Abu Dhabi deal aims to build global clean energy powerhouse

Creative Commons/Masdar

• TAQA and ADNOC to buy stakes in Masdar
• Partnership includes renewable energy and green hydrogen businesses
• New Masdar joint ventures valued at $1.9 billion

Abu Dhabi National Energy Company (TAQA) and Abu Dhabi National Oil Company (ADNOC) have signed binding agreements to buy stakes in Abu Dhabi Future Energy Company, better known as Masdar, from Mubadala Investment Company. 

The partnership aims to create a global clean energy powerhouse that consolidates the renewable energy and green hydrogen efforts of TAQA, Mubadala and ADNOC under the Masdar brand.

The transaction values the new Masdar joint ventures at approximately AED7 billion ($1.9 billion) on a 100 percent equity basis. 

Under the agreements, TAQA will acquire a 43 percent controlling stake in Masdar’s renewables business with Mubadala retaining a 33 percent interest and ADNOC owning the remaining 24 percent. 

ADNOC will take a 43 percent controlling stake in Masdar’s new green hydrogen joint venture while Mubadala will retain a 33 percent interest and TAQA will hold the final 24 percent. 

As part of the deal, TAQA will contribute its rights to a minimum 40 percent share in future Abu Dhabi renewable and green hydrogen projects, a statement said.

Sudharsan Sarathy, lead oil analyst for MENA at Refinitiv, told AGBI: “The deal is landmark in the sense that it brings together three leaders in their respective industries and unifies the efforts being taken towards the energy transition.

“In a way it would bring about efficiencies as the strategy would now be aligned for the joint entity. ADNOC in particular has been keen on exploring new energy avenues including supply of hydrogen and ammonia.”

He added: “ADNOC, along with Masdar, had signed agreements to explore the hydrogen supply chain while ADNOC had also announced earlier this month the intent to advance a world-scale blue ammonia manufacturing facility at Ruwais. ADNOC has experience in energy supply chains and many of the current buyers would also probably be looking to increase hydrogen in their mix, which allows ADNOC to leverage the partnerships.”

Jasim Husain Thabet, TAQA’s group CEO and managing director, said: “At the completion of this transaction TAQA will exceed its 2030 targets of having more than 30 percent of its generation capacity from renewable energy and will accelerate our future growth plans as the demand for renewable power and green hydrogen projects significantly increase. 

“Working closely with Mubadala and ADNOC we will transform the energy landscape through Masdar, grounded in collaboration and great ambition to drive forward the UAE’s Net-Zero by 2050 Strategic Initiative.”

Khaled Salmeen, executive director of the downstream industry, marketing and trading directorate at ADNOC, said: “This landmark transaction marks another important milestone in ADNOC’s ongoing journey to future proof its operations and grow its new energies business.

“We are confident that this new world-class partnership will continue to position the UAE at the forefront of the global energy transition.”

Musabbeh Al Kaabi, CEO, UAE investments of Mubadala Investment Company, said: “This milestone is a clear testament of Mubadala’s commitment to realising the UAE’s long-term sustainability ambitions.

“We established Masdar 16 years ago with the foresight to diversify the UAE’s energy mix and advance the global energy transition.

“Today’s signing with two of Abu Dhabi’s key energy players, ADNOC and TAQA, further cements Mubadala’s responsible investing strategy and is one step closer to delivering on the UAE’s sustainability aspirations.”

The transaction is now subject to relevant third-party and regulatory approvals and is expected to take a number of months to complete. 

Jad Salem, director at Fitch Ratings, told AGBI: “The transaction will help gradually diversify the power generation mix in Abu Dhabi away from gas and will lead to an improvement in TAQA’s asset quality. Following the completion of the transaction, TAQA gross installed capacity from renewables will reach more than 34 percent (operating and under construction), which is above the company’s 2030 target of 30 percent. We expect TAQA to revise its 2030 target once the transaction is completed.”

Salem added: “Similar to other transactions, integration risk should be assessed. This risk is mitigated especially that the counterparties have good integration record. For example, TAQA’s successful integration of Transco, ADDC, and AADC in 2020.”

The announcement comes just days after the president of the UAE, Sheikh Mohamed bin Zayed Al Nahyan, pledged to invest an extra $50 billion to fight climate change over the next decade.

Mariam bint Mohammed Almheiri, the country’s minister of climate change and the environment, said the president’s commitment, announced last Friday at the Major Economies Forum on energy and climate in Washington, placed the UAE “at the forefront” of the global battle.

“We have issued environmental protection laws and strategies and rolled out relevant initiatives.

“We have also adopted a proactive approach to promoting clean energy solutions as the sustainable, alternative energy sources of tomorrow,” said Almheiri.

Gulf nations have launched a number of ambitious projects to battle climate change.

Last year, Riyadh launched the Saudi Green Initiative, a strategy that aims to green the desert, reduce temperatures and make the country’s cities more sustainable for the population. The UAE and Bahrain have declared net zero targets and Qatar has pledged that the World Cup, which begins in November, will be carbon neutral.