State-backed investment funds taking stake in local power developer is a vote of confidence
The past week has been a good one for Saudi Arabia’s Acwa Power. Already a significant player in the region’s power sector, it has announced two deals that will only increase its profile.
Saudi Electricity Company (SEC) named the company preferred bidder for its next independent power project, the $2.5bn Rabigh 2 scheme. It was a significant win, not least because it was the second-highest bidder when SEC first opened prices in October.
A consortium backed by the Qatari and Abu Dhabi governments in the form of Abu Dhabi National Energy Company (Taqa) and Qatar Electricity and Water Company (Qewc) was almost 20 per cent cheaper. That prompted a wave of speculation about how they had managed to put together a cheaper bid in Acwa’s backyard. Whatever the background, it sparked a wave of intense lobbying from all sides and left SEC with a dilemma about who to award the contract to.
When the Taqa/Qewc consortium was asked to rebid on slightly different terms it declined. That cleared the way for Acwa. It was a neat solution to a messy situation, and avoided upsetting anyone.
At the same time, Acwa announced that the Saudi government, through two investment funds, had acquired a stake of around 20 per cent in it. The move is a massive vote of confidence in Acwa by Riyadh. As the firm continues its rapid expansion and prepares for an initial public offering on the Saudi Stock Exchange (Tadawul) in a few years’ time, it now does so effectively as a government-related entity. That will be worth far more than the current financial value of Riyadh’s investment in Acwa.