Green-certified utility projects on the rise in Saudi Arabia

An excellent case study of the PPP is the Taif Independent Sewage Treatment Plant, which was developed by Cobra & Tawzea and had a treatment capacity of 100,000 m³ per day. File
An excellent case study of the PPP is the Taif Independent Sewage Treatment Plant, which was developed by Cobra & Tawzea and had a treatment capacity of 100,000 m³ per day. File
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Updated 02 February 2023

Green-certified utility projects on the rise in Saudi Arabia

 Green-certified utility projects on the rise in Saudi Arabia
  • Saudi Arabia’s National Water Strategy is reshaping the private sector with a focus on ESG principles

RIYADH: When a consortium of water infrastructure companies closed green loans worth $480 million for three independent sewage treatment plants in Saudi Arabia last March, it was a harbinger of the verdant opportunity that awaited the Kingdom’s sustainable projects.

It was a watershed moment for the consortium of Saudi companies Tawzea, Tamasuk, and Spanish firm Acciona when they secured the amount for three ISTPs — Madinah 3, Buraidah 2, and Tabuk 2 — in just six months of expressing their interest.

What made the project a prime beneficiary of green financing was its commitment to the sustainability goals envisaged by the Saudi Vision 2030 and the endeavors of Saudi Water Partnership Co., the state-run company which facilitates the commercialization of water and electricity in the Kingdom.

Saudi Arabia is making headlines by taking measures to ensure a smooth transition to green energy and fight climate change. The Kingdom will host the 44th International Association for Energy Economics International Conference from Feb. 4-9 to discuss the path for a sustainable future.

“The construction and operation of the ISTPs will aid in optimizing the use of water resources in Saudi Arabia by providing treated and renewable water to be used for agricultural purposes, therefore reducing the consumption of freshwater,” said María Ortiz de Mendivil, primary analyst, S&P Global Ratings, in a second-party opinion note certifying the projects as green.

Once completed, Madinah 3 will serve up to 1.5 million inhabitants of existing and future residential areas near the city of Madinah. It will have an initial treatment capacity of 200,000 m³ per day, which can be expanded to 375,000 m³ per day.

Buraidah 2 will serve up to 600,000 people and have a capacity of 150,000 m³ per day. Tabuk 2, serving up to 350,000 people, will facilitate 90,000 m³ per day.

The treated water will replace freshwater resources for farming, saving this scarce resource and contributing directly to the nation’s water security. Daily water savings are expected to amount to 190,000 m³ per day at Madinah 3, 142,500 at Buraidah 2, and 85,500 at Tabuk 2.

HIGHLIGHTS

Madinah 3 will have an initial treatment capacity of 200,000 m³ per day, which can be expanded to 375,000 m³ per day.

Buraidah 2 will serve up to 600,000 people and have a capacity of 150,000 m³ per day.

Tabuk 2, serving up to 350,000 people, will facilitate 90,000 m³ per day.

“We have a zero-sludge-dispatch policy, meaning that all the sludge that we produce in these wastewater treatment plants is either used by farmers to replace other fertilizers or sent to cement factories for the production of cement,” said Julio De La Rosa, the Middle East business development director of Acciona Agua, while speaking at an International Desalination Association’s forum held two months ago.

Additionally, the photovoltaic solar panels installed at each plant will generate renewable power that will partially cover their daily energy consumption.

The green-certified project drew the attention of the bigwigs of the finance world, such as Abu Dhabi Islamic Bank, Mitsubishi UFJ Financial Group, Alimna Bank, Riyad Bank, and Siemens Bank, which parked their investments at first blush.

Green loans for a greener planet

So, what exactly is a green loan? According to the World Bank, a green loan is a form of financing that enables borrowers to use the proceeds to exclusively fund projects that make a substantial contribution to an environmental objective.

It is similar to a bond. The only difference is that a loan is typically smaller than a bond and executed in private operations. Also, green loans and green bonds follow different but consistent principles: The Green Loan Principles and the Green Bond Principles of the International Capital Market Association.

