million and carry out 50,000 rooftop solar installations by 2023. It estimates fewer than 10,000 Spanish homes currently have panels.

“This is the rooftop revolution,” said co-founder Carlota Pi. “We have spent so much time at home, we have become much more conscious of the value you can create by transforming your roof into a source of energy generation.”