Yellow Door targets South Africa and Saudi Arabia

Yellow Door Energy

• Solar electricity firm raises $500m
• Aim is $1bn of installed capacity
• Customers save up to 40%

Yellow Door Energy, the Dubai solar electricity provider that has raised nearly $500 million in funding from investors, is targeting South Africa and Saudi Arabia as key growth markets.

The company builds bespoke solar power plants for corporate clients, usually at their premises. These include factories, offices, shopping malls and warehouses.

Yellow Door also finances, designs, operates and maintains these solar electricity facilities.

Customers pay a monthly bill but will own the plant outright at the end of the contract, which is usually 10 to 15 years, in what is known as a build-own-operate-transfer agreement.

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Customers save 10 to 40 percent on their electricity costs, depending on local market regulations and dynamics, and also reduce their carbon footprint.

Yellow Door provides solar electricity in six countries: the UAE, Jordan, Saudi Arabia, Bahrain, Oman and South Africa. The company’s other services include battery energy storage systems and electric vehicle charging stations.

Yellow Door Energy chief operating officer Rory McCarthy said that South Africa is its biggest growth market, followed by Saudi Arabia, but that it was also considering expanding the supply of solar electricity into Turkey.

“Saudi Arabia has large areas that are off grid,” McCarthy said. The kingdom has also been slower to issue legislation or reduce subsidies to encourage a transition away from domestic fossil fuel consumption, making it more difficult for independent power suppliers.

“There are a large number of companies operating outside the grid,” he said.

On-grid electricity partially meets the needs of Saudi’s industrial zones, but many companies require additional power, which they obtain through on-site generators.

“We want to help those customers come off generators and onto cleaner sources of power,” McCarthy said.

Yellow Door Energy

South Africa needs energy solutions

In South Africa, lengthy power outages are a near-daily occurrence because of huge problems at the state utility, Eskom.

This so-called load shedding is the prime cause of the country’s sluggish economy, with real GDP growth likely to be just 0.6 percent in 2023, according to S&P Global.

“Large industry in South Africa is crying out for energy solutions and for capacity,” McCarthy said.

He said companies have back-up power, “but generators aren’t that efficient and it’s much smoother to transition away to distributed energy through solar and batteries.

“We’re working towards solutions to replace fossil fuel [and] also provide a greater level of generation of energy on site.”

Yellow Door raised $65 million in Series A funding in 2019, while in October 2022 it received a further $400 million from investors in a deal that made the private equity firm Actis its largest shareholder.

Some existing investors, such as the World Bank’s International Finance Corporation, Mitsui & Co and The Arab Energy Fund (formerly Apicorp), also participated in the funding round.

McCarthy added that Yellow Door is “EBITDA positive” (EBITDA refers to earnings before interest, taxes, depreciation and amortisation).

“We’re looking very closely at balancing growth with overheads control and trying to get the right yield and the right return,” he said.

Private to public

Yellow Door’s customers include Unilever, Nestle, and Agthia Group.

In the UAE, solar facilities must be built at customer premises, but Jordan and South Africa allow so-called wheeling, where privately generated electricity is transmitted across the public electricity grid. Utilities charge for wheeling, so for some countries this represents a welcome means to boost income.

The company built an 17-megawatt solar park in Jordan that supplies the mall operator Majid Al Futtaim’s 35 Carrefour supermarket stores across the kingdom.

“We’re particularly interested in investment opportunities and land that can be used for development for wheeling and transport of energy and building,” McCarthy said.

This week Yellow Door announced a 20-year, 34-megawatt capacity solar power project with the Abu Dhabi developer Aldar Properties. Under the build-own-operate-transfer agreement, it will supply electricity to 45 properties owned by Aldar.

McCarthy described the biggest challenges facing the energy transition as fossil fuel subsidies, limits on independent electricity production and inadequate regulations.

The company’s current operating capacity is 133 MW, with a further 90 MW under construction.

This installed and in-development capacity represents an investment of around $200 million. Yellow Door aims to increase this five-fold, so that it has $1 billion of installed capacity by 2027.

McCarthy predicts demand for renewable electricity will accelerate from 2027 as electric vehicles reach a so-called tipping point of representing around one third of new cars sold.

“All those vehicles coming in and charging at 7,200 watts on a Friday night are going to impact far more than switching on Netflix at 200 watts,” McCarthy said.

“Infrastructure is going to become a much bigger buzzword, and the UAE is very well structured in terms of its preparation for that. Our focus is solar energy, and then battery and grid support.”