This green financing assumes significance as investors worldwide are earmarking their funds into sustainable investment projects that neutralize greenhouse gases and run on renewable energy, making them attractive propositions in an environmentally conscious world.

Saudi Arabia, particularly, has been facing severe challenges due to the unsustainable use of water resources, and it has limited reserves of nonrenewable groundwater, which are depleting rapidly. In addition, high water demand in the agriculture sector has also exacerbated the water scarcity situation.

According to figures published by the Minister of Environment, Water and Agriculture, between 1985 and 2020, the water level in the Kingdom almost dropped by 90 meters. That led to the National Water Strategy, inspired by the Vision 2030 blueprint, which identified levers and enablers to fix the problem.

“The National Water Strategy reshaped the private sector, which has started to think about how to be efficient and contribute to the water strategy, gain benefits as per their sustainability roadmap and accommodate the environment, social and governance in their strategies,” said Mohammed Al Halawani, CEO of Tawzea.

This public-private partnership has spawned many efficient independent water and power projects and desalination plants that are fast becoming textbook case studies for sustainable projects worldwide.

An excellent case study of the PPP is the Taif Independent Sewage Treatment Plant, which was developed by Cobra & Tawzea and had a treatment capacity of 1,00,000 m³ per day.

It is the first ISTP that reached commercial operation in Saudi Arabia from the private sector under the build-operate-transfer model.

The plant has less than 0.35 kilowatt-hour per m³ electricity consumption. About 30 percent of the electricity was recovered by biogas cogeneration. Even the residual output was 90 percent dry solids and beneficial class-A sludge.

“Over 210,000 sq. m of trees will be introduced as part of the project with the support of the Saudi Green Initiative, which is equivalent to approximately sequestering 136 tons of carbon dioxide per year,” said Al Halawani.

Sustainable to the core

Another example is the Shuaibah 3 Water Desalination Co., a special-purpose vehicle created to finance and develop the Shuaibah 3 Independent Water Project.

The company was launched by Saudi utility developer ACWA Power and Water & Electricity Holding Co., also known as Badeel, both owned in part or whole by the Public Investment Fund.

The project aims to replace a thermal desalination plant, the Shuaibah 3 IWPP, powered by fossil fuels. The use of reverse osmosis technology makes the proposed plant more energy efficient than the previous thermal desalination plant that will come offline.

The conventional thermal desalination process, multi-stage flash distillation, and multiple-effect distillation produced nearly 20 kg of carbon dioxide equivalent per m³. However, the carbon footprint for the RO process could be anywhere from 0.4 to 6.7 kg of carbon dioxide equivalent per m³.

According to ACWA Power, this technology shift could accrue savings of about 45 million tons of carbon dioxide yearly.

That’s not all. Green financing is greenlighting a host of projects worldwide, and for the first time, more money was raised in the debt markets in 2022 for climate-friendly projects than fossil-fuel companies.

According to a Bloomberg report, roughly $580 billion was arranged in 2022 for renewable energy and other environmentally responsible ventures, while the oil, gas, and coal industries turned to lenders and underwriters for closer to $530 billion. 

While it may not indicate that green financing is finally having an upper hand on oil lenders, the well-trodden bazaars of fossil fuel funding have become eerily cold after the global pushback on loss and damage during the UN Climate Change Conference in Egypt last year.

Saudi Arabia, on its part, lives by the age-old adage: You never miss the water till the well runs dry. While going to press, Saudi power juggernaut ACWA Power announced that it added 2.4 million m³ day of water desalination capacity across four reverse osmosis megaprojects in 2022, the largest in a calendar year in the company’s history.

This achievement brings the company’s total water capacity under management to 6.4 million m³ across 16 projects in four countries, producing water at less than $0.50 per m³, which is up to three-quarters lower than the tariff of $2 per m³ just a few years ago.

Ergo, the message is loud and clear: The future of infrastructure financing is green, or there’s no future at all.


