ACWA Power bets big on Uzbekistan growth

ACWA Power bets big on Uzbekistan growth
The Uzbek economy will grow at about 6.5 percent this year, according to government projections. (Shutterstock)
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Updated 19 September 2021

ACWA Power bets big on Uzbekistan growth

ACWA Power bets big on Uzbekistan growth
  • ACWA has invested about $1.2 billion in Uzbekistan thus far
  • ACWA plans to contribute to $100 million Uzbekistan fund

MOSCOW/RIYADH: In the crowded corridors of the Hilton Tashkent City, ACWA Power Chairman Mohammad Abunayyan talks quietly with key delegates of the Islamic Development Bank’s annual meeting in Uzbekistan, who approach him one after another.

Abunayyan, a lean, middle-aged, intelligent-looking man is celebrating with the bank's officials the launch of the $100 million Economic Empowerment Fund for Uzbekistan earlier this month. 

ACWA Power is planning on becoming one of the Saudi investors that will make up 45 percent of the fund, which is also being financed with money from the Islamic Development Bank and the Uzbek government.

ACWA’s contribution would be the latest in a long line of investments in the Central Asian nation, where the utility now has assets worth $4.6 billion having invested about $1.2 billion, according to the prospectus for its initial public offering that was launched earlier this month.

Although that is less than one tenth of the SR248 billion ($66 billion) of assets ACWA has accumulated globally since it was established in 2004 with what Abunayaan describes as a small equity investment. Abunayaan joined the board in 2008.

Beyond its home market in Saudi Arabia, ACWA also owns assets in Oman, UAE, Bahrain and Jordan.

Still, Uzbekistan is an important market for ACWA Power.

In 2020, the company was awarded three projects: Sirdarya Combined-Cycle Gas Turbine (CCGT) independent power producer (IPP) with 1,500 MW of gross contracted power capacity; the 500 MW Bash Wind IPP; and the 500 MW Dzhankeldy Wind IPP.

The company’s fourth and largest Uzbek asset in Uzbekistan is the Karakalpakstan 1,500 MW Wind IPP project, valued at $2 billion. The Karakalpakstan, Bash and Dzhankeldy projects are at advanced stages of development and Sirdarya IPP is under construction.

ACWA Power’s investments in Uzbekistan represent a sizeable chunk of total foreign direct investment (FDI) that the country has received in recent years.

“Uzbekistan attracted $2 billion in FDI in 2020 and targets another $5 billion this year,” Atabek Nazirov, director general of the Direct Investment Fund of Uzbekistan, told Arab News on the sidelines of the IDB’s two-day conference on Sept. 3.

Such investments mean a long-term relationship between ACWA Power and Uzbekistan.

“[In our projects] we need to lay the foundation for a long-term partnership, this is a relationship that lasts for 20, 25, 30 years,” Tom Teerlynck, executive vice president of ACWA Power, said during a panel discussion organized by the Islamic Corporation for Insurance of Investments and Export Credits.

“The early years go very smoothly because everybody is happy — agreements signed, infrastructure is being built, the services being provided,” he said. “But problems come in later when people in ministries or private companies change. So, it’s very important to lay very robust foundations.”

Uzbekistan officials are confident that ongoing reforms will propel economic growth, despite the global shock caused by COVID-19.

“In 2020, Uzbekistan was the only economy in the Central Asia region that did not have a negative gross domestic product [GDP],” said Direct Investment Fund of Uzbekistan’s Nazirov. “We were able to achieve just above 1 percent growth.”

The government is forecasting economic growth of 6.5 percent this year although that is a conservative scenario and it is hoping for closer to 7 percent, Ilhom Norkulov, Uzbekistan’s deputy minister of economic development and poverty reduction, told Arab News at the IDB meeting.

“For the next five years our target is to increase GDP to $100 billion so we are working to create conditions for the economy to grow 6-7 percent a year,” he said.

However, Uzbekistan’s economy is facing tailwinds in the form of a high inflation rate – expected at 10-11 percent this year – unemployment of 10.5 percent in 2020 (up from 5.8 percent in 2017) and a decline in average monthly wages to a low of $226 in the fourth quarter of 2018 from a peak of $415 in 2016, but back to $280 in the second quarter 2021, according to official data.

Government officials say they are fully aware of the issues, and maintaining economic reforms and income growth should ease the employment and wage conditions over the long run.


Inflation in eurozone economies is transitory: IMF

Inflation in eurozone economies is transitory: IMF
Image: Shutterstock
Updated 13 sec ago

Inflation in eurozone economies is transitory: IMF

Inflation in eurozone economies is transitory: IMF
  • The reason the IMF gave this assessment is that the hikes in consumer prices didn’t turn into wage increases

Despite inflation hitting a record high last month in the euro area, the International Monetary Fund said that the rise in prices is transitory and not worrisome.

Annual inflation rate in the zone reached 4.9 percent in November, Reuters reported.

The reason the IMF gave this assessment is that the hikes in consumer prices didn’t turn into wage increases, also known as the second-round effect.

It pointed out that, meanwhile, monetary policy should remain loose.

The international lender also stated that governments in the euro area should continue backing their economies to overcome the adverse effects initiated by the pandemic. The organization added that fiscal consolidation is not urgent, but its plans should be readily available now.

“Policies should remain accommodative but become increasingly targeted, with a focus on mitigating potential rises in inequality and poverty,”the IMF said.

I took a quote from the source since it's reuters.


