ACWA’s CEO bullish on future with assets doubling while costs fall on AI, automation

ACWA’s CEO bullish on future with assets doubling while costs fall on AI, automation
Acwa Power's headquarters in Riyadh. (Supplied)
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Updated 09 September 2021

ACWA’s CEO bullish on future with assets doubling while costs fall on AI, automation

ACWA’s CEO bullish on future with assets doubling while costs fall on AI, automation
  • Acwa plans to invest up to SR2.8bn of its own money a year to expand its $248bn assets base
  • CEO Paddy Padmanathan confident any drop in renewable price won't harm profits

Acwa Power will stick to its ambitious spending plans after it goes public and double its assets over the next four years, the head of the energy and water company has told Arab News,

Paddy Padmanathan, CEO of the business, was bullish about Acwa’s future prospects as he talked up how technological developments are revolutionizing the way the company operates.

The Riyadh-based firm already has 64 projects across the world, and Padmanathan insists there will be no slowing down when 81.2 million shares, representing 11.1 percent of the company, are listed on the Main Market of the Saudi Stock Exchange, Tadawul.

The company, which the Saudi sovereign wealth fund is a key shareholder in, uses project finance to fund all of its projects but it will continue investing around SR2.8bn a year of its own money into these projects to keep growing, Padamanthan explained.

“We’ve got 64 assets in operation, construction and advanced development in 13 countries on three continents. This represents $248 billion worth in value, and we are producing 2.8 million cubic meters of desalinated water, and 20 gigawatts of energy. By 2025 this should be 41 gigawatts and 6.4 million cubic meters,” Padmanathan told Arab News, adding: “We developed a business model based on diversification, and demonstrated the efficiency we’ve demonstrated, and our ability to deliver new assets.”

IPO Rationale

For a company that is financially endowed like Acwa, tapping the equity market for additional funding might sound strange as they need now to deal with shareholders and filing requirements every few months, but its CEO thinks that it's the right move at the right time. “We made sure we got enough funding in other ways and put shares in the Saudi financial market as an ideal model for that,” he continued.

There are plenty of opportunities for Acwa that require optimal use of capital, and the company is keen to maintain good credit lines.

"It's important that we have investor diversification and share opportunities for energy transformation and carbon removal from industrial manufacturing," Padmanathan said.

As well as selling shares through Tadawul, the use of green sukuk bonds to raise capital are also on the company's radar with the company developing more clean energy projects.

AI, Automation and Cost Competitiveness

Padmanathan was also clear that energy-focused companies such as Acwa have nothing to fear from any drop in the price of renewable energy.

“The price of renewable energies [is] coming down predominantly due to fantastic advances in technology, amazing improvements in methods of construction, more confidence and more ability to operate and maintain more efficiently.”

“Artificial intelligence and machine learning also help in optimising the design, construction and operation and maintenance. That helps drive the cost down. We are also in a fairly low interest rate environment, which is allowing us to access debt capital [that is] very competitive.”

Padmanathan flagged up the developments in the solar panel industry as an example of where technology is helping companies reap financial rewards.

He said: “Four years ago, some guy put material on the back of the panel [as well as the front].”

“Wow! Surprise, we now have double sided panels. So, for the same infrastructure with a bit of extra silicon cost,  we're getting 15, 16, 18 percent more energy, straight away.”

“I've done nothing, I'm not losing any profit. It's because of technology improvement.”

Even the act of installing solar panels in fields has changed. Padmanathan said that five years ago up to 600 people would be digging foundations and installing the panels.

“[Now] we have automatic machines that just move and position themselves with a global positioning system. The machines don't take a break, they don't stop at night,” said Padmanathan.

All of this adds up to Acwa Power’s confidence in its ambitions to double its assets in the next four years.

“It's all about those who are able to stay ahead of the innovation, bring entrepreneurship, and continue to deliver fit for purpose solutions like we are doing,” Padmanathan said, adding: “You can continue to deliver lower and lower and lower costs and keep risk reflective margins, which is what we do.”

“It's not a case of the margins coming down. I think we should be more cost competitive as technology continues to improve and the learnings get better.”