Former US secretary of treasury calls for bipartisan legislation to ensure safety of depositors

Former US secretary of treasury calls for bipartisan legislation to ensure safety of depositors
Updated 01 April 2023

Former US secretary of treasury calls for bipartisan legislation to ensure safety of depositors

Former US secretary of treasury calls for bipartisan legislation to ensure safety of depositors
  • During the event, Steven Mnuchin discussed responsibilities, solutions after Silicon Valley Bank collapse

MIAMI: Former US Secretary of Treasury Steven T. Mnuchin has called for greater clarity and bipartisan legislation after the collapse of the Silicon Valley Bank.

“We don’t know if there’s another bank failure whether the government will or won’t guarantee all the depositors,” Mnuchin said at the Future Investment Finance forum in Miami.

“You could be a well-run midsize or regional bank today and you’re at a complete disadvantage because people are moving money to the money center panic. So, I think we need bipartisan legislation.”

“We shouldn’t have unlimited insurance, but we now need clarity because it’s unfair,” he said.

Talking about the recent collapse of SVB and the shockwaves experienced throughout the banking industry, Mnuchin explained that compared to the 2008 financial crisis, which “was about credit, a much more complicated issue to work through,” this event was a result of many missteps that could have been avoided.

“This banking crisis is all about interest rate risk, and this is simple, basic risk management 101.”

During the panel, Mnuchin discussed several key points about recent events in the sector, including the potential risk of a financial crisis caused by the Fed’s interest rate hikes and how this would impact the economy.

“The problem is most of the people we have in the financial markets in the US have never seen, quote, high-interest rates,” he said.

“Most people have been used to interest rates, short-term interest rates between zero and 2 percent. So you know, 4 percent, 5 percent is high on a relative basis.

“The economy is going to adjust pretty significantly. But as I said earlier, this is risk management 101 that a lot of people just got used to having low-interest rates forever.”

The discussion also covered the relationship between the US and China, including the need for better communication and coexistence.

“China is the second largest economy in the world. We have a responsibility to figure out how we deal with China in a proactive way,” Mnuchin said.

He added that although there were “legitimate national security issues with China, there’s a whole bunch of things that we should be doing with China, and we need to figure out how to coexist in the proper way.”


Saudi Arabia, Miami share similarities in quality of life standards experts tell FII Priority

Saudi Arabia and Miami have a lot in common when it comes to quality of life and business opportunities, experts said
Saudi Arabia and Miami have a lot in common when it comes to quality of life and business opportunities, experts said
Updated 31 March 2023

Saudi Arabia, Miami share similarities in quality of life standards experts tell FII Priority

Saudi Arabia and Miami have a lot in common when it comes to quality of life and business opportunities, experts said
  • Kingdom made quality of life a priority in Saudi Vision 2030
  • Cities should invest in arts and culture, panelists say

MIAMI: Saudi Arabia and Miami have a lot in common when it comes to quality of life and business opportunities, experts said at the FII Priority conference in Miami on Thursday.

Both cities have, in the last few years, they said, promoted better living standards for their citizens through socio-economic policies.

“Miami had this incredibly welcoming spirit. It was set up for success from the top down,” said Jeff Zalaznick, restaurateur and managing partner of hospitality company Major Food Group. “I’ve really gotten to understand — with Vision 2030 and the things that they (Saudi Arabia) are looking for — that there are a lot of similarities between the quality of life and business (policies) in Miami and what’s happening in Saudi Arabia.”

The Kingdom made quality of life a priority in Saudi Vision 2030 and is one of the few countries in the world to have a minister dedicated to improving quality of life for its residents.

“Everything we do is based on quality of life. It is so important to the crown prince that he set up its own ministry,” said Jerry Inzerillo, group CEO of Diriyah Gate Development Authority, adding that “positivity and optimism” are the “fuel of that country.”

In the latest World Happiness Report, Saudi Arabia was ranked No. 2 in the Arab World, and 30th in the world.

Barry Sternlight, chairman and CEO of Starwood Capital Group, pointed out that cities that have not not invest in their citizens’ quality of life have seen their population decline.