Bahrain aims to reduce government shares in listed companies

Bahrain aims to reduce government shares in listed companies
Updated 2 min 47 sec ago

Bahrain aims to reduce government shares in listed companies

Bahrain aims to reduce government shares in listed companies

JEDDAH: Bahrain aims to reduce government ownership in listed companies, the CEO of the Bahrain Bourse has said.

The country aims to list more governmental companies to encourage the private sector to follow the lead. 

At least two governmental firms are currently close to listing, including the Bahrain Airport Company,  Khalifa Al Khalifa added in an interview with Al Arabiya.

Bahrain Bourse has also reached an agreement with Abu Dhabi to facilitate direct trading between the two markets.

It is also implementing a four year strategy ending in 2026, to develop the financial market sector by listing more companies, including small and medium-size enterprises, Al Arabiya reported.


Oil prices exceed $70 pushing aside omicron concerns

Oil prices exceed $70 pushing aside omicron concerns
Image: Shutterstock
Updated 9 min 54 sec ago

Oil prices exceed $70 pushing aside omicron concerns

Oil prices exceed $70 pushing aside omicron concerns
  • Meanwhile, companies made offers on Monday to buy crude oil released from US strategic reserves

JEDDAH: Oil prices rose to $70 a barrel earlier on Dec. 7, as concerns eased about market demand and as fears of the omicron variant waned, Bloomberg reported.

Brent crude futures were up $1.66, or 2.3 percent, at $74.74 a barrel by 1005 GMT, after settling 4.6 percent higher on Monday.

US West Texas Intermediate crude was at $71.30 a barrel, up $1.81, or 2.6 percent, building on a 4.9 percent gain in the previous session.

At the weekend, Saudi Arabia increased the cost of its crude for buyers in Asia and the US, signaling that it still sees strong demand despite the wave of restrictions by various national governments in response to the latest variant of the COVID-19.

Meanwhile, companies made offers on Monday to buy crude oil released from US strategic reserves, according to Bloomberg.

The winning bids for the first 32 million barrels will be announced on Dec. 14. 


At least two oil refiners have expressed interests. 

The US release of crude is part of the Biden administration’s efforts to control gasoline prices, Bloomberg said.


UAE bank credit falls for first time since May; deposits rise

UAE bank credit falls for first time since May; deposits rise
Updated 14 min 55 sec ago

UAE bank credit falls for first time since May; deposits rise

UAE bank credit falls for first time since May; deposits rise

Gross credit in the UAE declined by a monthly rate of 0.8 percent in October to hit 1.76 trillion dirhams ($480 billion) on falls in both domestic and foreign credit, according to data published by the country’s central bank.  

The October decline in gross credit is the largest since March and is in contrast to September's performance, when it rose 0.3 percent month-on-month. 

Domestic credit went down due to drops related to the government, public, and private sectors. Credit provided to non-banking financial institutions rose by 2.7 percent, the central bank said in a press release issued Dec. 6.

In September, domestic credit increased by 0.2 percent to 1.6 trillion dirhams, while foreign credit, which includes loans, trade bills and advances to non-resident companies other than banks, grew 0.8 percent to 164.4 billion dirhams. 

Bank deposits in the UAE went up by a monthly rate of 1.3 percent in October to hit 1.97 trillion dirhams. This was the fifth consecutive month of growth and is the highest monthly rate since June.

This was mainly attributed to a 1.7 percent rise in residential deposits, offsetting a 1.7 percent drop in non-residential deposits. 

Outside of residential deposits, government and public sectors experienced the highest increases, jumping by 5.5 percent and 3 percent, respectively. At the same time, private sector deposits edged up slightly, rising by only 0.6 percent.

The monthly rate of growth in deposits accelerated from 0.7 percent recorded in September when resident deposits grew 0.3 percent to 1.7 trillion dirhams while non-resident deposits jumped 3.7 percent to 243.2 billion dirhams.    

The central bank also said that the gross banks’ assets increased by 0.7 percent in October when compared to the previous month. The balance stood at 3.27 trillion dirhams by the end of the month.

The UAE’s monetary base, which includes currency issued and bank reserves among others, grew by 1.3 percent month-on-month in October. This was driven by widenings in both issued currency and banks’ current accounts and overnight deposits with the central bank.

Moreover, M1, a monetary aggregate encompassing currency outside banks and short-term monetary deposits, underwent a 0.5 percent monthly increase in October. This was attributed to jumps in both of its components.

Additionally, a wider measure of money, M2, rose by 0.8 percent on more quasi-monetary deposits and a higher M1. Quasi-monetary deposits consist of residential time and savings deposits in local currency in addition to residential deposits in foreign currencies.

Similarly, M3 increased due to larger government deposits as well as higher M1 and M2.


High gas prices may delay energy transition: TotalEnergies CEO

High gas prices may delay energy transition: TotalEnergies CEO
Updated 32 min 15 sec ago

High gas prices may delay energy transition: TotalEnergies CEO

High gas prices may delay energy transition: TotalEnergies CEO

JEDDAH: High fossil fuel prices may affect the transition towards renewable energy sources, the leader of one of Europe’s largest oil companies has warned.

If fuel prices continue to remain high, this “might jeopardize the development” of alternatives, said TotalEnergies SE CEO Patrick Pouyanne, according to Bloomberg.

“Some Asian countries about to switch from coal to gas might be discouraged by too high energy prices,” he added, while speaking at the World Petroleum Congress on Monday. 

Pouyanne made the comments as Saudi Aramco CEO Amin Nasser warned that renewable energy supplies are not yet strong enough to compete with fossil fuels. 

On Sunday, Aramco increased the cost of its crude for January in an indication that demand outlook will remain high, Bloomberg said.

On Tuesday, US crude oil rose $2 to hit $71.52.