In a significant move to enhance its footprint in the Gulf region, Saudi Arabia’s ACWA Power has entered into a Share Purchase Agreement (SPA) to acquire substantial stakes in power generation and water desalination assets from French utility developer ENGIE. This transaction, valued at $693 million, encompasses key operational facilities in both Kuwait and Bahrain, marking a pivotal expansion for ACWA Power in the Middle East.
Details of the Acquisition
The agreement outlines ACWA Power’s acquisition of ENGIE’s shares in four major operational projects:
- Az Zour North Independent Water and Power Plant (IWPP) in Kuwait: ACWA Power will obtain an 18% stake in this facility, which plays a crucial role in supplying Kuwait’s power and water needs.
- Al Ezzel Independent Power Plant (IPP) in Bahrain: A 45% stake acquisition in this plant will bolster ACWA Power’s electricity generation capabilities in Bahrain.
- Al Dur IWPP in Bahrain: By acquiring a 45% stake, ACWA Power strengthens its involvement in meeting Bahrain’s increasing demand for power and desalinated water.
- Al Hidd IWPP in Bahrain: A 30% stake in this facility further solidifies ACWA Power’s presence in Bahrain’s utilities sector.
Collectively, these assets contribute approximately 4.61 gigawatts (GW) of gas-fired power generation capacity and produce around 1.11 million cubic meters of desalinated water daily. The acquisition also includes the associated operations and maintenance companies responsible for these facilities, ensuring seamless integration and continued operational excellence.
Strategic Implications
This acquisition signifies ACWA Power’s inaugural entry into the Kuwaiti market, aligning with its strategic objective to expand its presence across the Middle East. In Bahrain, where the company already maintains a significant footprint, the deal reinforces its commitment to providing reliable and sustainable power and water solutions.
Marco Arcelli, CEO of ACWA Power, emphasized the strategic importance of this move, stating, “We consolidate our presence in Bahrain, where we are already a reliable supplier of power and water, and we enter Kuwait, where we recently submitted a bid for a large power and desalination plant.” This statement underscores the company’s dedication to meeting the region’s growing energy and water demands.
Thomas Brostrom, Chief Investment Officer of ACWA Power, added, “With our first entry into the Kuwaiti market through the Az Zour North Facility, we have achieved a significant milestone in strengthening our regional energy and water desalination footprint.” This expansion aligns with ACWA Power’s broader strategy of tripling its assets under management to $250 billion by 2030, reflecting its ambitious growth plans in the energy sector.
ENGIE’s Strategic Focus
For ENGIE, this divestment aligns with its strategic focus on streamlining operations and concentrating on core activities. The company has been a significant player in the Gulf Cooperation Council (GCC) region for over 30 years, offering efficient gas-fired power solutions, desalinated water production, district cooling, hydrogen, and battery storage. By divesting these assets, ENGIE aims to reallocate resources towards renewable energy projects, flexible generation, and innovative low-carbon solutions, reinforcing its commitment to sustainable energy initiatives.
ENGIE is collaborating closely with ACWA Power to ensure a seamless transition of ownership, maintaining uninterrupted services during the handover. This cooperation reflects both companies’ dedication to operational excellence and customer satisfaction.
Financial and Legal Advisors
Goldman Sachs Saudi Arabia served as the sole financial advisor for ACWA Power during this transaction, providing expert guidance to facilitate the acquisition. Legal advisory services were rendered by King & Spalding, ensuring that all legal aspects of the deal were meticulously addressed. This collaboration with esteemed financial and legal advisors underscores ACWA Power’s commitment to executing strategic transactions with precision and due diligence.
Regulatory Approvals
The completion of this transaction is subject to customary regulatory and stakeholder approvals. Both ACWA Power and ENGIE are working diligently to meet these requirements, anticipating the finalization of the deal in the coming months. This process involves engaging with relevant authorities and stakeholders to ensure compliance with all regulatory frameworks, reflecting the companies’ adherence to governance and transparency standards.
Market Response
Following the announcement of the acquisition, ACWA Power’s shares experienced a 2.3% increase, indicating positive investor sentiment toward the company’s strategic expansion efforts. This uptick in share value reflects confidence in ACWA Power’s growth trajectory and its ability to capitalize on emerging opportunities in the energy sector.
The broader Gulf stock markets also responded favorably, with most major indices rising, supported by earnings and corporate announcements. This trend highlights the positive economic outlook in the region and the potential for growth driven by strategic corporate activities.
Conclusion
ACWA Power’s acquisition of ENGIE’s assets in Kuwait and Bahrain represents a strategic expansion in the Gulf region, enhancing its portfolio in power generation and water desalination. This move not only strengthens ACWA Power’s market position but also underscores its commitment to meeting the growing energy and water needs of the Middle East. By integrating these assets, ACWA Power is poised to play a pivotal role in the region’s energy landscape, contributing to sustainable development and economic growth.
This acquisition aligns with global trends emphasizing the importance of reliable and sustainable energy and water resources. As the Middle East continues to experience rapid population growth and urbanization, the demand for such resources is expected to rise significantly. ACWA Power’s strategic investments position the company to effectively address these challenges, ensuring the provision of essential services to support regional development.
Furthermore, this move reflects a broader industry shift towards consolidation and strategic partnerships, enabling companies to leverage synergies, optimize operations, and enhance service delivery. ACWA Power’s proactive approach in expanding its asset base demonstrates its commitment to long-term growth and resilience in the dynamic energy sector.
In summary, the acquisition of ENGIE’s stakes in key Kuwaiti and Bahraini assets marks a significant milestone for ACWA Power, reinforcing its leadership in the energy and water sectors and its dedication to supporting the sustainable development of the Gulf region.
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