“I think that quality of life is driving market share,” he said. “It’s driving the success of cities that are focused on improving the lives of their citizens.”

Sternlight observed that the parameters individuals use to determine quality of life are evolving and are no longer entirely centered on economic concerns.

“People are looking for meaning and purpose, and whether it’s sustainable development,” he said.

Sternlight added that people consider art and culture to be key aspects of quality of life in cities and emphasized that having museums, galleries, and artistic offerings as part of the fabric of a city is essential to its success.

The CEO of real estate development firm Daccra, Craig Robins, said that building an ecosystem around art and culture is crucial and should include supporting artists, small galleries, and other related businesses.

He cited Miami Design District as an example, and explained that since its launch in the early 2000s, the neighborhood has become a center of creativity and a thriving hub for culture and business — not only for Miami but the world.

“The goal was to create a sense of community that people would really love — something that was different, and something that could be a resource for all,” Robins said.


Saudi Arabia, UAE ‘play critical role in space exploration’

Saudi Arabia, UAE ‘play critical role in space exploration’
Updated 31 March 2023

Saudi Arabia, UAE ‘play critical role in space exploration’

Saudi Arabia, UAE ‘play critical role in space exploration’
  • Investment firm boss Brian Hook tells forum that people and funding will drive growth
  • Panel discussion hears ‘third space revolution’ is inspiring younger generations

MIAMI: Saudi Arabia and the UAE are playing a “critical role” in the future of space exploration, the boss of a major investment firm has told a panel of industry experts in Miami.

Brian Hook, the vice-chairman of Cerberus, told the FII forum that countries like the Kingdom and the UAE had greatly accelerated a new space race. “By putting both their people and their funding behind (it), they brought into existence this sort of new space economy,” he said.

He and other panelists examined the potential for development and investment in the space industry, and spoke about the breakthroughs and dynamics that make it appealing to the general public, investors and enterprises.

Hook said that allowing the private sector into the market had gained fresh momentum, and the overall market value was expected to surpass $1 trillion in the coming years.

“Private equity and venture capital have been funding and enabling some of the most innovative companies for space exploration,” he said.

Helene Huby, CEO of The Exploration Company, which wants “affordable, sustainable and open” space exploration, said there had been a renaissance in the industry in the last few years.

“We are living in the third revolution. The first was the Apollo mission, which was about access. The second was the industrialization of space exploration with the International Space Station,” Ruby said.

“And what we see now is a revolution that is not about access, it’s not about costs and industrialization. It’s about staying in space.”

Speakers said that current enthusiasm around space exploration and increased investments would play a critical role in addressing some of the world’s most pressing challenges, including climate change, food shortages and droughts.

“One of the things that people don’t consider is the effect that human spaceflight has not only on the people that fly but also the people on the ground,” said Jane Pointer, founder of carbon-neutral spaceflight company Space Perspective.

“Space is a great contribution to humanity,” added Alan Pellegrini, CEO of Thales North America, a defense and aerospace company.

“I was young at the time but Neil Armstrong’s landing on the moon transformed my life and inspired me to a career in aerospace. And I think it is having the same effect on younger generations today.”

“Space has always been a place where you can collaborate regardless of which nation you belong to, and I really hope that that spirit continues,” he added.

 


Medina Capital founder delivers cybercrime warning at FII Priority conference

Medina Capital founder delivers cybercrime warning at FII Priority conference
Updated 31 March 2023

Medina Capital founder delivers cybercrime warning at FII Priority conference

Medina Capital founder delivers cybercrime warning at FII Priority conference
  • Basic ‘common sense stuff’ will help people protect themselves, says Manuel Medina

MIAMI: Almost half of organizations globally will have experienced a cyberattack on their software supply chains by 2025, according to analyst firm Gartner.

As Manuel Medina, founder and managing partner of Medina Capital, said: “There are only two types of enterprises and government agencies today: the ones that have been hacked and the ones that are going to be hacked.”

