This is Masdar’s second US deal, and it has hinted at more to come. Financial firepower certainly wouldn’t be a problem: Masdar is part of Abu Dhabi state-owned sovereign wealth fund Mubadala, which has assets under management worth $229bn. But is this a one-off or the start of a broader trend?
Is US wind set to receive a tidal wave of Middle Eastern money?
That’s what we have to ask after a huge deal last week. On 13th August, Abu Dhabi developer Masdar Clean Energy announced it is buying a 50% stake in a 1.6GW portfolio of wind and solar projects from EDF Renewables.
This is Masdar’s second US deal, and it has hinted at more to come. Financial firepower certainly wouldn’t be a problem: Masdar is part of Abu Dhabi state-owned sovereign wealth fund Mubadala, which has assets under management worth $229bn. But is this a one-off or the start of a broader trend?
Let’s start by looking at the deal itself.
Masdar has agreed to buy a 50% stake in a portfolio that is made up of three utility-scale wind farms totalling 815MW in Nebraska and Texas; and five solar projects of 689MW in California, of which two include a combined 75MW of lithium-ion battery storage. It isn't just pinning its hopes on wind.
The wind projects are the 300MW Milligan 1 in Nebraska, the 273MW Las Majadas in Texas, and the 243MW Coyote in Texas. All three are being built and are due to be commissioned in the fourth quarter of 2020.
Masdar is set to co-own the portfolio with EDF Renewables North America, and they intend to sell electricity from the projects to off-takers including utilities, hedging providers, and community choice aggregators.
This extends the relationship that the two companies have in the Middle East and North Africa, as well as giving the North American arm of EDF access to the strong financial resources we mentioned earlier.
But Masdar entered the US independently of EDF last year.
In January 2019, it bought John Laing’s stakes in the 149MW Rocksprings wind farm in Texas and the 30MW Sterling wind farm in New Mexico. This 1.6GW deal with EDF is clearly a big step up from that but, with 18 months between the deals, it shows that Masdar hasn’t been going ‘hell for leather’ in its quest for US growth. It is now looking to accelerate? Well, possibly.
It’s undeniable that the oil and gas industry, in which Abu Dhabi is a major player, has had a tough year despite the recent rebound in prices.
This is likely to force more Middle Eastern oil giants to increase investments in renewables as they look to maintain their positions as leaders in global energy. This could translate into more renewables deals, including in the US.
But we’d be slightly hesitant. We’ve been watching Masdar with great interest since it invested in the 630MW London Array offshore wind farm in 2008.
Yet while it has the resources to buy big and buy fast, its deals have been more considered. It’s a company that you don’t hear from for a year – and then signs a deal with major significance for the market.
Just look at its portfolio. As well as London Array, its wind assets include the 400MW Dumat Al Jandal in Saudi Arabia, which is the largest wind project in the Middle East; a pioneering 500MW wind project in Uzbekistan; and a stake in Indian developer Hero Future Energies. It doesn't have a huge profile but its projects are frequently at the cutting edge.
Back to the original question. Will this herald a huge wave of Middle Eastern investment in US wind? It could well do. This deal shows that Middle Eastern sovereign wealth funds see US wind and solar as key renewables markets.
And the statement from its CEO Mohammed Jameel Al Ramahi in the 1.6GW EDF announcement reads like a statement of intent.
He said: “As the second largest renewable energy producer in the world in terms of installed power capacity, the US offers considerable scope for further growth and diversification of our renewable energy portfolio… We are delighted to expand our presence there through this landmark deal.”
'Landmark' can mean a marker that establishes a location. This deal meets that criteria as it establishes Masdar's credentials in the US.
'Landmark' can also mean an important stage or turning point. This deal could indicate a big turning point in appetite for US projects from Masdar and other state-backed Middle Eastern funds. It's not a tidal wave, but could become one.
If you want to discuss the latest investment trends in US wind, join us at Financing Wind North America on 2nd and 3rd September. Register now.
The World Bank has predicted that conflict in the Middle East could lead to a dramatic spike in oil prices, which is linked to increases in food prices - however it's argued that the forecasts do not take into account the ability of energy storage to meet demand
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