As of August 2022, three out of six GCC countries have published targets for net-zero emissions, according to data compiled by Várri Consultancy. In October 2021, the Government of the United Arab Emirates announced an initiative to become net zero by 2050. Over the last 15 years, the UAE has invested over USD 40 billion in the renewable energy sector. The UAE Government expects its combined renewable and nuclear energy capacity will increase to 14 GW by 2030, from 2.4 GW in 2020. Later the same month, both Saudi Arabia and Bahrain committed to net-zero emissions by 2060.
The public announcements by the governments have begun filtering down to the state-owned energy companies. For example, Saudi Arabian Oil Company shortly thereafter announced its commitment to achieving net-zero emissions by 2050. The state-owned energy giant’s target only includes Scope 1 and 2 emissions across its wholly-owned operating assets. However, the target date is set a decade earlier than the government’s overall target date.
S&P expects that the energy sector will increase its environmental investments in light of recent announcements of net-zero targets.
ThreeEightSix is a Dubai-based equity platform that invests in, develops, and operates renewable energy assets in the MENA region. When the investment company was expanding its pipeline of prospective clients, the executive team approached Várri Consultancy for advice.
Firstly, Várri Consultancy conducted a workshop with the founders and the C-Suite team. The purpose of the workshop was to improve the team’s understanding of managing risks in solar power projects. Building on the outcome of the workshop, a plan was agreed upon for future improvements.
Secondly, Várri Consultancy reviewed the investment committee procedures and reporting templates. The framework was improved to include a credit policy and risk matrix. These tools have since been used by the executive team to assist them with investment decisions.
Thirdly, Várri Consultancy began providing ongoing credit risk management support. This includes analysing potential off-takers under solar power agreements. As part of such credit analysis, each prospective company is assigned an internal credit score.
Choosing and using the appropriate credit scoring models can be difficult for companies outside of the financial service sector. Large corporates in developed countries may have publicly available credit ratings. However, private companies in the GCC region tend to be unrated. Furthermore, there is generally limited financial disclosure of private companies in the region.
Because of these factors, it is necessary to establish both a formal internal policy and a practical process. The policy sets the formal requirements and organisational boundaries. It is then implemented through practical processes. Those processes need to be commercially feasible and acceptable to all stakeholders.
Daniel Pedroso is the Chief Development Officer at ThreeEightSix. He has held various positions in the solar energy sector over the last 15 years, including 13 in the Middle East. Pedroso spoke to Clutch about his experience working with Várri Consultancy.
Várri Consultancy is a multi-skilled partner that provides both technical and human resources to ThreeEightSix, said Pedroso. They are knowledgeable and work effectively to bring clients in line with government and regulatory requirements, he continued. By establishing a credit risk and due diligence framework, the team was empowered to comply with government regulations. That was a big step forward for the investment committee, said Pedroso.
Daniel Pedroso, Chief Development Officer, ThreeEightSix.They’re the best vendor we’ve worked with regarding project management.