Why investors are going green
Diego Biasi, CEO of Quercus Investment Partners, explains how the renewable sector has become a major focus for the GCC and why the green economy is becoming so popular for investors
The renewable energy sector is growing at speed. How exciting a period is this for the field, and how does Quercus fit into the picture? “The global renewable energy sector has experienced exponential growth over the past decade. The MENA region has been quick to follow, outpacing many developed nations in recent years, with governments throughout the region becoming increasingly interested in boosting the renewable energy sector, for both environmental and economic reasons.
“Quercus fits into this picture by facilitating investment into this sector via our specialised asset managers and experi- enced core team, with a strong track record in renewable energy. Quercus has now expanded from its roots in Europe into the GCC region to assist investors in delivering a strong, long-term yield with maximum returns. Looking to the future, we expect this momentum to continue with strong growth for the next 10 to 15 years – especially when considering the global installed capacity for renewable energy is set to increase 70 per cent by 2030.” What are the main reasons for this growth and how will private companies and investors be affected? “The speed at which the renewable energy sector continues to grow is the result of many factors, most significantly the rising interest and attention from governments seeking to reform the energy sector towards greater levels of sustainability.
“Gulf countries are richly endowed with renewable resources of energy, and it is encouraging to see many MENA countries, particularly the United Arab Emirates, making committed progress towards understanding how to manage the changing energy market. This will lead to accelerated progress and greater confidence in the sector for private investors.
“A closer look at the growth of the renewable energy sector in the MENA region reveals a similar story to that which unfolded in Europe over the past 10 years, especially as the MENA market is currently following the same development trends of more mature markets. This means investors can anticipate an exponential growth period of approximately seven to eight years, followed by steady medium-term growth, as the MENA region moves towards the current state of the European market.” How involved are the Gulf countries in spearheading the sector, and why is it so important that they take a lead? “Collectively the GCC plans to invest $100bn in the renewable energy sector over the next 20 years, with the UAE emerging as a leader in this growth process. Gulf countries have seen rapid eco-
nomic growth of late and have become major energy consumers in their own right, leading to an increased need for such investment and adaption.
“In terms of spearheading the progress in the Gulf, the UAE is now a strategic choice for investors seeking to take advantage of the renewable energy sector. Investors in the UAE renewables sector also benefit from the low risk nature of investments in this industry and the local market incentives that make it a more profitable option compared to the traditional energy sector.
“MENA countries are currently at the beginning of a steep learning process with regards to fully realising the potential of this sector. However, with total assets under management of EUR350m ($392m) and current fundraising for three new funds that will reach a minimum target of EUR500m ($559m), Quercus is well positioned to provide assistance in the region. Our goal is to help develop a positive environment for investors and to grow the renewable energy market in the most efficient way.” You recently opened your new regional office in Dubai. Why did you choose Dubai as a base? How will it enhance your work and what opportunities do you expect to find in the GCC market? “Renewable energy investments in the Middle East and Africa gathered pace from less than $1bn in 2004 to a record $12.5bn in 2015. This level of interest in the region was a clear indicator of where the new renewable energy boom is set to take place.
"Factoring in that GCC member states have also announced plans to invest up to $100bn in renewable energy by 2030, the decision for Quercus to expand its operations in this region became a very logical one. Furthermore, the six GCC countries are in the top 14 per capita emitters of CO2 globally, therefore transforming the energy infrastructure landscape towards renewables offers a viable way forward, both economically and environmentally.
“Our Dubai office will thus allow our specialised asset managers to effectively apply their expertise in renewable energy infrastructure, solar plants, wind farms, biomass plants, and hydro plants to the burgeoning MENA market.” Quercus issued the largest bond in renewables in 2016, and expects to raise a significant amount for a series of funds this year. What are the benefits for regional investors? “Opening a Dubai office in 2017 has allowed Quercus to enter the MENA market in the early stages of the region’s growth. For regional investors this is a benefit due to the importance of local knowledge combined with vast international experience. There are many more advantages of renewable infrastructure investments in this region, including government support in the form of incentives, predictable cash flows from generation of electricity, low volatility as renewable energy is uncorrelated from financial markets, low risk, inflation protection and the added bonus of portfolio diversification into a long-term asset class as opposed to an equity or bond.” Your portfolio is currently spread across Europe. Do you aim to expand it into other regions and have you identified any potential GCC asset targets? “Quercus has become a top three renewable investment advisory company in Europe. The company has always been driven by growth and a commitment to serve its clients, wherever they are located and wherever the new opportunities arise.
“We see opportunities across the GCC in due-diligence, in consulting on building or acquiring assets and helping clients manage assets after construction projects or acquisition transactions. Today we see a trend for increasingly ambitious renewables projects across the MENA region, so our decision to open an office in Dubai came from this precise way of thinking, and looking to the future we are optimistic of further growth in this region. Where do you see the renewable energy sector heading in the coming months and years? “Throughout the MENA region we see an increasing focus and attention on the urgent need to transition to a diversified, non-oil economy. This has enhanced the recent transition towards renewable sources of energy being adopted in the region.
“Speaking of the short-term, 2017 to 2020 will be a crucial period of positive activity in the renewable energy industry as markets across the Gulf and wider MENA region accelerate their energy diversification programmes to meet national targets. Opportunities will be abundant during this phase of development, from increased access to affordable finance for solar projects and growing employment in the clean energy sector, to lowering carbon emissions and achieving national CO2 targets.
“Challenges will be relatively minor as this region can look to the mistakes and lesson from Europe’s journey into renewable energy over the last decade. By partnering with an organisation like Quercus, investors can be sure to learn from the experience gained in developed markets like Europe and ensure a prosperous venture going forward.” What plans do you have for Quercus in the same period? “The MENA renewable energy environment is becoming more attractive to foreign investors, and we are now witnessing a growing flow of investments into the region. We are confident that these investments will generate positive returns as long as they are managed correctly and with assistance of experienced specialists in the field.
“As we grow our operations in this region, investor confidence will continue to rise, leading to a more developed and efficient renewable energy sector. This will enhance our potential as investment partners and strengthen the sector as a whole for investors. Considering the speed at which we are witnessing renewable energy projects coming online in various locations around the world, Quercus sees huge potential for investment opportunities in new and exciting destinations globally.”