Speaking at the FII Priority conference in Miami, Medina highlighted the risk of cyberattacks, and said: “The internet was not designed to do what it’s doing today.”

Globalization and technological advances, such as cloud computing, mobility and virtualization, have made the internet less secure.

Companies across a host of industries are spending billions digitizing their infrastructure, but that infrastructure is difficult to protect, he said.

On an individual level, it mostly comes down to common sense, Medina added.

Social media companies do not charge users on their platforms because they are monetizing the users themselves, and by sharing copious amounts of personal information, users are only making it easier for both social media companies and potentially hackers to access their data, he said.

“They (social media companies) take your personal identity, and everything that they do is (about) how they track you in order to get commerce and sell you stuff. So, that’s totally contradictory to protecting you.”

Medina Capital, which hires “elite hackers,” has a motto of not liking people, because “people are the weak link,” Medina said.

“You are as strong as your weakest link.”

He added: “You can have the best software and the best systems,” but “human weakness” is the reason for the collapse of a security system.

Cybercriminals do not need weapons, politics or strategy; all they need is a laptop and a network connection, and governments need to evolve and cooperate to tackle this kind of criminal, Medina said.

Prosecuting cybercriminals is difficult because of globalization and innovation whereby it is possible for some evidence or information to be stored on a server located in a different country than the one where the criminal is being prosecuted, he said.

“The system today is the same system that it was 80 years ago. So, one of the things that we need to do is bring ourselves up to date.”

Individuals, too, need to do some basic “common sense stuff” to protect themselves, such as using multifactor authentication and storing their passwords in a secure digital wallet, he said.

“You have to sacrifice a little bit of convenience in order for you to be able to sleep better at night.”


GCC banks to see ‘limited impact’ from global banking worries prompted by SVB collapse: Kamco

GCC banks to see ‘limited impact’ from global banking worries prompted by SVB collapse: Kamco
Updated 31 March 2023

GCC banks to see ‘limited impact’ from global banking worries prompted by SVB collapse: Kamco

GCC banks to see ‘limited impact’ from global banking worries prompted by SVB collapse: Kamco

RIYADH: Banks in the Gulf Cooperation Council region are set to see a limited impact from the banking crisis hitting the US and Europe, according to a report from Kamco Invest.

The investment banking subsidiary of Kuwait Projects Company argues that financial institutions in the GCC had limited exposure to Silicon Valley Bank – the US firm that collapsed in March prompting concerns of contagion sweeping across the world in the manner of the 2008 global crash.

The report says balance sheets of the banks in the region remain strong, and in the final quarter of 2022 both aggregate lending and customer deposits remained strong.

“The broader GCC banking sector is expected to see only a limited indirect impact from the ongoing banking sector crisis in the US and Europe,” said the report, adding: “Shares of banks globally and in the region, especially, were affected due to fears of a contagion as the collapse of SVB was the biggest lender failure since the global financial crisis of 2008. 

“However, the collapse had only marginal impact with minimal exposure of banks only in the UAE, while most of the other countries in the GCC remained unaffected. 

“The bulk of the exposure was from various startups and VCs that had accounts with SVB that may now bank with local banks, although under increased scrutiny.”

The report also shows that rising interest rates in the US and its almost full replication by most GCC central banks during 2022 resulted in higher aggregate net interest margin for the region’s banking sector. 

NIM for GCC banks averaged at a multi-year high of over 3 percent during the fourth quarter of 2022, despite partially reflecting the higher interest rates as bulk of the rate hikes were made during the second half of the year. 

Saudi Arabia’s banks reported the highest average margin of 3.2 percent during the quarter followed by UAE and Qatari banks with margins also above the 3 percent mark after several quarters.

Aggregate lending in the GCC remained strong during the final quarter of 2022, with  central bank data showing Qatari banks experienced the strongest lending growth during, while Bahrain and the UAE banks showed a slight decline. 

Customer deposits bounced back to a stronger growth over the same period, with a quarter-on-quarter increase of 2.5 percent to reach $2.2 trillion