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

Gulf Business - - CONTENTS - NEIL KING

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.”

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