China Muscles In on Middle East Renewables with Alcazar Deal

(Bloomberg) --

China is making one of its biggest pushes yet into Middle Eastern renewable energy.

A group led by state power firm China Three Gorges Corp. is buying Alcazar Energy Partners, a Dubai-based wind and solar developer. The announcement on Monday confirmed a Bloomberg News report last week. 

While financial details weren’t disclosed, Bloomberg reported earlier that a deal could value Alcazar at about $1 billion, including debt.

“The region has really high growth prospects,” Daniel Calderon, Alcazar’s co-founder and chief executive officer, said in an interview with Bloomberg Television. Alcazar and its backers saw a large number of bidders and selected a “blue-chip investor” with a strategy to grow the portfolio in the region.

The deal could serve as a springboard for China to increase clean energy investments in the Middle East. Chinese companies have put their money into oil and gas in the likes of Iraq and the United Arab Emirates for years, but have rarely invested in renewables.

Previous Chinese investments include JinkoSolar Holding Co. and Jinko Power Technology Co., two affiliated solar-panel makers, taking minority stakes in solar projects in the UAE.

Power Grids

Several Middle Eastern governments, including the major oil producers in the Persian Gulf, are trying to cut the use of fossil fuels in their power grids. China Three Gorges South Asia Investment Ltd., or CSAIL, the unit leading the Alcazar transaction, said the region could attract $175 billion of clean-energy investments in the next decade.

Founded in 2014, Alcazar has projects in Egypt and Jordan with a total generation capacity of around 410 megawatts. Its investors include a fund linked to Abu Dhabi’s Mubadala Investment Co., Dubai-based BluStone Management Ltd. and the World Bank’s International Finance Corp.

Alcazar’s projects have helped power 275,000 households and saved over 15.6 million tons of carbon dioxide, according to Calderon. He was previously an executive at Masdar, an Abu Dhabi-based renewable energy firm owned by Mubadala, and General Electric.

CSAIL is an overseas investment company controlled by China Three Gorges. Its aim is to acquire and develop renewable power assets, primarily in Asia. The IFC and Chinese sovereign wealth fund Silk Road are minority shareholders.

China Three Gorges listed its renewable energy subsidiary earlier this year in Shanghai, raising $3.6 billion. It has been acquiring foreign assets for more than a decade. Since early 2020, it’s invested roughly 1 billion euros ($1.2 billion) in Spanish solar projects.

Standard Chartered Plc advised Alcazar on the deal. They began a strategic review last year, with the process taking longer than expected due to the coronavirus pandemic.

CSAIL was advised by Natixis and its affiliates by Vermilion Partners and EFG Hermes. Freshfields Bruckhaus Deringer provided legal advice to Alcazar.

(Updates to add other Chinese projects in the UAE in seventh paragraph.)

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